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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 249. Processing Form 8752 (Cont. 1)

3.11.249  Processing Form 8752 (Cont. 1)

3.11.249.7 
General Entity Perfection

3.11.249.7.1  (01-01-2009)
Entity Perfection (General)

  1. The entity area of Form 8752 identifies the taxpayer on the Business Master File. The main features are as follows:

    1. Employer Identification Number (EIN)

    2. Tax Period

    3. Name and Address

    4. Check Digits

  2. There are two types of entity captions:

    1. Preaddressed (IRS label)

    2. Non-preaddressed (non-IRS label)

  3. Whenever the caption does not show a check digit or the caption is for a non-preaddressed return, the name control must be determined.

  4. The name control consists of four alpha and/or numeric characters which are generally derived from the first name line.

    1. Blanks may be present only in the last two positions of the name control.

    2. Ampersands (&) and hyphens (-), are the only valid special characters in a name control.

    3. Delete prefixes from the name line.

      Example:

      Mr., Rev., Dr., Capt., and Sgt. Delete "Mrs." only if given name is present.

    4. Delete suffixes from the first name line such as owner, agent, attorney, proprietor, etc. Edit the suffix "Partner" to "Ptr" .

    5. Delete "THE" if followed by more than one word.

  5. You must determine the type of entity present on the return because the type of entity determines the name control procedures you must use.

    1. Individuals

    2. Corporations

    3. Partnerships

    4. Trusts and Estates

    5. Other organizations

  6. The methods for determining name controls are explained in Document 7071, Name Control Job Aid.

3.11.249.7.2  (01-01-2009)
Entity Perfection of Preaddressed Returns

  1. WITHOUT A CHANGE BY THE TAXPAYER—No action is required. A preaddressed return will have a label printed by IRS. These labels have check digits to the left of the EIN. (See Figure 3.11.249–2.)

    Figure 3.11.249-2

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Illustration of a Check Digit return

  2. WITHOUT A CHECK DIGIT—Underline the name control.

    1. Some returns which are privately printed, appear to have IRS pre-printed labels. To determine if they are IRS labels or non-IRS labels, look for the check digits. If the check digits are missing, treat the return as a non-preaddressed return.

    2. If the check digits are missing on a pre-printed label you will underline the name control. (See Figure 3.11.249–3.)

    Figure 3.11.249-3

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Form 8752 requiring Name Control editing

  3. WITH A NAME CHANGE BY THE TAXPAYER—

    1. If there is any change to the primary name line, (other than a minor spelling change), and the EIN is not changed, the return is unprocessible. Prepare Form 4227 and route to the Entity Control function for assignment of a new EIN. (See Figure 3.11.249–4.) Send any questionable entity changes to the Entity Control function (e.g., names, no EIN’s, etc.). Ensure that the reason for sending to Entity is specified (minor spelling changes can be input with a TC 013.)

      Figure 3.11.249-4

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 4227, Intra-SC Routing and Reject Slip

    2. Listed in the following chart are the conditions which indicate an entity change and require a new EIN (see Figure 3.11.249–5):

      Figure 3.11.249-5a

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Examples of Entity Changes Requiring a New EIN

      Figure 3.11.249-5b

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Examples of Entity Changes Requiring a New EIN

    3. A change to any other name line (continuation, sort, or c/o names), or any name change with a foreign address present (OSPC only) requires a change to the entity on the BMF. With this type of change, input a TC 016 with the name change. (See Figure 3.11.249–6.)

      Figure 3.11.249-6

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 Requiring TC-016 Input

  4. WITH AN EIN CHANGE BY THE TAXPAYER—Send for research per IDRS.

    1. If unable to locate EIN, attach a Form 4227 to an unnumbered return and route to the Entity control function.

    2. On numbered returns, edit CCC "U" and route to Entity Control using Form 4227; allow it to remain in the block.

  5. If there is an EIN change and the return already bears the notation "TC 011" or "IDRS EIN" , underline the new Name Control and circle the Check Digits and old EIN. Entity Control function has already taken the necessary action. (See Figure 3.11.249–7.)

    Figure 3.11.249-7

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    Example of a TC-011 Return

  6. PRIMARY NAME LINE CHANGE

    1. When a primary name line change clearly relates to the same taxpayer, input TC 013. A new EIN is not needed. (See Figure 3.11.249–8.)

      Figure 3.11.249-8

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Example of Form 8752 Clearly Relating to the Same Taxpayer

    2. A change to any other name line (continuation, sort, or c/o names), or any name change with a foreign address present (OSPC only) requires a change to the entity on the BMF. With this type of change input a TC 016 with the name change. (See Figure 3.11.249–9.)

      Figure 3.11.249-9

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 with Foreign Entity Name Change

3.11.249.7.3  (01-01-2009)
Entity Perfection of Non-preaddressed Returns

  1. WITH AN EIN PRESENT—Underline the name control.

  2. MISSING EIN, MULTIPLE EIN’S, PARTIAL EIN, AN SSN PRESENT—

    1. If unnumbered return and the EIN is missing, applied for, pending, etc. and cannot be located on attachments, send for research per IDRS (CC NAMES or EINAD). If unable to locate EIN, route to Entity Control function using Form 4227 for research. (See Figure 3.11.249–10.)

      Figure 3.11.249-10

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 With Partial EIN

    2. On numbered returns, enter CCC "U" and route to Entity Control using Form 4227; allow it to remain in the block.

  3. NEW EIN ASSIGNED—If the return has been given a new EIN by the Entity Control function, underline the name control. No further editing of the entity data is necessary. (See Figure 3.11.249–11.)

    Figure 3.11.249-11

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Form 8752 Illustrating EIN Assigned by Entity Control

  4. Returns with attachments or statements for the following conditions should be routed to Entity Control, using Form 4227.

    Note:

    If the return is numbered, edit CCC "U" and leave the return in the block.

    1. Name change requiring a new EIN

    2. Return is filed under another EIN

    3. Filing requirement was incorrectly established

    4. Taxpayer files bankruptcy

3.11.249.7.4  (01-01-2009)
Entity Perfection of Addresses

  1. Perfection of the address is not necessary unless the mailing address (street or P.O. Box) cannot be identified.

  2. DO NOT perfect the address on amended ("G" -coded) returns.

  3. Perfect the address in the following instances. ISRP (Integrated Submission and Remittance Processing System) can only input the street address (mailing address). A TC 016 must be input to retain the location address.

    1. If a street address has been crossed out by the taxpayer and a P.O. Box has been added, input a TC 016 to retain the prior street address as the location address. (See Figure 3.11.249–12.)

      Figure 3.11.249-12

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 Showing a P.O. Box Added in Place of a Street Address

    2. If both a P.O. Box and a street address are shown, underline P.O. Box and input "TC 016" in the left margin in order to retain the street address in the Location Address field. (See Figure 3.11.249–13.)

      Figure 3.11.249-13

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 with Both P.O. Box and Street Address

    3. If two street addresses are shown, underline the second street address and input a TC 016 to retain the first street address in the "Location Address" field. (See Figure 3.11.249–14.)

      Figure 3.11.249-14

      This image is too large to be displayed in the current screen. Please click the link to view the image.

      Form 8752 With Two Street Addresses

  4. Circle out an "in care of" symbol (%) if it is shown before the street address.

    Note:

    The "in care of" symbol is valid for the second name line, but not on the street address line.

  5. If more than one return for the same taxpayer is in the same batch or block, edit the mailing address on the oldest period return if two addresses are shown. The one return will establish the entity.

  6. If the city and/or state is missing, perfect from information on the document(s) or attachment(s). If not located, research using IDRS (CC INOLE) or local service center procedures.

  7. If a taxpayer shows a nine or twelve-digit ZIP Code, take no action.

  8. Foreign address changes can be made from the return.

  9. Returns with address changes in the following American possessions can be input with the return the same as a domestic address:

    1. American Samoa (AS)

    2. Federated States of Micronesia (MC)

    3. Guam (GU)

    4. Northern Mariana Islands (MH)

    5. Marshall Islands (MI)

    6. Palau (PL)

    7. Puerto Rico (PR)

    8. Virgin Islands (VI)

      Note:

      Route any returns received with an American Possession address to the Ogden Submission Processing Center (OSPC) for processing.

  10. The Postal Service established new address requirements for APO/FPO addresses. If the old address appears (i.e., APO New York, NY 091XX), it must be converted to the new state code abbreviations based on the ZIP code (i.e., the previous example would be edited as APO AE 091XX). Refer to the table below for the appropriate address requirements.

    APO/FPO CODE
    ABBREVIATIONS     		ADDRESS
    TYPE     		ZIP CODE RANGE(S)
    APO/FPO AA American 340XX
    APO/FPO AE Europe 090XX–098XX
    APO/FPO AP Pacific 962XX–966XX

  11. If Form 8822, Change of Address, is attached to the return, compare the Name Control, EIN, Address, City, State and Zip Code information on Form 8822 to the return.

    1. If the information is the same, take no action and continue processing.

    2. If the information is different, detach Form 8822 and route to Entity Control on Form 4227.

    3. Batch all Forms 8822 daily and hand carry to Entity Control for expedited processing or follow local service center procedures.

  12. Tax examiners are not required to edit abbreviations.

3.11.249.7.5  (01-01-2009)
♦Tax Period♦

  1. All returns must have a tax period. Edit the Tax Period under the title of the form in YYMM format. Determine the Tax Period by the year (printed) on the face of the tax form (i.e., for the 2008 tax form, the tax period should be "0812" . Taxpayers are advised to edit changes on the form to the tax year for prior tax periods.

  2. Do not edit the tax period if the current year form is used unless the taxpayer indicates on the top of the return that this is not a current year return (i.e., shows a prior year). Programming automatically inserts the current year when there is no ISRP (Integrated Submission and Remittance Processing System) entry (and verifies the correct tax rate was used on Line 9a). All Form 8752 filers must be for a calendar year.

  3. The tax period for all prior year returns must be edited . Edit the tax period under the title of the form in YYMM format.

    Example:

    If the election year ends May 1, 2008, the tax period is "0812" , not "0805" .

  4. If a prior-year form is submitted and the taxpayer does not indicate the tax period, edit "0812" under the title of the form, except when you receive multiple Forms 8752 from the same entity (see Figure 3.11.249–15).

    Figure 3.11.249-15

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Editing of a Prior-Year Form 8752

  5. If multiple Forms 8752 from the same entity using the current year form are received, try to find out the correct tax period to edit. Look at the "applicable election year beginning and ending." Make the latest "ending period" the current calendar year and edit prior year tax periods in descending order as can be best determined. (See Figure 3.11.249–16.)

  6. If a Form 8752 is received for a future tax period (i.e., if the tax period ending is after the current processing date), do as follows:

    1. Edit CCC "U" on the return.

    2. Attach Form 4227 and note "Early Filed" .

    3. Route to Rejects for Research to determine the correct tax period.

      Note:

      If a remittance is attached, prepare Form 3244, Payment Posting Voucher, and route to Deposit Activity for processing and posting to the taxpayer's account.

    Figure 3.11.249-16

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Multiple Forms 8752 from Same Entity With Current Year Form

3.11.249.7.6  (01-01-2009)
♦Centralized Authorization File (CAF) Indicator♦

  1. Editing of the CAF Codes is no longer required.

  2. The Centralized Authorization File (CAF) contains the type of authorization that taxpayers give to representatives regarding the taxpayers' accounts. Representatives may submit Form 2848, Power of Attorney (POA) and Declaration of Representative, or Form 8821, Tax Information Authorization (TIA).

    If... Then . . .
    Form 2848 or Form 8821 is attached, 1. Detach Form 2848 or Form 8821 from the return.
    2. Edit taxpayer name and EIN on Form 2848 or Form 8821 if missing.
    3. Edit received date on Form 2848 or Form 8821.
    4. Route Form 2848 or Form 8821 to CAF function.
    5. Edit action trail on tax return.
    A "General Power of Attorney" or a "Durable Power of Attorney" or "Tax Information Authorization" is submitted on any document other than Form 2848 or Form 8821. 1. Take no action.
    2. Leave the Power of Attorney or Tax Information Authorization attached to the return.
    3. Do not route to the CAF function.

3.11.249.8  (01-01-2009)
♦Received Date Editing♦

  1. A received date is required on all Forms 8752. The due date for Form 8752 is May 15.

    Note:

    Caution must be taken to determine when a return was filed or became processible.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If the due date falls on a weekend or legal holiday, the return is timely if postmarked by the first business day following the weekend or legal holiday.

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

  4. The received date may or may not be stamped on the face of the return.

  5. If the date stamp is not present, or the date is illegible or invalid, edit the Received Date, in YYYYMMDD format, in the middle of the first page of the return (in the area between Lines 1 and 6). Edit the Received Date according to the following priority:

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

      If. . . Then. . .
      An envelope has both a USPS and private metered postmark. Always use the USPS postmark.
      An envelope has two private metered postmarks. Always use the latest private postmark.
      An envelope has only one private metered postmark. Use the private metered postmark.

    2. Revenue Officer’s Signature Date

    3. Signature Date (only if within current year)

    4. Julian Control Date minus 10 days

    5. Current Date minus 10 days (unnumbered documents (Code and Edit))

  6. Edit the Received Date as follows:

    If. . . And. . . Then . . .
    A timely received date is the only received date stamped on the return   No editing is required.
    Two or more dates stamped on the return   1. Use the earliest IRS stamped received date.
    2. Circle out all other dates.
    A Federal return is addressed to the IRS Delivered to a State agency Used the postmark date as the received date.
    A Federal return is addressed to a State Agency   Use the IRS date stamp as the received date.
    Envelope is attached to the return The return is timely Discard the envelope.
    Envelope is attached to the return 1. The envelope is addressed to IRS
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡     		1. Look at the postmark/private delivery service date on the envelope.
    2. Change the Received Date to the date on the envelope.
    The postmark/private delivery service date is on or before the due date of the return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 1. Circle the Received Date on the return.
    2. Edit the postmark/private delivery service date in its place.
    Envelope is attached to the return 1. The postmark/private delivery service date is later than the due date of the return .
    2. There is no date stamp on the document (or cash register stamp date).    		 Edit the postmark/private delivery service date on the return as the Received Date.
    Envelope is attached to the return 1. The return is not timely.
    2. The envelope is not addressed to IRS.    		 Do not change the Received Date.
    No envelope is attached to the return No postmark/private delivery service date is indicated on a return with a delinquent received date Do not change the received date on the return.
    A received date has been entered by means other than a normal received date stamp (e.g., handwritten, typed, cash register stamp date, etc.)   Underline the received date in red, orange, or brown.
    The received date is entered in other than the center portion of the return   Edit it to the center portion of the return.
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡   ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. A received date that has been stamped or written by a District Office or a Revenue Officer will be considered a valid IRS received date.

  8. For the latest information regarding date stamping, the use of postmarks, private delivery service, and processing of private metered mail, consult IRM 3.10.72.7.3 Attaching Envelopes to Returns and Documents. ,

3.11.249.9  (01-01-2009)
♦Computer Condition Codes♦

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

  2. Edit the Computer Condition Code(s) in the upper left margin of the Form 8752.

3.11.249.9.1  (01-01-2009)
♦Computer Condition Code "D" —Reasonable Cause for Failure to Pay Taxes Timely♦

  1. CCC "D" will no longer be edited by Code and Edit examiners. If the taxpayer requests an abatement for Failing to Pay Timely when the return is submitted, send Letter 1382C (Penalty Removal Request Incomplete), which will inform the taxpayer of the proper procedure to follow to request abatement, if, and when a penalty is assessed.

  2. In the cases of a disaster, Code and Edit examiners will be provided with the coding procedures to follow.

3.11.249.9.2  (01-01-2009)
♦Computer Condition Code "F" —Final Return♦

  1. Edit CCC "F" when the taxpayer gives a positive indication that they are not liable for filing future returns. Notations such as (but not limited to) the following:

    1. Final

    2. Deceased

    3. Out-of-Business

    4. Liquidation

    5. Exempt under IRC 501(c)(3)

    6. Dissolved

    7. IRC section 444 was terminated.

      Note:

      In cases regarding Forms 8752, any references to a "terminating event" may also apply in determining whether this is a final return.

3.11.249.9.3  (01-01-2009)
♦Computer Condition Code "G" —Amended Return♦

  1. An amended return may be identified by checking the "Amended" box and/or by such words as "Supplemental" , "Duplicate" , "Additional" , or any other positive indication that the taxpayer has filed previously. Filing a "Copy" of a return is not sufficient reason to label a return "Amended" unless accompanied by a positive statement from the taxpayer.

    Note:

    Forms 8752 do not have an "Amended" box. Taxpayers are advised to file an amended Form 8752 and write"Amended Return" across the top to correct an error in a Form 8752 already filed.

  2. Examine the return for attachments. Do not separate any related attachments from the return that the taxpayer has submitted to explain the reason for the amended return. This information will be used by Accounts Management. Detach any unrelated documents and route them to the appropriate function, using Form 4227. Edit "Action Trail." on the return.

  3. Always edit a CCC "G" on an amended return.

  4. The following conditions or restrictions have been placed on the use of Computer Condition Code (CCC) "G" :

    1. The return has to be perfected for Name Control, EIN, Tax Period and Received Date,and Signature (Forms 8752).

    2. No other codes may be used with CCC "G" except "U" and "W" .

      Note:

      Neither the Computer Condition Code "3" (No Reply to Correspondence) nor any of the Error Resolution System (ERS) Action Codes apply to Forms 8752 processing.

  5. If the return has either a TC 59X or Integrated Collection System (ICS), which was entered by Compliance Services and any indication of an amended return, process the return as an original. Do not edit CCC "G" on these returns.

  6. EXCLUSIVE TO FORMS8752: DO NOTedit CCC"G" if the taxpayer clearly indicates that the return is used to submit a subsequent payment or did not include the payment with the original return filed. Edit CCC "U" on the return, prepare and notate on Form 4227, "Research-Missed or Subsequent Payment" , and route to Rejects. They will research to determine if the original return was posted and if the payment was misapplied.

    Note:

    DO NOT CORRESPOND FOR ANY MISSING INFORMATION.

3.11.249.9.4  (01-01-2009)
♦Computer Condition Code "O" —Manual Refund♦

  1. CCC "O" is entered when a Pre-Settlement Manual Refund was made and a Form 3753, Form 5792, or Form 12857 is attached. Verify that the Name Control, EIN, and Tax Period on the return is the same as the data on the form.

    1. If a completed Form 3753, Manual Refund Posting Voucher, or Form 5792, Request for IDRS Generated Refund (IGR), or Form 12857, Refund Transfer Posting Voucher, is attached to the return, verify that the Name Control, EIN, and Tax Period on the return is the same as the data on the form. Edit CCC "O" if the data is the same.

    2. If the data is not the same, refer the return and the attachment to your supervisor. The supervisor will send the return and the attached Form 3573, 5792, or 12857 back to the originating function.

3.11.249.9.5  (01-01-2009)
♦Computer Condition Code "R" — Reasonable Cause for Failing to Timely File Return♦

  1. If the taxpayer requests an abatement for Reasonable Cause for Failing to Timely File Return when the return is submitted, send Letter 1382C (Penalty Removal Request Incomplete), which will inform the taxpayer of the proper procedure to follow to request abatement, if, and when, a penalty is assessed.

  2. In the cases of a disaster, Code and Edit examiners will be provided with the coding procedures to follow.

3.11.249.9.6  (01-01-2009)
♦Computer Condition Code "U" —Unprocessible Return♦

  1. Unprocessible Return (numbered returns only). Edit this code when the return is too incomplete or illegible for processing. When CCC "U" is edited, continue perfecting the return to the extent possible. See 3.11.249.6 for unprocessible conditions.

  2. Edit on misblocked and non-ADP returns.

3.11.249.9.7  (01-01-2009)
♦Computer Condition Code "W" —Return Cleared by Statute♦

  1. Edit the code if the statute return is stamped "Cleared by Statute" .

  2. This code will prevent the validity check on returns which are filed two years and nine months after the due date if it has been previously cleared by Statute Control. Also, edit this code on a statute return which bears a TC 59X indicating that the return was secured as a result of Delinquency Investigation, whether or not cleared by Statute Control.

    Note:

    Edit CCC "W" only when the above conditions apply and the return processing date is two years and nine months after the return due date or received date, whichever is later.

  3. For additional information, refer also to instructions under 3.11.249.13.1, Statute Control Returns.

3.11.249.9.8  (01-01-2009)
Computer Condition Code "X" —Refund Freeze Code

  1. On no reply cases for a signature, edit CCC "X" on refund returns. This freezes the release of an overpayment (i.e., freezes the module from refunding or offsetting credit out) at the master file.

    Note:

    IMPORTANT : With other BMF returns, the "X" freeze may permit the Service to comply with the taxpayer's request to transfer a part of the refund applied to another account. This is NOT the case with Forms 8752. By law, money held in the taxpayer's Form 8752 (escrow) account, or any money earmarked for that purpose, is not permitted to be transferred to another account. (It is, for this reason, that we are unable to comply with the official text recommendations made by the BMF Consistency Task Team.)

3.11.249.9.9  (01-01-2009)
♦Computer Condition Code "7" —Reasonable Cause Statement Denied♦

  1. CCC "7" is no longer edited by Code and Edit examiners. (See also IRM 3.11.213.15.2 and 3.11.213.15.7 regarding CCCs "D" and "R" , respectively.)

3.11.249.10  (01-01-2009)
Taxpayer Pre-computed Penalty and Interest Code (P/I Code)

  1. The P/I Code is used when the taxpayer has paid an amount for penalty and/or interest even though the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Code will allow the computer to compute penalty and/or interest when it normally would not.

  2. Edit Code "1" to the right of the Office of Management and Budget (OMB) number (upper-right corner) on Form 8752 when precomputed delinquency penalty and/or interest is shown.

3.11.249.11  (01-01-2009)
Personal Service Corporations

  1. Personal Service Corporations (PSC’s) are NOT required to file Form 8752. In the case of a PSC, such corporations must complete Schedule H (Form 1120), Section 280H Limitations for a PSC, to figure the minimum distributions and the maximum deductible amount, if applicable.

    1. If the taxpayer clearly indicates on the return or attachment that they are a PSC, edit CCC "F" on the return and continue processing (unnumbered only).

    2. If a determination cannot be made, route the return for IDRS (BMFOL or MFTRA) research.

    Note:

    Other indications that the taxpayer is a PSC are entity information. Some examples are business names which indicate professions in the area of health (i.e., "Dr." present in entity), law, engineering, architecture, accounting (i.e., "C.P.A." present in entity), actuarial science, performing arts, or consulting.

  2. If any of the above occupations are listed, route the return for IDRS research.

  3. If research verifies that the taxpayer is a PSC (Tax Class 6, MFT 02, and Document Code 11, Filing Requirement 19 and TC 054 is present), take the following action:

    1. If numbered, edit CCC "U" and route to the Reject function using Form 4227. Notate on Form 4227 "PSC not required to file Form 8752 per IRC 444(c)(2)."

    2. If unnumbered, edit CCC "F" and continue processing the return. Notify the taxpayer, only if they have not noted on the return or attachment that they are a PSC, they are not required to file Form 8752. However, they must complete Schedule H (Form 1120), Section 280H Limitations for a PSC, to figure the minimum distributions and the maximum deductible amount, if applicable.

    Note:

    A REPLY FROM THE TAXPAYER IS NOT NECESSARY. ALSO, DO NOT SEND THE RETURN BACK.

  4. If research verifies that the taxpayer is not a PSC, or has not changed the Form 1065 or 1120S to a calendar year (XXXX12), continue processing the return.

3.11.249.12  (01-01-2009)
Perfecting Data on Form 8752

  1. This section provides instructions for perfecting the money amounts, deferral ratios, and other numerical data to be transcribed from Form 8752. See Exhibit 3.11.249.1 for transcription lines.

3.11.249.12.1  (01-01-2009)
Line 1—Net income for base year

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.2  (01-01-2009)
Line 2—Applicable payment made during base year

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.3  (01-01-2009)
Line 3—Base year deferral ratio

  1. Edit a three-digit code for the percentage on the dotted portion of Line 3 (to the left of the taxpayer’s entry). There are eleven codes you can enter: 083, 167, 250, 333, 417, 500, 583, 667, 750, 833, 917. These represent deferrals of one to eleven months (i.e., with "083" representing a deferral of one month and "917" for a deferral of eleven months, respectively). DO NOT put a decimal place in front of these numbers.

  2. The "Deferral Ratio" is the three-digit code representing the allowable deferral percentage for the taxpayer’s deferral period. The term "Deferral Period" means the number of months that occur between the last day of the elected tax year and the last day of the required tax year. For example, if the taxpayer elected a tax year ending on September 30 and his/her required tax year is the calendar year, the deferral period would be 3 months (the number of months between September 30 and December 31). (If the deferral period is 3 months, edit "250" as the Deferral Ratio.) Using the same example (i.e., if the required tax year is the calendar year), the deferral period would be 2 months for an elected tax year ending in October, while the deferral period would be one month for an elected tax year ending in November. (Edit "167" for the Deferral Ratio for a deferral period of 2 months. For a deferral period of one month, edit "083" .)

    Note:

    By law (Tax Reform Act of 1986), the "required" tax year for corporate and partnership entities is a calendar year (ending in December). Statutes may dictate otherwise in circumstances permitting the taxpayer to file fiscal-year returns for a legally acceptable business purpose.

  3. Generally, the deferral percentage will not exceed 25%. However, entities with taxable years for 1986 and prior to make the section 444 elections can retain that taxable year even if the deferral period was more than 3 months. If the taxpayer claims an amount greater than 25%, but less than 91.7%, accept taxpayer’s amount. If the taxpayer claims more than 91.7%, allow only 91.7%.

    Note:

    Before you lower the rate, multiply Line 1 by the amount shown on Line 3 to make sure the taxpayer actually used that rate. For instance, if a taxpayer put $1,000 on Line 1 and 83 percent on Line 3, but came up with an amount of $83.00, he did not multiply by 83%, but rather, 8.3%. In this case, you would edit "083" .

  4. The taxpayer may either round the percentage (i.e., put down 8% or 17% or 67%, rather than 8.3% or 16.7% or 66.67%), or carry the percentage to multiple places (8.33% or 16.67% or 66.67%). In either case, you will enter "083" or "167" or "667" .

  5. If the taxpayer enters a percentage that does not approximate the allowable percentages, enter the acceptable code that is:

    1. Lower than the percentage claimed, and

    2. Closest to the percentage claimed (seeexample below).

      Example:

      If the taxpayer put down 12%, edit "083" . If the taxpayer put down 21%, edit "167" .

    3. If the taxpayer puts down an amount on Line 3 that is less than 8 percent, correspond to ask what his/her deferral period is. Edit the appropriate code based on the taxpayer’s answer. If there is no response, enter "083" .

    Exception:

    Edit lowest percentage of "083" when taxpayer enters "0" (zero), dash (-), none, N/A, or leaves blank. (See also instructions in (6), below.)

  6. If the taxpayer shows a deferral ratio in the form of a decimal rather than a percentage, convert to a percentage.

    1. Example 1: If the taxpayer enters .17 as the deferral ratio, edit code "167" .

    2. Example 2: If the taxpayer enters .08 as the deferral ratio, edit code "083" .

  7. IMPORTANT: If the taxpayer checked the box on Line B ("If this is the entity’s first tax year, skip lines 1 through 10, enter -0- on line 11, and check this box" ), NO editing of an entry on Line 3 is necessary. (Line B is the second line item located immediately beneath the entity portion of Form 8752.)

3.11.249.12.4  (01-01-2009)
Line 4—Line 1 deferred amount

  1. This line is the result of multiplying Lines 1 and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.5  (01-01-2009)
Line 5—Line 2 deferred amount

  1. This line is the result of multiplying Lines 2 and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.6  (01-01-2009)
Line 6—Applicable payments made during the deferral period of the base year

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.7  (01-01-2009)
Line 7—If the entity had a 12-month base year …

  1. This line can be the result of:

    1. Subtracting Line 6 from Line 5, or

    2. In the case of a short base year, the taxpayer enters an amount based on the applicable payments made during the deferral period of the applicable election year.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.8  (01-01-2009)
Line 8—Net base year income

  1. This line can be the result of:

    1. Adding lines 4 and 7, or

    2. In the case of a short base year, subtracting Line 7 from Line 4.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.9  (01-01-2009)
Line 9a—Calculation of required payment

  1. This line is the result of multiplying Line 8 by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.10  (01-01-2009)
Line 9b—Required payment

  1. This line will be either the amount shown on Line 9a or $0, which is the result of multiplying Line 8 by the applicable tax rate.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.11  (01-01-2009)
Line 10—Net required payment balance

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ number, in which case enter zero.

3.11.249.12.12  (01-01-2009)
Line 11—Required payment due

  1. There will be an amount on this line when Line 9b is greater than Line 10.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ put the refund/balance due amount on the wrong line or on both. In that case, "X" out the amount placed on the wrong line and/or place the amount on the correct line.

3.11.249.12.13  (01-01-2009)
Line 12—Refund payments

  1. There will be an amount on this line when Line 10 is greater than Line 9b.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ put the refund/balance due amount on the wrong line or on both. In that case, "X" out the amount placed on the wrong line and/or place the amount on the correct line.

  3. Refunds of 1 million dollars or more:

    1. If line 12 is 1 million dollars or more, use Computer Condition Code "U" and route to Rejects with Form 4227.

    2. Note "Manual Refund" on Form 4227.

  4. If Line 12 is $1 million or more and Form 8302, Electronic Deposit of Tax Refund of $1 Million or More , is attached, follow the instructions in "a." above, but do NOT detach Form 8302.

3.11.249.12.14  (01-01-2009)
Transfer of Credits

  1. SPECIAL TO PRIOR-YEAR RETURNS: If the taxpayer files prior-year returns and the payment(s) posts to one Form 8752 tax period module, initiate Adjustments action to move the money to the correct tax period(s)

    Note:

    We realize these procedures can be followed by Document Perfection only if the taxpayer makes a notation on the form regarding these circumstances.

    1. Prepare Form 3465, Adjustments Request.

    2. Notate on the Form 3465 (under "Other" ) that the taxpayer filed a prior-year return(s) and the payment(s) for the return(s) must be credited to the correct tax period(s).

    3. Attach a photocopy of the return(s) to the Form 3465 and route to Adjustments for the appropriate action.

  2. DO NOT move money to another type of tax module (e.g., Form 1120S).

3.11.249.13  (01-01-2009)
Special Returns

  1. This section contains information for handling of amended returns, foreign returns, re-input documents, secured returns, and statute control returns, and non-taxable returns with no line entries.

3.11.249.13.1  (01-01-2009)
♦Statute Control Returns♦

  1. Any return with a received date that is 2 years and 9 months or more after the Return Due Date is a potential statute control return.

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

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

    • Compliance (6020(b)) returns

      Note:

      This condition does not apply to Forms 8752. Collection will not prepare (nor perform follow-up action regarding) any of these returns.

    • A return with TC 59X or ICS notated on the face of the return

    • Returns that are substitute returns prepared by Examination (SFR in top margin) with document Form 13133, Expedite Processing Cycle, attached.

      Note:

      This condition does not apply to Forms 8752. Examination will not prepare (nor perform follow-up action regarding) these returns.

  4. Statute returns are unprocessible until they are cleared by Statute Control.

    If... Then...
    The return is numbered 1. Edit Computer Condition Code "U" on the return.
    2. Attach Form 4227 and check the box for Statute Control Unit.
    3. Leave the return in the batch and continue processing.
    The return is unnumbered 1. Do not continue processing.
    2. Pull the return from the batch.
    3. Attach Form 4227 and check the box for Statute Control Unit.

  5. Approved statute control returns will be stamped "CLEARED BY STATUTE" . If "CLEARED BY STATUTE" stamp is present, edit CCC "W" on the return and continue processing.

  6. Returns which have a due date or received date considerably earlier than the current processing date may be near the statute of limitations expiration date. You are responsible for identifying and taking necessary action on potential statute returns.

  7. The return format must correspond to the current year format. Overlay a prior revision with the form or renumber the transcription lines; reconstruct the return to the standard size if necessary.

3.11.249.13.2  (01-01-2009)
♦Amended Returns♦

  1. See IRM 3.11.249.9.3, entitled, Computer Condition Code"G" Amended Returns, for instructions for processing amended Forms 8752.

3.11.249.13.3  (01-01-2009)
Non-Taxable Returns Reflecting No Line Entries

  1. Non-taxable returns reflecting no-line entries usually involve the following returns:

    1. First tax year Forms 8752, where form instructions advise the taxpayer to check the box on Line B, skip Lines 1 through 10, and enter "0" (zero) on Line 11.

    2. Final tax year Forms 8752, where the taxpayer files to claim a full refund of the net required payment balance because of a terminating event (i.e., election filed under IRC section 444 was terminated). Form instructions advise the taxpayer to check the box on Line C, skip Lines 1 through 9a, enter "0" (zero) on Line 9b, and complete the rest of the form.

3.11.249.13.4  (01-01-2009)
Foreign Returns

  1. If the return has an address outside of the 50 states and the District of Columbia (APO or FPO address is not considered foreign), follow the procedures below.

    Note:

    The following two paragraphs apply to all service centers except the Ogden Submission Processing Center (OSPC).

    1. If numbered, edit CCC "U" on the return.

    2. Prepare Form 4227, Intra-SC Reject or Routing Slip, and indicate that an 86c letter should be prepared and the return sent to the Ogden Submission Processing Center (OSPC).

    3. If unnumbered, route the return to the Correspondence function for transmittal to OSPC.

    4. If the return is not date stamped, follow procedures in IRM 3.11.249.8.

Exhibit 3.11.249-1  (01-01-2009)
Transcription Lines for Form 8752, Required Payment or Refund under Section 7519

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Exhibit 3.11.249-2  (01-01-2009)
Examples of Frivolous Returns and Claims

Potential Frivolous Return for Examination Review
Alleged Churches/First Amendment Income from non-religious sources and may claim a vow of poverty.
Altered Form Altering any or all line items with the intent of facilitating non-compliance with the tax laws.
Altered Jurat/UCC 1-207 Return contains income and deductions but the jurat has been altered or stricken. May include reference to UCC 1-207 or a statement that the return was not signed under penalties of perjury.
Amended Returns/Form 843 Claim Amended return or a Form 843 filed to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument.
Challenges to Authority/Due Process Questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. Argues that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.
Challenges to Authority/Title 26 or "law" in Other Documents Argues that Title 26 of the United States Code is not law because it was never enacted as named
Disclaimer Submits a disclaimer stating, "disclaims the liability for the tax due" , making the liability on the return zero.
Fifth Amendment Assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.
IRS is a Private Organization/Collects Tribute, Not Taxes Argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc., which was incorporated in Delaware in 1933, it is a collection agency for the Federal Reserve Bank, or is part of the United Nations and is clandestinely leading the tax-paying public into a "new world order."
Obscene, Vulgar, Harassing Submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.
Protest Against Government Action/Inaction Argues that refusal to file or pay is justified because they disagree with government policies or spending plans.
Sixteenth Amendment Argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment.
Taxes are Voluntary/Law Does Not Require Submits a return, amended return or correspondence that argues income taxes are voluntary.
U.S. v. Long Submits a return with zero money amounts much the same as the Zero Return category and U.S. V. Long is referenced. See NOTE in Zero returns below.
Unsigned Returns The individual completes a return but fails to sign, A statement indicating disagreement with the tax system is attached or added to the return.
Valuation Income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.
Zero Returns Submits a return with zero money amounts. A statement is attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income.
Note: Returns having only zeros, no entries, are blank, or indicate "None" ,"Not Liable" , etc. with no evidence of frivolous arguments are not to be considered as frivolous returns.
Other All others. This category includes non-filer accounts resulting from initial compliance check such as cross-reference TINs.
Note:Frivolous arguments citing "Collection Due Process" (CDP) should be reviewed by Collections for possible referral to Appeals. Refer to IRM 5.19.8.4, Collection Appeal Rights Procedures, for additional information.
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