The text is organized to help find corrective procedures quickly and to provide, to the extent possible, all necessary procedures in one place. The text is organized as follows:

This text provides sufficient information to correct most error conditions. It may be necessary to refer at times to the instructions in IRM 3.11.16, Corporate Income Tax Returns. If there is a discrepancy between the instructions contained in IRM 3.11.16 and those in IRM 3.12.16, contact your Headquarters Analyst on the Submission Processing Web Site http://hqnotes1.hq.irs.gov/sphome.nsf and continue to follow the instructions in IRM 3.12.16. If there is a conflict between IRM 3.12.16 and another IRM or Job Aid, IRM 3.12.16 takes precedence until the conflict is resolved.

"Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all."

The mission of the Wage and Investment (W&I) Division is to provide Wage and Investment customers top quality service by helping them understand and comply with applicable tax laws and to protect the public interest by applying the tax law with integrity and fairness to all.

The Restructuring and Reform Act of 1998 (RRA98), Section 3705 provides identification requirements for all IRS employees working tax-related matters. IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face and written contact. In addition, a telephone number is required on all taxpayer correspondence. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax-related matters.

All IRS employees, in the field, national and regional offices, who communicate, by telephone, correspondence or face to face, with taxpayers or their personal authorized representatives, on tax-related matters, are required to provide (at a minimum) the following information:

The IDRS number is automatically generated. If it is not generated, or a handwritten note is prepared, the badge identification (ID Card) number must be used. Toll-free employees may also provide their location for identification purposes. Facsimiles to taxpayers on tax-related matters, are considered manually-generated correspondence and must include the required information.

Correspondence, whether sent directly to the taxpayer or to the taxpayer's personal authorized representative, must contain the required information in (2) above.

When a taxpayer requests to speak with a specific employee who previously handled his or her inquiry or request, or complains about the level of service previously provided, every attempt should be made to resolve the taxpayer's inquiry. If the issue cannot be resolved, the employee should refer the inquiry using established procedures to his or her manager.

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

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

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

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

When contacting taxpayers by telephone, you must be sure you are speaking with the taxpayer or authorized representative before disclosing tax information. See IRM 21.1.3.2.3, Required Taxpayer Authentication, and IRM 21.1.3.2.4 Additional Taxpayer Authentication. Also, before leaving a message on a taxpayer's answering machine, see IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail.

Prior to faxing confidential information to the taxpayer, review fax procedures contained in IRM 11.3.1.10, Facsimile Transmission of Tax Information.

During taxpayer contact, refer taxpayers to the Local Taxpayer Advocate (see IRM Part 13, Taxpayer Advocate Service) when the following criteria is met:

If you are able to resolve and close the TAS issue on the same day as the taxpayer contact, do not refer the inquiry to TAS. The definition of "same day" is within 24 hours. There will be times you can completely resolve the issue within 24 hours. There will also be times that although you cannot completely resolve the issue within 24 hours. If you have taken steps within 24 hours to resolve the taxpayer's issue, these cases also meet the definition of "same day" . Do not refer these cases to TAS unless the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS following local procedures.

The National Taxpayer Advocate and the Commissioner, W&I Division have reached an agreement outlining the procedures and responsibilities for processing Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete a case transaction rests with the W&I Division.

In preparation for a case being referred to a W&I Division function, the TAS employee is responsible for:

W&I Division is responsible for:

For further information, refer to IRM 13.1.19, TAS Operations Assistance Request (OAR) Process and IRM 13.1.19.2, TAS Service Level Agreements (SLA).

Internal Revenue Code (IRC) 6702 imposes a penalty for frivolous tax returns or specified frivolous submissions. A frivolous argument is used for the purpose of expressing dissatisfaction with the substance, form, or administration of the tax laws by attempting to illegally avoid or reduce tax liabilities. Recognized frivolous arguments made by business include, but are not limited to, the examples in IRM 4.10.12.1.1, Frivolous Arguments, and also shown in Exhibit 3.12.16-12, Frivolous Return Criteria.

A complete list of frivolous positions/arguments can be found in Notice 2008–14.

Review the return to determine whether it appears to be a frivolous return.

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

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

Follow the instructions below for processing "CIS" returns.

Tax returns can be received via fax as part of return perfection even if a taxpayer signature is required. In circumstances where contact with the taxpayer has been made and documented, fax signatures are acceptable.

Contact with the taxpayer may be by telephone or correspondence. Follow local procedures to determine which method of contact will be used.

Code and Edit examiners will indicate the fax paragraph on the Form 3696, Correspondence Action Sheet, to advise taxpayers of the option to fax their response.

Some Submission Processing Centers have developed local use Desk Procedures. Such procedures are only to be used:

Team managers must have a signed approval on file from the responsible Operation Manager on all Submission Processing Center Desk Procedures.

All existing local information and procedural issuances should be reviewed periodically by the Operation Manager level (at least 2 times a year or with each IRM revision) to ensure conformance with Headquarters procedures (make necessary changes, secure necessary approvals, etc.).

Emergency problems should be telephoned to the Headquarters Analyst if the problem cannot be resolved and is identified as a work stoppage.

An "in-care-of" name can be identified by the words "in care of" or the symbols "c/o" or "%" (percent). Correct "in-care-of" names by researching IDRS using Command Code (CC) INOLES.

CC MFREQ Instructions
Enter: MFREQCOO-1234567
00 000000 XXXX

Document Perfection is responsible for identifying refunds and for initiating requests for manual refunds.

Expeditious processing of refund returns is critical if the 45-day period is about to expire.

Taxpayer Advocate Service (TAS) Manual Refunds – any return hand walked by a W&I Submission Processing (SP) liaison for Taxpayer Advocate Service (TAS) as a manual refund should be processed by a Lead Tax Examiner or designated tax examiner using the following procedures:

If the taxpayer writes a question or request for assistance on the return itself, make a photocopy of the question/request and the taxpayer’s Employer Identification Number (EIN), name and address. Route this information to the appropriate function.

There are four general types of errors which cause a record to print on the error register.

Field validity errors are indicated on the error register by an asterisk preceding the field in error. This occurs when a field does not contain required data or when the contents of the field does not meet the requirements for that field. See Figure 3.12.16-1.

Figure 3.12.16-1

Missing sections are identified by a (*) single asterisk preceding the section number. This indicates a required section was not transcribed and required data shall be entered with Action Code "6" . Do not delete the section with Action Code "4" . See Figure 3.12.16-2.

Figure 3.12.16-2

Extraneous sections are identified by a single pound sign (#) preceding the section number. Correct as follows:

Terminus Error - Erroneous size field or section or a non-numeric character in a numeric field or the format of the section is incorrect.

Integrated Submission and Remittance Processing (ISRP) Error - An Error detected by the System Edit run. A pound sign (#) and the corresponding error number is printed to the left of the section number. All fields of a section must be examined when this condition exists. If Section 01 of a return is coded, then examine the tax data base section for error to ensure the return data is for the taxpayer whose name control is in Section 01. This error will be shown on the error register as follows. See Figure 3.12.16-4.

Figure 3.12.16-4

Even though one or more sections of a record are coded, the validity and consistency checks necessary for the record are made for all sections.

Corrective action for fields in error shall be taken as instructed in the applicable chapter of IRM 3.12.16.

Math Errors are indicated by the presence of an underprint or data present in Sections 11 or 13 on the error register. See Figure 3.12.16-5.

Figure 3.12.16-5

Under the ISRP system, error codes are displayed by a 4 digit field. Validation remains the same but the error is reported by the display of a numeric character in a specific position of the field. The positions and the valid characters are as follows:

Action Codes are entered on the error register to alert the computer to the type of correction being attempted. The table below lists the Action Codes and describes when each Action Code can be used.

When a Computer Condition Code (CCC) is not present, and is required, it must be entered in the dotted portion of the income section, Page 1 (Lines 1–11).

A maximum of ten codes can be entered, as required.

A math error will occur when the taxpayer provides incorrect information (or there is an coding or transcription error) in any of the following fields:

Take the following action during the preliminary review process:

On Controlled Group Form 1120-REIT and/or Form 1120-RIC returns with tax periods beginning after December 31, 1986, thru November 30, 1988, the computer will not compute the 5% Additional Tax if applicable.

Prepare Letter 3833C (or applicable letter) to notify the taxpayer of errors or adjustments to the return when a TPNC will not be sent.

Prepare Letter 3833C (or applicable letter) when:

An error record must be rejected with Action Code "3" when:

Reject an error record with Action Code "3" when it is international related and one of the following conditions is present:

Reject an error record with Action Code "3" when one of the following situations are present:

When a record is rejected, it will be necessary to prepare one or more of the following:

Use Transaction Code (TC) 599 with Closing Code (cc) 17 for Form 1120 series returns. Input TC 599 with cc 18 using Command Code FRM49 if the form is being processed after the program completion date and TC 599 with cc 17 has not already been input.

The following table provides instructions for preparing and handling the Form 3892, Corporation Edit Sheet. See Figure 3.12.16-7.

Figure 3.12.16-7

In a mixed section with both single and double alpha fields, the single alphas must have a space between the AFD and the money amount.

Section 01 shall always be present.

It cannot be deleted or added. Action Codes "4" and "5" will never be used.

The error indicators that apply are the asterisk, underprint, ISRP Errors and Terminus.

Fields 01–A, 01–B and 01–C are fixed fields and all positions shall be accounted for. The remaining fields are variable in length.

The record can be accepted (Action Code "0" ), rejected (Action Code "3" ), or changed (Action Code "6" ).

Form 1120-FSC is processed in OSPC only.

Only Section 01 will print on a "G" coded return.

All Forms 1120-FSC/L/ND/PC/SF require manual computations except "G" coded returns. See IRM 3.12.16.34 , Manual Computations, for procedures.

The chart below shows Section 01: Field Designator, Title, Field Length and Location on the Return.

Field 01–A can never be changed with Action Code "6" . If the remittance was transcribed incorrectly take the following action:

This field will be blank for non-remittance returns, overpaid returns and remittance returns processed through the Integrated Submission and Remittance Processing (ISRP)/Residual Remittance Processing System (RRPS).

Field 01–A will asterisk if present on a non–"G" coded return when Total Tax Computed is zero or blank, or if Total Tax Taxpayer is zero or blank. Take the following action:

On the loop, Field 01–A will not asterisk on Forms 1120-FSC/L/ND/PC/SF.

This is a four position field and is used for either the check digits (two letter code preprinted on the label which is assigned to the taxpayer) or the name control (the first four significant characters of the corporation except when the first word is "the" and is followed by more than one word).

This field must contain one to four characters. The valid characters are:

The name control field may contain one to three blanks.

Take the following action:

All returns and documents input through ISRP shall have the Name Control and Tax Period validated on the EIF (Entity Index File).

Field 01–B (Name Control) and/or Field 01–D (Tax Period) will underprint if the transcribed field and the EIF Name Control and/or Tax Period don’t match.

Compare the entries in Field 01–B (Name Control) and 01–C (EIN) with the return, to determine the corrective action necessary.

From the research determine the correct EIN and name control for the return on the error register. Take the following action:

The EIN is located in the box indicated on the return or on the preprinted label.

This field must:

Correct all coding and transcription errors.

If EIN is changed from the one the taxpayer used, issue Letter 3875C as a non-suspense letter to the address on the return. Continue processing the return.

SUSPENSE CORRECTION:

Field 01–D contains the ending month and year of the tax period in YYYYMM format.

The following procedures address invalid tax periods for EARLY FILERS.

A statute control document is a document that is filed for a barred period. A barred period is a taxable period on which statutory limitations are placed for allowing refunds, credits, or for assessing additional taxes.

A claim for refund must be filed or additional tax assessments must be made not later than three years from the date the original return was filed or two years from the date the tax was paid.

Process non– "G" coded returns as follows:

Process "G" coded returns as follows:

On both non– "G" and "G" coded returns both Fields 01–D and 01–F (Computer Condition Codes) will asterisk if the processing date is less than two years after the Return Due Date and a CCC "W" is present.

Do not send to the Statute Control Group any returns secured by Compliance or any return that is a substitute return prepared by Examination (SFR in top margin with Form 13133, Expedite Processing Cycle, attached). See IRM 3.0.273, Administrative Reference Guide and enter CCC "W" if applicable.

If there is an indication that the return has already been cleared through the Statute Control Group within the last ninety days, then enter CCC "W" . Code and Edit will enter CCC "W" if the return has been cleared by Statute.

If no indication, reject the record, attach Form 4227 to return and route to Statute Control Group.

If it appears that a rejected document will not reach the Statute Control Group in time for clearance, then photocopy Page 1 of the return, stamp the photocopy "Photocopy—Do not process" and forward it to the Statute Control Group.

Compare the EIN on the return with Field 01–C (EIN) and apply the following corrective procedures when the tax period underprints.

If the tax period on the return is for a short period, "Final" , "Change in Accounting Period" or "Initial" , proceed as follows:

If the return covers a full 12 months and the FYM in Field 01–D (Tax Period) does not agree with the underprint, research using IDRS.

Initiate correspondence with the taxpayer, requesting a clarification of the accounting period, if the posted TC 150s are for various tax periods (no pattern), or posted TC 150s are all for the same FYM but disagree with the tax period of the return. Telephone contact may be used.

The received date cannot be earlier than:

The received date must be printed in YYYYMMDD format, and it must be all numeric. If no received date is stamped on the return, Code and Edit may edit it in the dotted portion of the Deduction Section.

Input the correct received date if Field 01–E (Received Date) asterisks.

It must be equal to or earlier than the processing date. The year-month combination must be equal to or later than the tax period year-month. Otherwise, Field 01–E (Received Date) will asterisk.

Check for coding and transcription errors. Compare the date with the date stamped or edited on the face of the return and take the following action:

See IRM 3.12.16.2.3 for a list of valid Computer Condition Codes (CCCs) and their descriptions.

Field 01–F (CCC) can contain up to 10 positions.

The table below identifies the forms and valid codes on the raw register.

Enter CCC "8" to suppress penalties of estimated tax for Forms 1120-FSC/L/ND/PC/SF.

CCC "L" is valid on Forms 1120-FSC/L/PC. It must be entered when a taxpayer writes "Section 6114 Election" on the return or attaches Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), to the return.

Take the following action to correct Field 01–F (CCC):

CCC "O" is entered if a quick refund has been issued or if a manual refund has been issued (e.g., $1 million refund). Also a Reserve Code "1" must be entered when a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Field 01–F will asterisk if CCC "W" is present and the processing date is less than two years after the return due date. Field 01–D, (Tax Period), will also asterisk. See IRM 3.12.16.3.6 for corrective procedures.

CCC "Y" is used to update the Tax Period at Master File; however, it also indicates the return must be manually computed.

If CCC "Y" is present without Action Code "0" or "1" , Field 01–F will continue to asterisk. See IRM 3.12.16.34 , Manual Computations, for corrective action.

CCC "3" will be entered for no reply cases and used as an indicator for Master File to suppress credit interest.

This field must be blank if prior to the return due date and in YYYYMMDD format if significant and after the return due date. It cannot be later or the same as the current processing date. It cannot be earlier than the received date.

If there is an indication that Entity Control has assigned an EIN to the return, enter the Entity Assignment Date (found in the lower left corner of Page 1 of the return) in Field 01–G, if it is later than the received date and return due date. Field 01–G (Correspondence Received Date) will be invalid if Entity assigned the EIN and the Entity Assignment Date is before the due date of the return. Blank Field 01–G (Correspondence Received Date).

If no reply to correspondence, edit CCC "3" in Field 01–F (CCC). If an overpayment is indicated on Forms 1120-FSC/L/ND/PC/SF, input CCC "X" to freeze the refund.

The Paid Preparer Checkbox is located next to the taxpayer signature area. The Paid Preparer Checkbox is used to indicate whether or not the taxpayer has elected to allow the Paid Preparer to answer questions about the taxpayer's return as it is processed.

The Paid Preparer indicator is located on Page 1, lower right margin, next to the Discuss with Preparer Checkbox, Forms 1120-FSC/L/ND/PC/SF.

ISRP will enter a "1" if the Paid Preparer Checkbox, Yes is checked.

Correction Procedures:

The Paid Preparer Phone Number is located at the bottom of Page 1, Forms 1120-FSC/L/ND/PC/SF below the Paid Preparer's EIN at the bottom right hand corner.

Valid Characters — Field 01–I must be alpha or numeric or a combination of alpha, numeric and/or blank characters, not to exceed 10 characters.

Invalid Condition — Field 01–I is invalid if other than alpha, numeric and/or blank.

Correction Procedures:

The Preparer's Social Security Number (SSN) is located at the bottom of Page 1, Forms 1120-FSC/L/ND/PC/SF. Data may or may not be present in Field 01–J.

Valid Characters – Field 01–J can be blank or numeric. If numeric, it cannot be all zeros and it cannot be all nines.

Invalid Condition – Field 01–J is invalid if any of the following conditions are present:

Correction Procedures:

The Preparer EIN is located at the bottom of Page 1, Forms 1120-FSC/L/ND/PC/SF.

Valid Characters – This field can be blank or numeric. It cannot be all zeros or all nines.

Invalid Condition – This field is invalid if it is all zeros, all nines or less than nine characters.

Correction Procedures:

The Entity Underprint Code will force the computer to bypass the underprint and accept the transcribed entry for Fields 01–B (Name Control) and/or 01–D (Tax Period).

The underprint in Field 01–B (Name Control), and/or Field 01–D (Tax Period), will not clear until either an Entity Underprint Code is entered in Field 01–L or the field is corrected to agree with the underprint.

When CCC "F" is entered to correct a Tax Period underprint, the Entity Underprint Code is not necessary to clear the Tax Period underprint.

The computer will not recheck the Entity Index File after initial input. Enter code as follows:

The valid Taxpayer Notice Codes for Forms 1120-FSC/L/ND/PC/SF are 88, 89 and 90.

Enter the TPNC in the upper left entity portion of the return.

Attach a TPNC 90 card/paper to the return with the exact statement to be printed on the notice.

Re-enter TPNC 90 with Action Code "1" , if it was transcribed incorrectly.

TPNC 90 is an error explanation that shall be used if the standard TPNCs do not adequately describe an error condition. Ten blank lines are available to provide pertinent information to the taxpayer.

If Field 01–M (TPNC) is invalid (*), do not change Field 01–M, This will happen if Field 07–Z (Manually Corrected Total Tax) was not entered previously. Never change Field 01–M.

When necessary to send a TPNC for Forms 1120-FSC/L/ND/PC/SF, you must enter the correct tax in Field 07–Z (Manually Corrected Total Tax) first, then allow it to loop to send the TPNC. On loop, the amount in Field 07–Z will underprint Field 07–A (Total Tax) for the notice.

Field 02–A is located in the Entity Section of Forms 1120-FSC/L/ND/PC/SF.

Valid Characters - Field 02–A has 35 positions and the valid characters are alpha, numeric, ampersand, dash or slash.

Invalid Condition - Field 02–A is invalid if any of the following conditions are present:

Correction Procedures:

Field 02–B is located in the Entity Address Section of the return.

Valid Characters – Valid characters are alpha, numeric and special characters.

Invalid Condition – Field 02–B will generate as an error when the Field 02–E (State Code) contains a period/space (. ) and any of the following conditions are present:

Correction Procedures:

This field will asterisk (*) if other than specified above.

For additional information, see Exhibit 3.12.16-17, Foreign Country Codes, and Exhibit 3.12.16-18, Province, State and Territory Abbreviations.

First position must not be blank. The first position can only be alpha or numeric characters.

Valid characters are alpha, numeric, blank, hyphen, and slash.

There cannot be two consecutive blanks followed by valid characters.

If Field 02–D (City) contains a Major City Code (MCC), a street address must be present. (If a MCC is used and no address is present, enter the city in "city format" , not in MCC format.) Check returns and attachments if the address is not present. See Exhibit 3.12.16-15 for the listing of Major City and ZIP Codes or refer to Document 7475.

This field will asterisk if other than specified above. Correct this field accordingly.

First position cannot be blank.

Second and third positions cannot both be blank.

There cannot be two consecutive blanks within significant data.

Valid characters are alpha and blank.

When a Major City Code has been used:

If a valid MCC cannot be used, then the entire City must be input with Action Code "6" . When the entire city name is used, Field 02–E (State) must be present.

This field will asterisk if the MCC does not agree with the first three digits of the ZIP Code. Field 02–F (ZIP Code) will also asterisk.

The ZIP Code will require ZIP Code look-up if the Major City has multiple ZIP Codes. Correct Field 02–F (ZIP Code).

See Exhibit 3.12.16-15 for the listing of Major City and ZIP Codes. See Exhibit 3.12.16-16 , U.S. Possessions/Territories and ZIP Codes, for use with address corrections.

IMPORTANT: If there is a foreign address, the country must be present in this field. Do not abbreviate the name of the country. See Exhibit 3.12.16-17 , Foreign Country Codes, for a list of the valid foreign country codes.

If present this field must contain a State Code of two alpha characters.

This field will asterisk for the following conditions:

The State Code does not agree with the first three digits of the ZIP Code. Field 02–F (ZIP Code) will also asterisk:

OSPC will delete Section 02 if a Non-U.S. Possession Foreign Address.

IMPORTANT: Field 02–E must contain a period/space (. ) if the address is foreign.

Field 02–F is the entity ZIP information.

Correction Procedures:

If a valid ZIP Code is not available from the return or attachments to the return, see Exhibit 3.12.16-15, Major City and ZIP Codes, see Exhibit 3.12.16-16, U.S. Possessions/Territories and ZIP Codes, or see the State Codes and ZIP Codes chart below for a valid ZIP Code.

All ZIP Codes are standardized at Martinsburg Computing Center (MCC) before the return posts to the Master File. A program called "Finalist" matches the taxpayers Street Address and City Address to the ZIP Code on the return with the latest ZIP Code updates received from the U.S. Postal Service.

If you have an incomplete ZIP Code (partial) on the return, but it contains a Street and City address, no research is necessary, take the following action:

If you have an incomplete ZIP Code on the return and the Street or City address is incomplete and/or missing, then research is needed for the complete address.

If only the first three digits of the ZIP Code can be determined, enter "01" for the fourth and fifth digits.

If the first three digits of the ZIP Code cannot be determined use the following chart to determine the appropriate ZIP Code:

The Postal Service established new address requirements for APO/FPO addresses. If the old address appears (e.g., APO New York, NY 091XX) it must be converted to the new state code abbreviation based on the following ZIP codes (e.g., the previous example would be converted to APO AE 091XX):

IMPORTANT: Field 02–F must be blank if the address is foreign.

The chart below shows Section 03: Field Designator, Title, Field Length and Location on the Return or Edit Sheet (Form 3892).

The ABLM Code is generated from the Document Code in the DLN for Forms 1120–PC and 1120–L. This field cannot be corrected.
Note: ABLM is not an acronym. The letters are a carry over from when the tax Form 1120 was generic. The letters are defined as follows:

The 6-digit North American Industry Classification System (NAICS) Code (which is based on the Principal Business Activity (PBA) is computer generated for Forms 1120-L/ND/PC/SF.

The NAICS Code is entered on Form 1120–FSC, Page 1, above Box A.

Field 03–B will asterisk if blank, all zeroes or if Field 03–B does not contain six numeric digits on Form 1120-FSC only, on other than "G" coded returns. See Figure 3.12.16-10.

Figure 3.12.16-10

When the 6 digit PBA Code (also known as NAICS Code) is missing, take the following action:

Field 03–B must always be present on Form 1120-FSC.

The Missing Schedule Code (MSC) is edited to and transcribed from Line 20 of the Edit Sheet. Below is a list of valid codes and an explanation of each.

Check for coding and transcription errors if Field 03–C is asterisked.

Do not enter the Missing Schedule Code if the entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Precomputed Penalty and Interest Code is edited on Line 21 of the Edit Sheet when the return indicates an amount for Precomputed Penalty and Interest, and the return is received during the grace period of the original due date.

CCC "R" must be present in Field 01–F, if interest only is indicated.

Field 03–D must be blank or "1" .

Check the Edit Sheet and the return for all coding and transcription errors.

Reserve Code is edited on Line 22 of the Edit Sheet.

Code and Edit may enter a "9" to force the record to the error register and will attach an explanation to the return.

If Field 03–E is asterisked, correct the field and the Edit Sheet as appropriate.

Enter Reserve Code "1" when a $1 million or more refund has been issued. The "1" is valid on correction only.

Enter Reserve Code "4" if Form 2220, Underpayment of Estimated Tax by Corporations, is attached and the taxpayer has checked the box on Part II, Line 8 "Large Corporations" .

Priority of Reserve Codes are as follows:

This code applies only to Forms 1120-FSC/L/PC.

The Tax Preference Code is edited as follows:

Tax Preference Code "1" is required when Form 4626 or substitute is attached or, when an amount is present for Alternative Minimum Tax computation as follows:

Field 03–F must be blank or "1" . Check for coding and transcription errors and correct accordingly.

Field 03–H (Audit Code) is transcribed from Line 19 of the Edit Sheet.

This field may be blank or contain digits 1 thru 6. Only three codes can be entered. The following table lists the valid Audit Codes:

The Audit Codes and conditions are listed in the following table:

If Field 03–H (Audit Code) is asterisked, check for coding and transcription errors. Correct Field 03–H as appropriate.

Field 03–I is transcribed from Line 23, Edit Sheet, for Form 1120-FSC only.

This field must be 1, 2, 3 or blank. The codes are based on the response to Question "3" , Form 6252, Installment Sale Income.

Valid codes for Installment Sales Indicator are:

The following table provides instructions for resolving Field 03–I.