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Compare INT amounts with entries on:

Interest comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as interest:

If Form 1040, Schedule B, or Form 1040A, Schedule 1 (or an attachment in lieu of Schedule B or Schedule 1) is attached, compare IRs with individual items. If you cannot match individual IRs:

If a breakdown of interest by payer is not shown on the return or on an attachment and there is more than one IR:

Taxpayers often interchange interest and dividend income. Check any dividend income areas when comparing INT amounts. Offset interest income against dividend income ONLY if one of the following applies:

If interest income is listed on Form 1040, Schedule B, or Form 1040A, Schedule 1, Part I, but is not added into the AGI:

If you notice a math error on Schedule B/Schedule 1:

A Form 1099-OID IR reflects the original issue discount allocable to the tax year and the qualified stated interest paid or credited on the obligation during the tax year.

Original issue discount is identified on the Case Analysis screen by the literals "99 OID" in the DOC TYPE field and the following literal(s) in the INCOME TYPE field:

Original issue discount, which is treated as interest income, is the difference between the issue price and stated redemption price of a debt instrument (i.e. bond). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ issued by a brokerage firm or by financial institutions (banks, credit unions, and savings and loans).

Original issue discount (other than original issue discount on an obligation with a term of 1 year or less) is reported on Form 1099-OID.

If the taxpayer reports a partial amount or no amount from a 1099-OID IR, consider whether the taxpayer has made an adjustment for acquisition premium, or some other offset. Original issue discount may be reduced by these offsets provided the taxpayer first included the gross amount of original issue discount on Form 1040, Schedule B, line 1. The line 2 amount should then reflect the taxable amount of original issue discount as adjusted for these offsets.

If the taxpayer reports a partial amount or no amount from a Form 1099-OID IR and the Schedule B does not reflect any adjustments, consider the OID, S-INT and OIDTO amounts in determining the U/R amount.

If 1099-OID and 1099-INT IR(s) are present from the same payer, and you cannot determine which amount is reported:

Interest from U.S. Savings Bonds, Treasury Bills, Treasury Bonds, and Treasury Notes appear on 1099-INT IRs with the literal "BOND" .

Bond interest is identified on the Case Analysis screen by the literal "99INT" in the DOC TYPE field and the literal "BOND" in the INCOME TYPE field.

If the taxpayer reports an amount of savings bond interest that is equal to or greater than the IR(s) amount, consider the IR(s) reported unless the return amount is identified as being from a different payer.

Accept bond interest if the taxpayer indicates the following:

If the taxpayer included Bond income as capital Gains on Schedule D, Part II, consider the Bond reported. Subtract the Bond Income from the LONG TERM GAIN/(LOSS) field in the Sch D/8814/ECR Tax window and send the IR(s). Include the following Special Paragraph: "The Bond income you reported on Form 1040, line 13 or Schedule D, Capital Gains and Losses, do not qualify for capital gains treatment. Your payers reported this income to us as bond interest, so you must report the income as ordinary income on your tax return." .

If the taxpayer reports bond interest but does not identify the payer and there is more than one BOND IR:

If the taxpayer reports an amount as savings bond, T-Bill bond, or note interest, and the 1099-INT IR shows only regular interest, consider the IR reported if the amounts match within $1 ONLY if the taxpayer has not excluded interest on Schedule B, line 3, for college tuition. PARAGRAPH 108 automatically generates when the exclusion is fully disallowed.

1099-INT IRs should not show EWPEN amounts if only bond interest is present. Treat such IRs as potential Payer/Agent data or questionable.

Form 8815, Exclusion of Interest from Series EE U.S. Savings Bonds After 1989, is allowed on Form 1040, Schedule B, line 3 (Form 1040A, Schedule 1, line 3).

Bond Interest must be reported on the return before being claimed as a Savings Bond Exclusion on Form 1040/1040A.

When the taxpayer excludes a savings bond interest amount and the adjusted gross income (AGI) is changed, the Adjusted Gross Income and Savings Bond Exclusion windows may display when the Return Value window is selected. If the windows do not display, they must be accessed before continuing to the Return Value screen.

The AUR system computes the new excludable savings bond interest amount based on the entries in the Adjusted Gross Income and Savings Bond windows and displays it in the RECOMPUTED SAVINGS BOND EXCLUSION field.

If the Adjusted Gross Income (AGI) window appears, see IRM 4.19.7.

The savings bond exclusion claimed on Form 1040, Schedule B, line 3, (Form 1040A, Schedule 1, line 3) is disallowed when:

The savings bond exclusion claimed on Form 1040, Schedule B, line 3, (Form 1040A, Schedule 1, line 3) is adjusted when the new MAGI is greater than $65,600 for Single and Head of Household filers; $98,400 if Married Filing Joint or Qualifying Widow(er).

If the system determines the exclusion claimed should be disallowed in whole or part, an IR is created by the system for the amount of the disallowance and coded with Status Code " U" .

PARAGRAPH 105 automatically generates when the exclusion is adjusted or eliminated. PARAGRAPH 107 automatically generates when the exclusion is eliminated based on the filing status.

If you adjust the Savings Bond Exclusion, enter the amount from Schedule B/Schedule 1 in the RETURN field of the Summary screen.

Interest income may be reduced by any of the following, provided the taxpayer first included this income on Form 1040, Schedule B, line 1, or Form 1040A, Schedule 1, line 1. The line 2 amount should then reflect the taxable amount of interest minus these adjustments:

Pursue the issue if it appears the taxpayer reports an incorrect taxable interest due to improper deduction of these amounts.

PARAGRAPH 85 automatically generates to inform the taxpayer he/she may be subject to Back-Up Withholding when the total of U/R interest, dividends, and patronage dividends is greater than $500.

1099-INT IRs may reflect an Early Withdrawal Penalty (EWPEN). See IRM 4.19.3.8.5 for further instructions.

If a Form 1099-INT IR, from the U.S. Treasury, with EIN 38–1798424 is shown on the Case Analysis screen, it is credit interest paid to the taxpayer(s) by IRS for refund cases and is fully taxable.

Form 1099-INT IRs may reflect W/H. If there is an indication that the interest account is jointly owned with someone other than the taxpayer's spouse or the filing status is 3:

A fully U/R interest IR with an EIN is considered self-employment income. Input an Income Identify Code to assess Self-Employment Tax. See Exhibit 4.19.3-17, Income Identify Codes.

If interest is U/R, enter the amount from Form 1040, line 8a, Form 1040A, line 8a, or Form 1040EZ, line 2, in the RETURN field on the Summary screen.

The types of dividends compared are:

Dividends are identified on the Case Analysis screen by the literal "99DIV" in the DOC TYPE field and one of the following literals in the INCOME TYPE field:

The AUR system considers each of the following amounts separately:

If a 1099-DIV IR with multiple income types is U/R, and the tolerance for issuing a notice is met, screen all elements of the IR.

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Compare ORDIV amounts with entries on:

Compare IR(s) on the Case Analysis screen with individual items listed on Form 1040, Schedule B or Form 1040A, Schedule 1, if attached. The taxpayer may use an attachment in lieu of Schedule B.

Dividend IRs display Ordinary Dividends (ORDIV), Qualified Dividends (QDIV), Capital Gain Distributions (CG), and non-dividend distributions (non-taxable) as separate amounts.

If individual IR(s) do not match the amount claimed on the return:

If a breakdown of dividends by payer is not shown on the return and there is more than one dividend IR:

Dividends and interest income are often interchanged by the taxpayer. Check any interest income areas when comparing IRs (e.g., credit union dividends). Check any dividend income areas when comparing INT amounts. Offset dividend income against interest income ONLY if it is the same amount (within $1) from the same payer.

If dividend income is listed on Form 1040, Schedule B, or Form 1040A, Schedule 1, Part II, but is not added into the AGI:

If the taxpayer reports ordinary dividends on Schedule D, lines 1d or 8d:

If you notice a math error on Schedule B:

During Case Analysis do not screen the QDIV element of the IRs. The taxpayer determines the portion of QDIV (from Form 1099-DIV, Box 1b) that is entered on Form 1040/1040A, line 9b. For all 99DIV IRs where the ORDIV element is fully or partially U/R and a QDIV element is present, take the following action:

The taxpayer may report a net dividend amount based on the payer's estimated percentage of taxability (especially utility companies). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

PARAGRAPH 85 automatically generates to inform the taxpayer he/she may be subject to Back-Up Withholding when the total of U/R interest, dividends, and patronage dividends is greater than $500

Dividends from money market funds may be reported under a different name. If a dividend amount on a 1099-DIV IR matches an amount on Schedule B, consider the IR reported unless there is an IR(s) for that individual payer.

Restricted stock transferred to an employee as compensation for services may accrue dividends. Even though these dividends are reported on Form 1099-DIV, they should be treated as wages. Consider the income reported if the amount was included with wages.

Reinvestment dividends are not allowable as an exclusion.

Form 1099-DIV IRs may reflect W/H. If there is an indication that the dividend account is jointly owned with someone other than the taxpayer's spouse or the filing status is 3:

A fully U/R Dividend IR with an EIN is considered self-employment income. Input an Income Identify Code to assess Self-Employment Tax. See IRM 4.19.3.14.1(6) and (7).

Nominee dividends may be deducted provided the taxpayer first included this income on Schedule B, line 5.

If dividends are U/R, enter the return amount in the RETURN field on the Summary screen.

Capital Gain Distributions are identified in the Case Analysis screen by the literal "99DIV" in the DOC TYPE field and "CG" - Capital Gain Distributions - Income Identify Code "SD" displays for Capital Gain Distributions in the INCOME TYPE field.

The AUR system considers Capital Gain Distributions separately from Ordinary Dividends.

Compare capital gain distributions amounts with entries on:

Compare IR(s) on the Case Analysis screen with individual items listed on Form 1040, Schedule D-1 if attached. The taxpayer may use an attachment in lieu of Schedule D-1.

If the taxpayer provides a breakdown of capital gains (for example on an attachment), be sure that the amount was properly transferred to either Schedule D, line 13, column (f) or Form 1040, line 13 (or Form 1040A, line 10) before considering them reported. If not, then consider the amount U/R and send PARAGRAPH 3 ( See Exhibit 4.19.3-12).

If a breakdown of capital gain distributions is not shown on the return and there is more than one capital gain distribution IR:

Compare the amounts reported on Schedule D, line 13, columns (f) (or if no Schedule D is present, Form 1040, line 13) or Form 1040A, line 10 with the CG amounts from the 99DIV IRs. If the taxpayer reported a lesser amount, the difference is U/R.

Capital Gain Dividends reported on Form 1099–DIV with a "S" or "P " in the TP field on the Case Analysis screen default with an Income Identify Code of "SD" for long term capital gain/loss belonging on Schedule D, Part II. If the TP field contains an " E" for EIN, the user MUST ENTER an Income Identify Code of " SD" .

Change the Income Identify Code on partially U/R CG elements when you can determine from the taxpayer's reported amount that:

Capital Gain IRs with Income Identify Codes of "SD" or "ST" are screened using the following procedures:

If Capital Gain Distributions are U/R, enter the return amount from Schedule D, line 13 (Form 1040, line 13, if no Schedule D is attached, Form 1040A, line 10) in the RETURN field of the Summary Screen.

State and local income tax refunds (SITR) are potentially U/R if there is no SITR amount on Form 1040, line 10.

Input/verify the required amounts on the SITR window. See IRM 4.19.7, Compute SITR Change window.

PARAGRAPH 69 automatically generates when SITR is U/R.

Form 1099-G IRs with reported SITR amounts for other than the prior tax year are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . The literal "X" displays in the IR CODE field of the Case Analysis screen.

When any of the following conditions are present, mark all SITR IRs (including those system identified as discrepant) with Status Code "D" ,"N" , or "R" :

The AUR system will not compute an U/R SITR if Form 1040, line 10 does not equal the total of the SITR IRs ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If Form 1040, line 10 is zero (0) or blank, the AUR system computes the correct U/R SITR amount.

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If the system computed a SITR refund and the current year filing status code has changed from the prior year, the PRIOR YEAR TOTAL ITEMIZED DED field on the SITR window is less than or equal to 0 (zero), the system displays the following message: "Warning: SITR refund. Prior Yr Sch A info needed, access RTVUE on IDRS."

If the system computed a SITR refund and the current year filing status code has not changed from the prior year, the system displays the following message: "Warning: SITR refund."

PARAGRAPH 16 automatically generates when SITR is O/R because the taxpayer did not claim itemized deductions for the prior AUR tax year.

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If the difference between the sum of state and local income tax withheld and the SITR IR(s) is equal to or greater than the taxpayer's current AUR tax year Schedule A, line 5 amount, this indicates the taxpayer netted.

Do not refund apparent O/R SITR for taxpayers who are minors or who are claimed as a dependent on someone else's return. Delete the SITR IRs for minors and dependents claimed on someone else's return.

If the taxpayer filed "married filing jointly" in the prior year, and filed "married filing separately" in the current AUR tax year and reported one-half of the SITR amount, consider the SITR fully reported.

If SITR is U/R, enter the return amount in the RETURN field of the Summary screen.

Compare NEC amounts with entries on:

When comparing NEC IRs with entries on any line not specifically identified for NEC, the amount must match within $1 or be CLEARLY IDENTIFIED by payer name, activity or as NEC income:

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If Form 2106, column A, line 7 is greater than line 6, the taxpayer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The U/R amount cannot exceed the excess of line 7 over line 6 on Form 2106, column A, line 8. To arrive at the amount to input in the RETURN field, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

If the payer is an oil, gas, or petroleumcompany:

Nonemployee Compensation may represent crop insurance proceeds, which are reported on Schedule F, line 8a or 8b, or Form 4835, line 5a or 5b. the taxpayer may elect to postpone the crop insurance proceeds to the year following the damage. If the NEC amount(s) appear to be this type of income, consider the amount reported if:

If an explanation is attached to the return indicating the fellowship, grant, or stipend was used for tuition, fees, books, supplies, and equipment required for the course, AND:

If the NEC IR is identifiable as fellowship/grant/stipend income, no explanationof tuition expenses is attached, and the IR is not fully reported, pursue the amount not reported. Send PARAGRAPH 124.

If the taxpayer reports NEC income on Form 1040/1040A, line 7 and attaches a Form 8919, Uncollected Social Security and Medicare Tax on Wages, to assess the employee share of FICA, the taxpayer is indicating that he/she is NOT LIABLE for SET on NEC because he/she is an employee. Unless an employment status determination has been rendered by the SS-8 group to identify if the taxpayer is an independent contractor or employee, SE Tax must be assessed. To ensure that credit is given for the tax paid on Form 4137, access the SE Tax window and input the amount paid in the primary/secondary SE Tax Per Return Field. Send PARAGRAPH 12 ( See Exhibit 4.19.3-12). See IRM 4.19.3.20.3.24.

If Form 4137, Social Security and Medicare Tax on Unreported Tip Income, is attached to the return follow the procedures in 4.19.3.7.6.1 (9) above and DO NOT assess a tip tax penalty.

If taxpayers who are members of federally recognized Native American Tribes report Form 1099-MISC tribal-related income on Form 1040, Line 21, do not assess SE Tax if any of the following literals are provided:

If a NEC amount on a 1099-MISC IR is U/R, verify the Income Identify Code so the system computes SE Tax correctly. See Exhibit 4.19.3-17, Income Identify Codes.

Underreported NEC is considered self-employment income (Income Identify Code is "PB" , "PF" , " SB" , or "SF" , as applicable) even if there is Form W-2 wage income from the same payer, unless the following applies:

If there is reported NEC on which the taxpayer should have paid SE Tax but did not, SE Tax must be computed or recomputed if NEC is asterisked or a CP 2000 is sent for another issue(s). Include the reported NEC amount in the PRIM REPRTD SE INC NOT ON SE and/or SEC REPRTD SE INC NOT ON SE field(s) on the Self-Employment Tax window. See IRM 4.19.3.14.1.

)If the taxpayer reports NEC income, but indicates he/she worked as an employee and

If the taxpayer reports NEC income AND attaches a Form 4137:

If the taxpayer reports NEC income AND attaches a Form 8919:

1099-MISC IRs may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

If there are two or more fully U/R NEC IRs with an out-of-state address beyond the reasonable commuting area for the taxpayer (for example, taxpayer lives in Pennsylvania and U/R IRs are for Georgia, etc.), send PARAGRAPH 167 ( See Exhibit 4.19.3-12).

If the taxpayer participates in a nonqualified deferred compensation plan that does not meet all requirements as specified in IRC Section 409A, the payer must report the deferred compensation as income and the amount is subject to an additional tax.

If NEC is U/R, enter the GROSS return amount in the RETURN field on the Summary screen.

Compare MED amounts with entries on:

MED comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as MED payments:

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If MED payments are U/R and the taxpayer's occupation and/or the payer name on the 1099-MISC IR(s) is NOT related to the medical field, the income may be sick pay or disability payments. Forms 1099-MISC are sometimes incorrectly used to report sick pay or disability payments.

If MED payments are U/R and the taxpayer is in the medical profession, treat U/R MED payments as self-employment income. See IRM 4.19.3.14.1.

If there is reported MED on which the taxpayer should have paid SE Tax but did not, SE Tax must be computed or recomputed, if MED or SE Tax is asterisked on the Income Comparison screen or a CP 2000 is sent for another issue(s). See IRM 4.19.3.14.1.

IRs with MED amounts may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

If MED payments are U/R, enter the GROSS return amount in the RETURN field on the Summary screen.

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

If a FISH amount on a 1099-MISC IR is U/R, verify the Income Identify Code so the system computes self-employment tax correctly. Valid Income Identify Codes are "PB" , " PF" , "SB" , or "SF" , as applicable. See Exhibit 4.19.3-17, Income Identify Codes.

If there is fishing income reported on which the taxpayer should have paid SE Tax but did not, SE Tax must be computed or recomputed if FISH or SE Tax is asterisked on the Income Comparison screen or a CP 2000 is sent for another issue(s). See IRM 4.19.3.14.1.

Form 1099-MISC IRs with FISH amounts may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

If fishing income is U/R, enter the GROSS return amount in the RETURN field on the Summary screen.

Form 1099–R's may display the following literals:

A Category of Distribution (COD) code displays in the IND field on the Case Analysis screen and on the Information Return window for Form 1099–R IR(s). The COD contains up to two indicators. For the meaning of each individual indicator, See Exhibit 4.19.3-10, Category of Distribution (COD) Chart.

Consider the indicators on any attached Form 1099–R, Box 7 the most accurate information available. If attached documents indicate that the displayed COD is incorrect and the COD code is "J" , "L" , "S" , "1" , "5" , or "7" (MUST BE COD 7 WITH A PGR INDICATOR OF 1), modify the IR to show the correct COD code.

Use COD codes to compare Form 1099–R IR amounts with the proper placement on the tax return.

The following hint text displays on all 1099-R IRs:

Payers report lump-sum credit distributions to Civil Service annuitants on Form 1099-R. The gross credit amount is included with the total of any periodic payments made. The taxpayer must compute and report the taxable credit amount on Form 1040, line 16b.

The taxpayer may erroneously treat 1099–R income as Social Security/Railroad Retirement Benefits, reporting the amount on Form 1040, line 20a and 20b or Form 1040A, line 14a and 14b. See IRM 4.19.3.7.9.5 (5) for more information.

Taxpayers make donations of cash and/or other assets (generally stocks) to nonprofit organizations and receive an annuity from the nonprofit organizations from their donations. These annuities are partly capital gains from the taxpayers' donated assets as well as annuities. Nonprofit organizations report these capital gains and annuities on Forms 1099-R; COD "F" in Box 7 indicates charitable gift annuities and may contain ECG amounts. See IRM 4.19.3.7.9.8, Lump Sum Distributions, for further instructions.

The following references are for specific retirement types and MUST be used in conjunction with the general instructions in See IRM 4.19.3.7.9.3. and See IRM 4.19.3.7.9.4..

See IRM 4.19.3.7.9.5 for Railroad Retirement income when:

See IRM 4.19.3.7.9.6 for Pensions/Annuities when:

See IRM 4.19.3.7.9.7 for IRA Distributions when:

See IRM 4.19.3.7.9.8 for Lump Sum Distributions when:

See IRM 4.19.3.7.9.9 for Employee Savings Plans when:

These are general instructions and MUST be used in conjunction with the instructions for specific retirement types.

Compare retirement plan IRs with entries on:

If the taxpayer included ordinary retirement income as Capital Gains on Schedule D, Part II, compare the amount reported, if identified as the same payer, with the IR and take the following action:

Accurate analysis of retirement plan IRs depend on whether the payer of reported Form 1099-R income is identifiable. The payer is identified if the taxpayer has:

Do not pursue Form 1099-R IRs with COD codes of "6" , "D" , "G" , "N" , "P" , "Q" , "R" or "T" .

The Office of Personnel Management (OPM) is the payer of a Civil Service Annuity.

If there is an indication the Form 1099-R income is a military retirement distribution See IRM 4.19.3.7.9.6.1.

If there is an indication that a pension from a Form 1099-R IR is a disability pension, input an Income Identify Code of "PE" or "SE" , as applicable. Disability pensions (COD "3" ) are considered earned income.

If there is an indication that the distribution is a Qualified Charitable Distribution (QCD), See IRM 4.19.3.7.9.7 (3).

When both "GR/A" and " TX/A" amounts are present on the same Form 1099-R IR, the system automatically assigns Status Code "X" to the " GR/A" amount. Change the Status Code if necessary.

If the IR or Form 1099-R attached displays only the "GR/A" literal, pursue the GROSS distribution amount when the taxpayer does not include the distribution on the return.

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If the IR or Form 1099-R attached displays only the "TX/A" literal, pursue the TAXABLE distribution amount ONLY.

If a "TX/A" amount is present and the payer indicates the "taxable amount has not been determined" , accept what the taxpayer reports if:

If there are multiple Form 1099-R IRs from the same payer, compare the total gross IR amount to the total amount reported by the taxpayer. If the gross amount is not present, use the taxable amount.

Compare the IR amount to the return amount (Form 1040, lines 15a, 15b, 16a, 16b; Form 1040A, lines 11a, 11b, 12a, or 12b). If the return amount:

Consider Form 1099-R IRs reported when the return indicates that the U/R amount is due to employee contributions AND:

The Payee/Payer name line on a Form 1099-R IR may contain the word "rollover" with the date the taxpayer transferred funds into the new plan. Consider the 1099-R IR valid and pursue any U/R income.

Beginning with TY 2007, inherited distributions (usually COD 4) may be rolled over by a non-spouse beneficiary, in a direct trustee to trustee transfer to an account that was set up to receive the distribution.

A Form 1099-R IR with COD "3" , "5 " , "8" , "E" or " L" cannot be rolled over. If a Form 5498 IR with either ROLV or FMV is present that matches the 1099-R IR ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with COD "3" , "5" , "8" , "E" , or "L" , , ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ When pursuing the issue, PARAGRAPH 34 generates for COD "L" .

If a Form 5498 IR is present with either the literal ROLVR or the literal FMV only in the INCOME TYPE field, and it has an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , consider the income to be "rolled over" . It is not necessary to verify Form(s) 5498 attached to the return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

If Form 5498 IR with either ROLVR or FMV is not present to substantiate the rollover (per IRM 4.19.3.7.9.4 (4) above), consider the 1099R distribution U/R.

When a distribution contains a TX/A amount and W/H, the TP receives a net amount (GR/A minus W/H). In order for a distribution to be considered fully rolled over (i.e. tax free), the TP MUST rollover the entire TX/A amount by supplementing the amount withheld with additional monies from another source. Adjust the W/H, if necessary. See IRM 4.19.3.15.1 for further instructions.

Taxpayers may partially roll over retirement plans reported on Form 1099-R. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the following apply:

If a Form 5498 IR with either "ROLVR" or "FMV" is not present to substantiate the rollover ( See IRM 4.19.3.7.9.4 (7) above), consider the Form 1099R distribution partially U/R when the taxpayer enters the GR/A amount on the gross return lines, reports a lesser amount on the corresponding taxable return lines.

Pensions and annuities are reported from the RRB on Form RRB-1099-R.

The RRB files a separate Form RRB-1099-R for each of the following amounts and each of these amounts displays as separate IR's for each taxpayer:

The following list contains the symbols and definitions for COD's, positions 1 and 2, for RRB-1099-R documents:

Railroad Retirement Board pension income is reported as GR/A on a separate Form RRB-1099-R IR showing COD "X" , "W" , "Z" or "Y" . Group these RRB-1099-R IRs together to determine the total taxable amount. Unless the taxpayer indicates that the simplified general rule was used, the GR/A is considered fully taxable. Compare the total to the amount reported on Form 1040, line 16b or Form 1040A, line 12b. Consider the difference U/R.

The taxpayer may erroneously treat the RRB-1099-R income as Social Security/Railroad Retirement Benefits, reporting the amount on Form 1040, lines 20a and 20b, or Form 1040A, lines 14a and 14b. In this situation, consider the IR(s) fully underreported.

A pension is generally a series of payments made after retirement for past services with an employer. An annuity is a series of payments under a contract purchased by the taxpayer alone or with the help of an employer. Annuity payments are made regularly for more than one full year.

Total distributions are indicated on either the IR, Form 1099-R with the appropriate box checked, or an attachment to the return.

If the Form 1099-R IR or an attachment shows the income is for support of a minor child:

If a U/R Form 1099R IR shows a city, county, or state as the payer and the taxpayer indicated " disabled fireman" or "disabled policeman " on the return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ if the taxpayer is under age 65.

Generally taxpayers must include as income amounts received from personal injury or sickness through an accident or health plan that is paid for by the employer. Pursue any Form 1099-R IRs unless the taxpayer provides a statement and/or documentation that the income is excludable. The taxpayer may provide any of the following (this list is not all inclusive):

Retired ministers are allowed to reduce taxable pension amounts by their housing allowance. Accept the amount reported by the taxpayer if there is an indication that part of the pension is a housing allowance.

Traditional Individual Retirement Arrangements (IRA), Simplified Employee Pensions (SEP), Roth IRA's, and SIMPLE IRA's are tax-favored means of saving for retirement.

The following literals may display:

Beginning in TY 2006, certain taxpayers can make a nontaxable qualified charitable distribution (QCD) from their IRA (traditional or ROTH). Taxpayers indicate that a distribution is a Qualified Charitable Distribution by entering "QCD" next to Form 1040, line 15b or Form 1040A, line 11b. Consider the 1099R IR(s) resolved when "QCD" is shown next to Form 1040, line 15b (or Form 1040A, line 11b) AND:

Form 8606 is used to figure:

Form 8606, Part I, is used to figure the taxable portion of nondeductible contributions to Traditional IRA's as well as distributions from Traditional, SEP and SIMPLE IRA's. The total amount is reported on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable amount from Form 8606, line 15c is reported on Form 1040, line 15b or 1040A, line 11b. If the total of the Traditional, SEP or SIMPLE IRA distribution IR(s) matches the Form 8606, line 7 amount:

Form 8606, Part II, is used to figure the taxable portion of conversions from Traditional, SEP, or SIMPLE IRA's to Roth IRA's. The total amount is reported on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable amount from Form 8606, line 18 is included on Form 1040, line 15b or Form 1040A, line 11b. Consider the 1099-R distribution IR reported when the taxpayer reports the taxable amount on Form 8606, Line 18, Part II (whether or not a matching Form 5498 RCONV is present).

Form 8606, Part III, is used to figure the taxable portion of non-qualified distributions from Roth IRA's. The total amount is reported on Form 1040, line 15a, or Form 1040A, line 11a and the taxable amount from Form 8606, line 25c is included on Form 1040, line 15b or Form 1040A, line 11b.

If the taxpayer reports a lesser taxable amount and Form 8606 is not completed, pursue the difference. Send PARAGRAPH 83 ( See Exhibit 4.19.3-12) to request a completed Form 8606.

A return of regular contributions from a Roth IRA or qualified distributions from a Roth IRA are considered non-taxable. A qualified Roth IRA distribution generally meets the following conditions:

Distributions from a SIMPLE(Savings Incentive Match Plan for Employees) plan are fully taxable as ordinary income. Premature distributions from a SIMPLE plan may be subject to the additional tax on early distributions. Distributions made within the first 2 years are subject to a 25% tax on early distributions and are identified by a COD " S" . See IRM 4.19.3.14.3 for further information.

IRA distributions do not qualify for special tax treatment on Form 4972. See IRM 4.19.3.7.9.8 (11) and (12). Send PARAGRAPH 152 ( See Exhibit 4.19.3-12..

COD 5 is used for prohibited transactions such as borrowing from an IRA or using an IRA as security on a loan. If either of these transactions occur, treat the entire value of the account as a distribution to the taxpayer. These distributions are subject to the 10% tax on early distributions from qualified plans and cannot be rolled over. See IRM 4.19.3.14.3.

A lump sum distribution is income received within a single tax year of the balance to the credit of an employee from an employer's qualified pension, stock bonus or profit sharing plan, employee stock ownership plan (ESOP), qualified annuity plan, etc.

A lump sum distribution may qualify for special tax treatment on Form 4972, Tax on Lump Sum Distributions. The system assigns Income Identify Code of "LS" when the COD is "A" . When the taxpayer reports his/her lump sum distributions on Form 4972, determine if he/she reported the total amount.

If the taxpayer reports the total amount of the lump sum distribution on Form 4972, consider the income reported.

If Form 4972 was used to report the lump sum income AND there are U/R issues other than Lump Sum:

If there is only one Form 1099-R IR present, and it is only partially reported (i.e., the taxpayer claimed W/H from a 1099-R IR):

If an ECG amount is shown on the Form 1099-R IR, the taxpayer may elect not to receive capital gains treatment. The taxpayer should then report the taxable amount of the distribution.

Consider the IR (with ECG amounts ) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ if any one of the following situations apply:

The taxpayer may elect to receive capital gains treatment and report the ordinary income and capital gains separately on Form 4972. The entire distribution must be included on the Form 4972, and cannot be allocated between different forms.

Capital gains from a lump sum distribution should not be reported on Schedule D if the taxpayer has elected to report the lump sum income on Form 4972. If the taxpayer has erroneously included a Lump Sum CG on Schedule D, exclude the CG from the Schedule D and include the CG amount on Form 4972. See IRM 4.19.7, Lump Sum Tax window.

The taxpayer may elect to treat the entire distribution(ECG and Ordinary Income) as ordinary income on Form 4972. The amount from Box 2a (Taxable Amount) minus the amount from Box 3 of Form 1099-R should be reported on Form 4972, Part III, line 8. If the taxpayer did not complete Part II of the Form 4972, enter the Taxable Amount from Box 2a of Form 1099–R.

Lump sum distributions do not qualify for the special tax treatment onForm 4972 when:

If any of the conditions in (11) above apply and the income matches either the gross or taxable amount on a Form 1099-R IR, consider the taxable amount U/R.

Lump sum distributions do not qualify for the special tax treatment on Form 4972 when a portion of the lump sum distribution is from U.S. Retirement Bonds. Disallow the special tax treatment for the bond portion ONLY.

Consider Lump sum distributions reported ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Enter Income Identify Code "LS" if applicable.

Distributions from employee savings plans are reported on Form 1099-R.

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If a taxpayer is younger than 55, the 10% tax on early distributions from qualified plans is assessed by the system if the COD is "L" , "1" , "5 " , or "7" . (COD 7 MUST HAVE PGR IND 1).

PARAGRAPH 34 automatically generates when the U/R retirement distribution has COD "L" .

Form 1099-R IRs may be subject to an additional 10% or 25% tax. See IRM 4.19.3.14.3 for further information.

PARAGRAPH 11 automatically generates to inform the taxpayer whenever the proposed tax increase shown on the CP 2000 includes the additional 10% tax on early distributions from qualified plans. See IRM 4.19.3.14.3.

Form 1099-R IRs may reflect W/H. Follow instructions in See IRM 4.19.3.15.1. for further information.

PARAGRAPH 96 automatically generates when retirement income is U/R regardless of Income Identify Code.

When Form 1099-R IRs are U/R, enter the return amount in the RETURN field on the Summary screen.

Compare RENT or ROYAL amounts with entries on:

When the rent or royalty income is partially reported as self-employment income by the taxpayer, identify the RENT or ROYALTY amount as Self-Employment income by entering the appropriate Income Identify Code in the INCM CODE field on the Case Analysis screen. See Exhibit 4.19.3-17, Income Identify Codes.

If there is rent or royalty income reported on which the taxpayer should have paid self-employment tax but did not, the SE Tax must be computed or recomputed, if the Rent/Royalty or SE Tax is asterisked on the Income Comparison screen or a CP 2000 is sent for another issue(s). See IRM 4.19.3.14.1.

If U/R rent or royalty can be identified as coal/timber royalties, patents, rights of way or easements, it should be reported on Schedule D:

If there is U/R Schedule D RENT or ROYAL and the taxpayer reported a capital loss on Form 1040, line 13, See IRM 4.19.3.7.4.5 to access the Schedule D window.

Form 1099-MISC IR(s) may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

When rent or royalty income is U/R, enter the gross reported amount in the RETURN field of the Summary screen.

Delete K-1 IRs if the payee or payer area identifies the income as being from:

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

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Schedules K-1 are not required to be attached to the return. If attached, use them as part of the screening process.

Schedules K-1 should not include W/H. Only backup withholding can be reported on a Schedule K-1. W/H amounts shown on a PTK-1 (Form 1065), SBK-1 (Form 1120S) or TRK-1 (Form 1041) IRs may be the result of erroneously identified/transcribed Schedule K-1 data. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 4.19.3.15.1.1 (2) for further instructions.

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

Accept conduit income as reported if the amounts match ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Consider all elements of conduit IRs reported if a statement attached to the return indicates:

If a Form W-2, 1099-MISC or Schedule K-1 (PTK-1, SBK-1 or TRK-1) IR are present for the same taxpayer, from the same payer AND for an identical money amount, take the following action:

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

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

INT is included on Schedule B, Part I, line 1. Pursue any U/R amounts. See IRM 4.19.3.7.3.1 for further instructions.

DIV is included on Schedule B, Part II, line 5. Pursue any U/R amounts. See IRM 4.19.3.7.4.2 for further instructions.

STCG is reported on Schedule D, line 5. Pursue any U/R amounts. See IRM 4.19.3.7.4.5 (8) for further instructions.

LTCG is reported on Schedule D, line 12, column (f). Pursue any U/R amounts. See IRM 4.19.3.7.4.5 (8) for further instructions.

ROYALis reported on Schedule E, Part I, line 4.

Section 179 Expenses are generally reported on Schedule E, Part II, Column (i). Taxpayers may reduce the ORINC, REAL, OTREN or G-PAY amount by the 179EX and report the net income on column (g) or (j). If the ORINC, REAL, OTREN or G-PAY U/R amount matches the 179EX amount on the SBK-1 or PTK-1 IR AND column (i) is blank, consider the IR reported. If the taxpayer also included the 179EX on column (i) this represents a double deduction. Disallow the double deduction and send PARAGRAPH 142 ( See Exhibit 4.19.3-12).

ORINC, G-PAY and REAL/OTREN (from PTK-1 or SBK-1 IRs) are reported on Schedule E, Part II, Columns (g) and/or (j). If the amount is not found on Schedule E, Part II, Columns (g) and/or (j), check column (a) for the payer name and/or column (d) for the payer EIN.

BNINC and REAL/OTREN (from TRK-1 IRs) are reported on Schedule E, Part III, column (d) and/or (f), If the amount is not found on Schedule E, Part III, column (d) and/or (f), check column (a) for the payer name and/or column (b) for the payer EIN.

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Always attempt to match ORINC, REAL, OTREN, G-PAY and/or BNINC income element(s) to the amounts reported on the return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The taxpayer must disclose an amount (including zero) in order to consider the income element(s) partially reported.

Conduit amounts (ORINC, REAL, G-PAY, and OTREN) from PTK-1 IRs may be subject to self-employment tax. If any of the following conditions apply, enter Income Identify Code "PB" , "PF" , "SB" , or "SF" as applicable.

When conduit income is U/R, enter the appropriate return amount in the RETURN field on the Summary screen. For conduit income types reportable on Schedule E Part II and Part III, use the sum of Schedule E lines 32 and 37 as the "per return" amount. If the resulting "per return" amount is negative, enter the actual loss amount in the RETURN field.

Agricultural subsidies (including CCC certificates) are reported to IRS on Form 1099-G.

Agricultural subsidies (including CCC certificates) are identified on the Case Analysis screen by the literal " 1099G" in the DOC TYPE field and the literal "AGSUB" in the INCOME TYPE field.

Compare AGSUB amounts with entries on:

AGSUB comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as AGSUB:

AGSUB comparisons to the following entries must match within $1 or be CLEARLY IDENTIFIED as compensation from PEANUT QUOTA BUYOUTS:

Consider AGSUB amounts ≡ ≡ ≡ ≡ ≡ ≡ if a Form W-2 or an WAGE IR shows that the taxpayer is incorporated (payer name must include INC, PA, PC, or SC) in a farming business and paid wages to himself/herself (the payer name and/or address is similar to or matches the taxpayer name and/or address). Do not consider AGSUB reported if the W-2 and 1099-G IR are from the same payer.

Agricultural subsidy payments made to members of federally recognized Native American Tribes under programs administered by the Department of Agriculture's Stabilization and Conservation Service are exempt from federal income taxes when the subsidy is received as a result of activity occurring on the individual's allotted land. Do not pursue apparent U/R AGSUB amounts if information on the return or attached schedules/statements references Revenue Ruling 69-289.

Underreported AGSUBs are considered self-employment income unless the conditions defined below apply; delete the Income Identify Code if:

The system computes SE Tax when Income Identify Code "PF" or "SF" , is entered for AGSUB income.

If there are reported agricultural subsidies on which the taxpayer should have paid self-employment tax but did not, the SE Tax must be computed or recomputed if the AGSUB is asterisked or a notice is sent for other issue(s). See IRM 4.19.3.14.1.

Form 1099–G IRs may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

If AGSUB is U/R, enter the return amount in the RETURN field on the Summary screen.

Generally, CCC loan proceeds are not reported as income. However, if a taxpayer pledges part or all of his/her production to secure a CCC loan, he/she may elect to report the CCC loan proceeds as income in the year the proceeds are received, instead of the year the crop is sold.

Taxpayers may make the election to report CCC loans on Schedule F, lines 7a or 41a or Form 4835, line 4a.

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ; i.e., those marked with asterisk. If the case is open because of other income discrepancies, do not screen the non-asterisked 1099-A IRs. Mark any non-asterisked 1099-A IR with Status Code "N" or "D" .

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CCC loans forfeited are reported on Form 1099-A.

Commodity Credit Certificates received under some government programs are sold or used to pay the CCC loans. These certificates are includable as income and are reported on Form 1099-G.

A farmer may pledge grain or other commodities to secure a loan from the CCC. He/she may also have elected not to include the proceeds of the loan as income in the year it was actually received. If, however, he/she uses the commodity credit certificates to repay the loan, that income is reported on Schedule F, lines 7b, 7c, 41b, or 41c or Form 4835, lines 4b or 4c. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Commodity Credit Corporation loans forfeited are identified on the Case Analysis screen by the literal "1099A " in the DOC TYPE field and one of the following literals in the INCOME TYPE field:

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Compare DEBTS (debt satisfied amounts on Form 1099-A IRs) with entries on Schedule F or Form 4835.

If a DEBTS amount is U/R, verify the Income Identify Code so the system computes SE tax correctly. The Income Identify Code should be "PF" or "SF" , as applicable. See Exhibit 4.19.3-17, Income Identify Codes. Delete the Income Identify Code for U/R DEBTS amounts if the:

PARAGRAPH 102 automatically generates.

If CCC income is U/R, enter the return amount in the RETURN field on the Summary screen.

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Compare Form 1099-PATR IR amounts with entries on:

IfForm 8903 is present, group DPAD elements from all available 99PATR IR’s and compare the group total to the amount reported on Form 8903, line 17.

If Form 8903 is not present, group DPAD elements from all available 99PATR IR’s and:

Consider PTDIVs ≡ ≡ ≡ ≡ ≡ ≡ ≡ if there is a Form W-2 or WAGE IR present that shows the taxpayer is incorporated (payer name must include INC, PA, PC or SC) in a farming business, and paid wages to himself/herself (payer name and/or address is similar to or matches the taxpayer's name and/or address). Do not consider PTDIV reported if W-2 and Form 1099-PATR IR are from the same payer.

If a Form 1099-PATR IR amount is U/R, verify the Income Identify Code, so the system computes SE Tax correctly (Income Identify Code "PF" , "SF" , "PB " , or "SB" as applicable). See Exhibit 4.19.3-17, Income Identify Codes. Delete the Income Identify Code if:

If there are reported PTDIVs on which the taxpayer should pay SE Tax but did not, SE Tax must be computed or recomputed if the 1099PATR is asterisked or a notice is sent for another issue(s). See IRM 4.19.3.14.1.

PARAGRAPH 85 automatically generates when the total of U/R interest, dividends, and patronage dividends is greater than $500.

When PTDIV is U/R, include the following Special Paragraph: " The distributions received from cooperatives, as shown on this notice, includes the sum total of: patronage dividends, non-patronage distributions, per-unit retain allocations and redemption of nonqualified notices."

If PTDIV is U/R, enter the return amount in the RETURN field on the Summary screen.

If the DPAD element is discrepant, enter the return amount in the RETURN field on the Summary screen. Include the following Special Paragraph: "Our records indicate that you have a domestic production activities deduction from cooperatives as shown on Form 1099-PATR, box 6. We used this information to revise your Form 8903, Domestic Production Activities Deduction. " .

Compare CROP amounts with entries on:

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If a CROP amount is U/R, verify the Income Identify Code so the system computes self-employment tax correctly (Income Identify Codes are "PF" or "SF" , as applicable). See Exhibit 4.19.3-17, Income Identify Codes. Delete the Income Identify Code if:

If there are reported crop insurance proceeds on which the taxpayer should pay SE Tax but did not, the SE Tax must be computed or recomputed if CROP is asterisked or a notice is sent for another issue(s). See IRM 4.19.3.14.1.

PARAGRAPH 103 automatically generates when CROP is U/R.

If CROP is U/R, enter the return amount in the RETURN field on the Summary screen.

Compare UNEMP amounts with entries on:

UNEMP comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as UNEMP payments:

If the tax return indicates the UNEMP income was repaid and includes an amount, accept as reported. The repaid amount plus reported amount must equal the IR, otherwise pursue the difference.

If the EIN begins with "66" and the payer information is in Spanish, this income is not subject to U.S. income tax, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

If supplemental unemployment benefits are received from a company financed fund, and the taxpayer did not contribute to the fund, they are not considered UNEMP. They are reported on Form W-2 and are fully taxable wages, subject to withholding tax, and should be reported on the wage lines. See IRM 4.19.3.7.1 for further instructions.

Unemployment compensation (Form 1099-G) may reflect W/H. See IRM 4.19.3.15.1 for further instructions.

If UNEMP is U/R, enter the return amount in the RETURN field on the Summary screen.

PARAGRAPH 67 automatically generates when UNEMP is U/R.

When screening SS/RR IRs, check the name line area of the IR(s) to ensure that the benefits are properly credited to the appropriate taxpayer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ they are payments to a former spouse or dependent children, unless there is an indication the taxpayer in question is one of the actual recipients.

Compare the total of SS/RR amounts with entries on:

When the taxpayer is married filing separately (FS 3 or 6) and lived apart from their spouse for the entire year, they are instructed to enter a "D" on the dotted line next to Form 1040, line 20a (Form 1040A, line 14a). If a "D" is present (or a "Y" on an ELF return) on Form 1040, line 20a (Form 1040A, line 14a), enter an "N" in the TP LIVED WITH SPOUSE? field in the SSA RRB Changes window. If a "D" is not present:

On jointly filed returns, when one of the taxpayers is deceased, mark the deceased taxpayer's SS/RR IR with Status Code "D" when:

The taxable amount of SS/RR payments is computed by the system based on the appropriate entries on the Adjusted Gross Income window and the SSA/RRB window. If the taxpayer files a Credit for the Elderly or Disabled, the system requires you to access the SSA/RRB window. See IRM 4.19.7, SSA/RRB window.

If Form 1040, line 20a or Form 1040A, line 14a is greater than the IR amount(s) and an adjustment to SS/RR is necessary, do not send the SS/RR IR(s) to the taxpayer.

Verify that the amount in the TAX EXEMPT INTEREST field of the SSA/RRB window is correct. See IRM 4.19.3.7.3.5(1) if the TP improperly excluded tax-exempt interest on Schedule B.

If the repayment amounts exceed the SS/RR amounts, and the taxpayer reports a taxable SS/RR amount, but fails to subtract any or all of his/her payments from the SS/RR amount, the system reduces the recomputed SS/RR amount as appropriate. This results in either a refund to the taxpayer or a reduction to his/her tax.

If there are no SS/RR IRs on the Case Analysis screen, the taxpayer reports a gross amount on Form 1040, line 20a or Form 1040A, line 14a and the amount on Form 1040, line 20b or Form 1040A, line 14b is blank, zero or less than 85% of the gross amount, and there are other U/R issue(s):

If the taxpayer reported SS/RR (larger than the IR amount(s)), and the IR shows a REPAY amount, the REPAY IR must be coded with IR Code "D" . Otherwise, the system uses 85% of the REPAY amount as an offset and recomputes the tax.

When the system computes taxable SS/RR, it uses the amount the taxpayer reported as benefits or the total of the IRs (less any REPAY amounts), whichever is greater. If the taxpayer attached documentation stating the SS/RR amounts were repaid in the current AUR tax year and no corresponding IR is present showing the REPAY amount, you must create an IR so the system correctly computes the taxable portion.