3.11.14. Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N)

(1) The purpose of Document Perfection is to code and edit (perfect) returns and other documents for input to the Master File (MF) through the Integrated Submission and Remittance Processing System (ISRP) or the Service Center Recognition Image Processing System (SCRIPS). In addition, Document Perfection forwards any other documents or attachments not related to the processing of the returns to the function responsible for handling them.

(2) It is not the purpose of Code and Edit to mathematically verify or to check the validity of the returns and other documents being processed unless otherwise specified in the applicable section. The computer and/or Error Correction (Resolution) will perform these functions if the returns and other documents are co ded and edited as prescribed in the applicable subsections of this section.

(3) While working assigned cases, Submission Processing (SP) employees may come across some that are blocked on IDRS and is shown by an IDRS security violation message, "Unauthorized Access to This Account". Forward the return to your manager. Managers will notify the local Planning and Analysis (P&A) Staff who will scan the case and send encrypted information to the "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡" mailbox requesting access to the account.  Managers will retain the original case in a file awaiting access (can take up to 5 business days). Once notified access was granted, the case is worked following applicable procedures.

(1) The Internal Revenue Code of 1986 or more commonly known as the Internal Revenue Code (IRC) is the authority for these procedures. Treasury/IRS rules and regulations interpret the law. The IRC was amended by acts and public laws such as the following:

• The Protecting Americans from Tax Hikes (PATH) Act

• Hiring Incentives to Restore Employment (HIRE) Act

• Consolidated Appropriations Act (Extenders)

• American Taxpayer Relief Act (ATRA)

• Health Care and Education Reconciliation Act

• Patient Protection and Affordable Care Act (ACA)

• Foreign Account Tax Compliance Act (FATCA)

• Revenue Reconciliation Act of 1998 (RRA 98)

• Section 2006(a) of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law (PL) 114-41, changed the return due dates for returns of partnerships, and C corporations.

(2) All Policy Statements for Submission Processing are contained in IRM 1.2.12, Servicewide Policies and Authorities, Policy Statements for Submission Processing Activities.

(1) The Director of the Submission Processing Campus (SPC) is responsible for monitoring operational performance for that SPC.

(2) The Operations Manager is responsible for monitoring operational performance for their operation.

(3) The team manager/lead is responsible for performance monitoring and ensuring employees have the tools to perform their duties.

(4) The team employees are responsible to follow the instructions contained in this IRM and maintain updated IRM procedures.

(1) Ensure documents are coded and edited ready for transcription.

(2) Program Reports - Batch Block Tracking System (BBTS) Report.

(3) Program Effectiveness - is measured by the following:

• Embedded Quality Submission Processing (EQSP)

• Balanced Measures

• Managerial reviews

(4) Annual Review: is done by the Federal Managers Financial Integrity Act (FMFIA) review.

(1) Quality Review conducts a statistically valid sample size review of completed work to ensure IRM guidelines are followed.

(1) The following is a table of interpretation words that need clarification:

(2) There are specific terms used when dealing with estates and trusts. See below:

(3) There are many types of trusts as shown in the following:

(4) There are many types of estates, as shown below:

(5) See Exhibit 3.11.14-10, Acronyms and Abbreviations, for a list of common acronyms.

(1) Here are other websites used in accomplishing the work:

• Servicewide Electronic Research Program (SERP)

• Submission Processing Design Center (SPDC)

• Integrated Data Retrieval System (IDRS)

(1) The following schedules are found within Form 1041:

• Schedule A (Charitable Deductions) - Used by a trust that claims a contribution deduction under IRC 642(c), or by a trust described in IRC 4947(a)(2).

• Schedule B (Income Distribution Deduction).

• Schedule G (Tax Computation).

(2) Listed below are other schedules and forms which may be filed with Form 1041:

• Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship)

• Form 1040 Schedule E, Supplemental Income and Loss

• Form 1040 Schedule F, Profit or Loss from Farming

• Form 1040 Schedule H, Household Employment Taxes

• Form 1041 Schedule D, Capital Gains and Losses

• Form 1041 Schedule D-1, Continuation Sheet for Schedule D for 201212 and prior years only.

• Form 1041 Schedule I, Alternative Minimum Tax-Estates and Trusts

• Form 1041 Schedule J, Accumulation Distribution for Certain Complex Trusts

• Form 1041 Schedule K-1, Beneficiary's Share of Income, Deductions, Credits, etc., - Used to report each beneficiary's share of the Income, Deductions, Credits, and Alternative Minimum Taxable Income from the estate or trust.

• Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Accounts - Used by a trust that claims a contribution deduction under IRC 642(c), or by a trust described in IRC 4947(a)(2).

• Form 1041-ES, Estimated Tax for Estates and Trusts - Used to figure and pay estimated tax for fiduciaries.

• Form 1041-T, Transmittal of Estimated Tax Credited to Beneficiaries - Used by an estate or trust to make an election under IRC 643(g) to allocate an estimated tax payment to beneficiaries.

• Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts

• Form 3800, General Business Credit

• Form 4136, Credit for Federal Tax Paid on Fuels

• Form 4797, Sale of Business Property

• Form 4952, Investment Interest Expense Deduction

• Form 5884-A, Credits for Affected Disaster Area Employers (for Employers Affected by Hurricane Harvey, Irma, or Maria or Certain California Wildfires)

• Form 5884-B, New Hire Retention Credit

• Form 8938, Statement of Specified Foreign Financial Assets

• Form 8941, Credit for Small Employer Health Insurance Premiums

• Form 8948, Preparer Explanation for Not Filing Electronically

• Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF)

• Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts

• Form 8936 (Schedule A), Clean Vehicle Credit Amount

(1) The purpose of this initiative is to achieve consistency in the Business Master File (BMF) Code and Edit (C&E) processing IRMs.

(2) Topics for BMF Consistency have been shown and developed as a coordinated effort between Ogden, Kansas City, and Paper Processing Branch BMF C&E / Error Resolution Systems (ERS).

(3) BMF Consistency subsections are shown by a ♦ (diamond) in front of and after the title.

(4) Text in normal print is the common processes for BMF returns. The text in BOLD print is form specific and applies to this IRM only.

(1) IRM deviations must be submitted in writing following instructions from IRM 1.11.2.2.4, When Procedures Deviate from the IRM, and elevated through proper channels for executive approval.

(1) The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the Taxpayer Bill of Rights (TBOR). TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems, they haven’t been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning as it should. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

(2) TAS uses Form 12412, Operations Assistance Request (OAR), to start the OAR process of referring a case to the Wage and Investment (W&I) Division, to affect the resolution of the taxpayer’s problem. For more information, refer to IRM 13.1.19, Taxpayer Advocate Service, Taxpayer Advocate Case Procedures, Advocating with Operations Assistance Requests (OARs).

(3) Refer taxpayers to TAS when the contact meets TAS criteria or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order) is attached and steps can’t be taken to resolve the taxpayer's issue the same day.

(4) The definition of “same day resolution” is within 24 hours. The following two situations meet the definition of “same day resolution”:

• The issue is resolved within 24 hours.

• IRS takes steps within 24 hours to resolve the taxpayer’s issue.

(5) When making a TAS referral, use Form 911, and forward to TAS following your local procedures.

(6) IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, for more information.

(1) BMF Identification (ID) Theft is increasing. If a case is found with attachments or correspondence showing the taxpayer is a victim of ID Theft, give the entire case to the manager/lead.

(2) The manager/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the Submission Processing (SP) BMF ID Theft liaisons. The taxpayer must show that they are a victim of "ID Theft"; do not send cases that are subject to Criminal Investigation (CI), Examination (Exam) or Fraud review.

(3) Effective January 1, 2017, Computer Condition Code "E" will be edited on Form 1041, Form 1041-QFT, and/or Form 1041-N, (any year) after the SP BMF ID Theft Liaison finds a potential identity theft filing.

(1) For returns completed in other than U.S. currency, process as filed. However, if corresponding for missing/incomplete item(s), add in the letter to resubmit in U.S. currency.

(1) Returns marked as "Protective Claim", "Protective Refund", "Protective Claim for Refund", or similar statement will be removed from the batch and routed to Accounts Management (AM). Notate "Protective Claim" in the remarks box of Form 4227, Intra-SC Reject or Routing Slip.

(1) Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC are willful attempts to evade or defeat the income tax. Flagrant criminal activity is, but is not limited to, the failure to pay taxes due and/or taxes collected or withheld and false claims for refunds based on bogus return information.

(2) For returns with refund claims of ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more, do the following:

(3) Because of the repetitive nature of the Code and Edit (C&E) function, C&E Tax Examining technicians often recognize income tax return data which is outside of the norm for data found on similar returns for each income tax return type. If C&E finds return characteristics not meeting Audit Code or Exam referral criteria it deems suspicious, CI is available to review the referral.

(4) If a suspicious return is found, do the following:

• Make a copy of the first two pages of the tax return along with any page of the return that appears suspicious.

• Attach Form 4227, Intra-SC Reject or Routing Slip, to the copy.

• Route the copy as shown in the table below.

Ogden	Kansas City
Mail Stop 9001, Criminal Investigation (CI)	Internal Revenue Service 1973 North Rulon White Blvd. Mail Stop 9001 Criminal Investigation (CI) Ogden, UT 84404

• Edit "Copy to CI", or "CI Referral", or similar language in the lower left corner going vertically up the side of the return.

• Continue processing the return.

(5) If the return fits other criteria (e.g., Frivolous Argument), edit the return properly.

(1) The primary objective in identifying tax returns for examination is to promote the highest degree of voluntary compliance. Examination will give support and assist Submission Processing (SP) with any questionable return shown during processing. Exam has a vast multitude of programs and tolerance criteria already shown in various IRM sections. Exam doesn't restrict SP with the flexibility to refer questionable returns other than what is currently shown in various IRMs.

(2) Some returns will need special care. If the withholding is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, attach Form 4227 and place in the locally designated basket for Examination, Frivolous Return Program (FRP) for review. Pay particular attention to returns with Form 1099-OID attached.

(1) All attachments to the return being processed will be examined and edited as required by the attachment.

(2) When an attachment influences the document being processed, it will remain attached unless a specific instruction requires that it be detached.

1. Notate any editing on Form 1041, Form 1041-QFT, and/or Form 1041-N regarding attachments, photocopying, etc., to leave a working trail. Edit the Working Trail(s) in the lower left corner going vertically up the side of the return.

2. Refer to the Campus Mail Routing Guide for proper disposition of attachments not found in the Routing Guide for Attachments. See IRM 3.11.14.43, Routing Guide for Attachments.

(3) If the document to be detached has any information that is pertinent to the return being processed, photocopy or transfer the data to a blank piece of paper and attach it to the return.

(4) Forward any attachment requesting an adjustment or correspondence to Accounts Management Branch via Form 4227.

(1) Edit marks are edited on the return for transcription to the Automatic Data Processing (ADP) System through the Integrated Submission and Remittance Processing (ISRP) system. Enter edit marks in brown, red, orange, purple, or green.

(2) Only edit items on the return that are for transcription except where specific instructions require editing of a non-transcribed item. Leave lines blank if the entry would be a zero amount unless otherwise instructed.

(3) Do not obliterate, alter, or erase the original entry on a return when deleting or correcting an entry. Always exercise care to ensure that the original entry remains legible. Perfected entries give a legible "edit trail" for anyone who may work with the return later.

(4) Do not re-edit edit marks entered by other areas, such as Collections, Entity or Accounts Management, except to place the marks in the correct area or perfect for legibility. Do not edit (or write) over another area's edit marks.

(5) Photocopied Returns - Re-edit or underline any valid, black edit marks. See IRM 3.11.14.6.3.3, Correspondence Imaging Inventory (CII) Returns and IRM 3.11.14.10.6, Re-Entry Document Procedures.

(6) For a description of specific edit marks, see the table below:

(1) Document Perfection is responsible for arranging Form 1041 in the following order when transcription line entries are present:

• Pages 1, 2, and 3

• Schedule I (Form 1041)

• Form 4952

• Schedule H (Form 1040)

• Schedule D (Form 1041)

• Form 8949 valid for 2017 and later.

• Form 8995 or Form 8995-A valid for 2019 and later.

• Form 4136

• Form 8978 valid for 2017 and later.

• Form 965-A valid for 2017 and later.

• Form 8941

• Form 5884-B not valid for 2012 and later.

• Form 3800

• Form 8997 valid for 2021 and later.

• Form 8960

• Form 8936 (Schedule A) valid for 2023 and later.

Note: It is not necessary to sequence the forms and/or schedules if there are no transcription line entries, including forms with the entity section only filled in. There’s no need to X forms and/or schedules not in sequence order.

(2) Below are more instructions:

• Form 1041 Schedule D-1, Pages 1 and 2 should be moved out of the sequence order for Form 1041 on 201212 and prior year returns only. Schedule D-1 is no longer valid.

• "X" any prior year Schedule I that supports Form 8801 (Schedule G, Line 2c*). See IRM 3.11.14.22.2.3(2), Line 2c, Schedule G - Credit for Prior Year Minimum Tax (Form 8801).
  *(Line 2d for 2009 and prior see IRM 3.11.14.22.2.4, Line 2d, Schedule G - Bond Credits).

• Place all Form 1041 Schedule K-1, filed as attachments to Form 1041, as the last attachment in the package or follow local agreement. Detach current year and prior two year's Schedules K-1 and all future year Schedules K-1.

  Example: Tax years 2021 and later, Form 1041 Schedule K-1.

  See IRM 3.0.101.5, Code and Edit, for Schedule K-1 procedures.

(1) Taxpayers must give documentation to support claims for most gains, losses, debits, and credits ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡

1. Unless otherwise instructed, correspond for documentation to support any claims ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

(1) Form 1041 - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

• Line 24 - Total Tax

• Line 25 - Net 965 Tax Liability Paid

• Line 26 - Total Payments

• Line 27 - Estimated Tax Penalty

• Line 28/29 - Tax Due/Overpayment

• Line 30a - Credit Elect

• Line 30b - Refund

• Line 10, Schedule G, Part II - Estimated Tax Payments

• Line 11, Schedule G, Part II - Credit to Beneficiaries

• Line 13, Schedule G, Part II - Tax Paid With Extension

• Line 14, Schedule G, Part II - Federal Income Tax Withheld

• Line 15, Schedule G, Part II - Net 965 Tax Liability Amount

• Line 16, Schedule G, Part II - Payments from Form 2439

(2) Form 1041-QFT - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

• Line 12 - Tax

• Line 13 - Credits

• Line 16, Total Tax

• Line 17 - Payments

• Line 18 - Elective Payment Election Amount from Form 3800

• Line 20 - Overpayment

• Line 21a - Credit Elect

• Line 21b - Refund

(3) Form 1041-N - Edit forms and schedules as dollars only, except for the following lines which are dollars and cents:

• Line 14 - Tax

• Line 15 - Credits

• Line 16, Total Tax

• Line 17 - Net 965 Tax Liability Paid

• Line 18 - Payments

• Line 19 - Elective Payment Election Amount from Form 3800

• Line 20/21 - Tax Due/Overpayment

• Line 22 - Credit Elect

• Line 22b - Refund

(1) Reference is made throughout this IRM to "significant entries." A significant entry is defined as any amount other than zero.

(1) A return must have specific items before it is considered processable. Perfect all documents to the extent possible from schedules and other attachments. The specific items needed are:

• An Employer Identification Number (EIN),

• A legible name (for name control),

• Valid tax period,

• Legible tax data, if tax liability is shown, and

• A signature attesting to the perjury statement Jurat shown on the document.

(2) Conditions which make a return unprocessable are:

• Name so illegible or incomplete that the name control cannot be decided.

• The EIN or Taxpayer Identification Number (TIN) is other than nine numeric digits and cannot be perfected from information on the return or attachments.

• The document has two or more different EIN's.

• Taxpayer has stated that he/she has combined liability for more than one tax period or more than one type of tax.

• Tax data entries are so incomplete, illegible or contradictory that the tax liability cannot be decided.

• The return is mis-blocked.

• The return is unsigned.

• The return has only entity data and no other statements, attachments from the taxpayer.

• Any condition set forth as unprocessable in the sections on processing specific documents.

(3) If a return has no entity data, or the signature on the return is illegible and the alpha letter of the last name cannot be decided, and the only entries are money amounts, then give the return to the manager.

(4) Use the following guidelines for disposition of returns that cannot be perfected from schedules and other attachments and necessary data was not gotten through research. If you cannot correspond or send the return back to the taxpayer because of illegible entity data, consider the return unprocessable:

(5) If a Form 1041 is received with a second Form 1041 attached and the second return has the same EIN, Tax Period, and money amounts:

• Leave the second return attached to the first.

• "X" the first page of the second return and treat as an attachment to the first return.

  Exception: Do not "X" if an amended return. Detach amended return and process separately. The amended return will show on IDRS as a duplicate and be worked by Accounts Management.

(1) Perfect all documents if possible. Examine schedules and other attachments for the information necessary to make the document processable.

1. When found, edit on Form 1041.

2. When perfection is not possible, prepare Form 4227 and notate the reason for rejection. Attach Form 4227 to the face of the document in a position that will leave the entity data, Condition Codes and Remittance Amount visible for transcription.

(2) If liability for two or more Form 1041 forms for the same tax class have been reported on one numbered return and the information necessary for the preparation of the individual returns is present:

• Adjust the line entries on the multiple periods return to reflect the liability for the earliest period.

• Edit Action Code 610/611 (Renumber/Remittance Renumber) and leave the original return in the block.

• Prepare the other period returns.

• Route the newly prepared returns for processing.

(3) If liability for two or more Form 1041 forms for the same tax class have been reported on one unnumbered return and the information necessary for the preparation of the individual returns is present:

1. Adjust the line entries on the multiple periods return to reflect the liability for the earliest period.

2. Prepare other period returns.

3. Retain all these unnumbered returns in the batch.

(4) Reject all non-remittance Form 1041 forms showing taxable income but no tax computation and the taxpayer notates that the return is for an exempt organization (e.g., EXEMPT, NONTAXABLE, NONPROFIT, etc.):

1. Prepare Form 4227 and notate "TAX EXEMPT STATUS PENDING".

2. Forward the return for shipment to the proper Key Area Examination function.

(5) For all other conditions, start correspondence action when the document cannot be perfected from attachments or schedules. The only exceptions are when the Name and Address are missing or are so illegible that correspondence is impossible, and when a document is being re-input after correspondence has already been conducted but the document still is unprocessable.

(1) There are two types of correspondence that Code and Edit may encounter:

• Correspondence received from taxpayers, and

• Correspondence issued to taxpayers.

(1) For Tax Periods 201712 and later returns, CCC "B" is used to identify an Election to defer Net Tax Liability under Section 965(i).

(2) See IRM See IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later) for instructions on when to edit CCC "B".

(1) CCC "C" is an invalid code which will force the return to error correction.

(2) Edit CCC "C" if Form 8834, Form 8910, and/or Form 8939 has an invalid vehicle year or an invalid in service date.

(1) Do not edit CCC "D" if the taxpayer requests abatement for "Failure to Pay Timely" when the return is submitted. Send Letter 1382C, Penalty Removal Request Incomplete, to inform taxpayer of the proper procedure to follow to request penalty abatement, if, and when a penalty is assessed.

(2) Edit CCC "D" if an internal use form or routing slip is attached and shows "DO NOT ASSESS FAILURE TO PAY PENALTY".

(3) Edit CCC "D" on a "Final", Balance Due return if the Received Date is after the short period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡. See IRM 3.11.14.8.5, CCC "F" Final Return.

(4) Do not edit CCC "D" when pre-computed penalty is shown on the return.

(5) Edit CCC "D" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

(1) Effective January 1, 2017, Computer Condition Code "E" may be edited on Form 1041, Form 1041-QFT, and/or Form 1041-N for any year, after the SP BMF ID Theft Liaison verifies a potential identify theft filing.

(2) If a tax examiner in Submission Processing (SP) Code and Edit (C&E) finds a case with attachments or correspondence showing the taxpayer is a victim of ID Theft, give the entire case to your senior/lead. Your senior/lead will expedite the case to the Planning and Analysis (P&A) staff for referral to one of the SP BMF ID Theft liaisons. The taxpayer must show that they are a victim of "ID Theft"; do not send cases that are subject to Funny Box or Fraud review.

(3) If the SP BMF ID Theft Liaison says the return is ID Theft, the tax examiner will edit CCC E.

(1) Edit CCC "F" when the "Final Return" box is checked, or the estate or trust shows it is not liable for future returns. Notations may include (but are not limited to):

• Final

• Out of Business

• Liquidation

• Exempt Under IRC 501(c)(3)

• Dissolved

(1) See IRM 3.11.14.10.1, Amended Return, for instructions.

(1) Edit CCC "I" when Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) is attached.

(1) For Tax Periods 201712 and later returns, CCC "J" is used to show a Section 965 return.

(2) See IRM 3.11.14.10.9, Section 965 Returns Form 1041 and Form 1041-N (TY 2017 and later), for instructions when to edit CCC "J".

(1) Edit CCC "K", for taxable periods ending in 2009 only, when Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, box "E" is checked in Part II.

(1) Edit CCC "M," when tax period is 201712 and later, and Form 8949 (Sales and Other Dispositions of Capital Assets) has a code "Z" or "Y" in any line for column (f) of Part I and Part II.

(1) Edit CCC "N" when Form 8939, Allocation of Increase in Basis for Property Received from a Decedent, is attached to Form 1041.

(1) CCC "O" is edited when a Manual Refund will be issued and a Form 3753 or Form 5792 is attached. Verify that the Name Control, EIN, and Tax Period on the return are the same as the information on the attached form.

(2) When editing CCC "O", research to decide if TC 840 (Manual Refund Transaction) has posted:

(1) Edit CCC "P" on the return when "Streamlined" is written on the top of the return.

(1) Do not edit CCC "R" when a reason is given by the taxpayer for a delay in filing a return. Issue Letter 1382C, Penalty Removal Request Incomplete, and continue editing the return.

(2) Edit CCC "R" on the return when any of the following conditions are present:

• There is an indication such as "DO NOT ASSESS FAILURE TO FILE PENALTY" on a secured return annotated with TC "599".

• If an internal use form or routing slip is attached and shows do not assess failure to file penalty.

Note: All "R" coded returns must have an IRS received date. If one is not present, edit the IRS Received Date in the middle of the return.

(3) Edit CCC R on final short-period if the received date is on or prior to the normal due date for a full-period return. See IRM 3.11.14.12.2 (2), Final Returns for possible editing of CCC R on short period.

(4) Edit CCC "R" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

(1) Edit CCC "T" when Form 8886, Reportable Transaction Disclosure Statement is attached to a return.

(1) Edit CCC "V" when Form 3800, Part III, Lines 1a and/or 4a has a significant entry and Form 3468, Part II, Line 8 has an entry.

(1) CCC "W" is used when the return was cleared by Statute Control. See IRM 3.11.14.10.11, Statute Returns.

(1) Edit CCC "X" when any of the following conditions occur:

(1) CCC "Y" is edited for a Change of Accounting Period. Enter only for short period returns due to change of accounting period not due to initial or final filing:

• See IRM 3.11.14.12.5, Short Period Returns - Editing Proof of Entitlement

• See IRM 3.11.14.12.6, Short Period Returns - Missing Proof of Entitlement

• See IRM 3.11.14.12.7, Short Period Returns - Editing a Disapproved Application (Form 1128)

• See IRM 3.11.14.12.8, Short Period Returns - Editing Form 1128 With No Indication of Approval or Disapproval

• See IRM 3.11.14.12.9, Short Period Returns - with Prepaid Credits

(2) If a prepaid credit is claimed on a short-period Final return, see IRM 3.11.14.12.9, Short Period Returns - with Prepaid Credits.

(3) Don’t edit CCC "Y" for "Initial" or "Final" returns.

(1) Edit CCC "1" when Form 8824, Like-Kind Exchanges, is attached.

(1) For Tax Year 2020 and later, Form 8938, Statement of Foreign Financial Assets, will be input into the General Purpose Programming (GPP) database. If attached process a TY 2020 Form 8938 and later, per the instructions below:

(2) Process Form 8938 with the following criteria:

1. Tax Period on Form 1041 is 202012 or later, and

2. Form 8938 is a 2020 and later revision and

3. Form 8938 has significant entries.

   Note: A significant entry is defined as any amount other than zero.

(3) If Form 8938 is attached, but doesn't meet the above criteria, then continue normal processing of Form 1041. Edit CCC 2, do not sequence the form to the back of the return, or place the form in the designated basket.

(4) If the return meets the criteria in paragraph (2), process Form 8938 per the instructions below:

1. Completely edit Form 1041.

2. Edit CCC "2".

3. Detach Form 1041 Schedule K-1 and paper clip to return.

4. Pull the Form 8938 from the return and sequence to the back of the last page of Form 1041 (after schedules and attachment pages), attaching the Form 8938 so that it is back- to- back with the parent return.

5. Place the Form 1041 in a designated basket.

6. Only one Form 8938, Pages 1 and 2, is processed. If multiple Form 8938 are attached, select the form that has the highest account value in Part V, Line 4; or highest asset value in Part VI, Line 4 and delete the others.

   Note: The Form 8938 can have multiple "Continuation Statements". Do not confuse the multiple continuation statements with multiple Form 8938.

(5) Form 1041 with Form 8938 attached must be batched separately.

(1) Edit CCC "3" when the return is unprocessable and there is an indication that correspondence was sent, and no reply received.

(1) Edit CCC "4" when the IRS's Compliance Branch prepared a return and the Revenue Officer entered IRC 6020(b).

(1) Edit CCC "8" when any of the following conditions are present:

(2) Edit CCC "8" on a complete Streamline return filing. See IRM 3.11.14.10.14, Streamlined Filing Compliance Process (Ogden Only) (Form 1041).

(1) Edit CCC "9" when any of the following forms are attached and an entry is present on Line 2b*, Schedule G of Form 1041
*(Line 2c for 2009 and prior):

• Form 8586, Low-Income Housing Credit.

• Form 8609, Low-Income Housing Credit Allocation and Certification, for year's 200412 and prior.

• Form 8609-A, Annual Statement for Low Income Housing Credit.

• Form 8693, Low-Income Housing Credit Disposition Bond.

(1) A return is considered amended based on the following:

• The Amended box is checked.

• Words such as, "Supplemental", "Corrected", or "Additional" are present.

• Any indication from the taxpayer a previous return was filed.

  Note: Words such as Copy or Duplicate are not sufficient and must be accompanied by a statement from the taxpayer that a previous return was filed.

• The return appears to be a duplicate and IDRS research shows a Transaction Code (TC) 150.

(2) If a Form 1041 is received with a second Form 1041 attached and the second return has the same EIN and Tax Period:

• Leave the second return attached to the first.

• "X" the first page of the second return and treat as an attachment to the first return.

  Exception: Do not "X" if an amended return. Detach amended return and process separately. The amended return will show on IDRS as a duplicate and be worked by Accounts Management.

(3) Examine the return for attachments:

• Do not separate any related attachments submitted to explain the reason for the Amended return. Accounts Management may use the information.

• Detach any unrelated documents and route them to the correct function using Form 4227 and edit the Working Trail on the return.

Exception: Pull any amended Form 1041 that has "Qualified Cellulosic Biofuel Credit refund or CBR" notated and route to Accounts Management.

(4) Follow the instructions in the chart below when there is an indication of an amended return:

(5) Do not edit CCC "G" on returns filed under Section 443(b)(2). See Exhibit 3.11.14-5, IRC Sections and Actions to be taken on Form 1041.

(6) The following data must be edited on all amended returns:

1. EIN - See IRM 3.11.14.14.2, Entity Perfection - Employer Identification Number (EIN).

2. Name Control - See IRM 3.11.14.14.3, Entity Perfection - Name Control.

3. Tax Period - See IRM 3.11.14.12, Tax Period.

4. CCC "G" - See IRM 3.11.14.8.6, CCC "G" - Amended Returns, and Reminder above.

   Exception: Don’t route to Statute Control Unit for clearance, edit CCC "W" and continue processing if any of the following conditions are present:
   Compliance IRC 6020(b) returns.
   Secured by Examination/Collections, Secured by TE/GE, Secured by TE/GE EP Exam
   Returns with "TC 59X" or "ICS" notated on the face of the return.
   Returns that are substitute returns prepared by Examination (SFR) in top margin of the form.
   Returns with a stamp showing a previous clearance by Statute Control within the last 90 days.

   Note: If corresponding for a signature on an amended return, you will still code with CCC G and CCC 3.

5. IRS Received Date - See IRM 3.11.14.11, Received Date.

6. Signature - See IRM 3.11.14.19, Signature.

(7) Detach Schedules K-1 for current year and prior two years. Process accordingly. See IRM 3.0.101, General, Schedule K-1 Processing. Watch for the Amended Box on Schedules K-1.

(8) Amended 1041 returns with "Streamline" written across the top will need special handling. Amended Streamlined 1041 returns will not be processed, give them to the lead. Instead, they will be scanned into CII in Austin and worked by Ogden's AM. If amended 1041 Streamlined returns are received in Ogden, they will be scanned into CIS with a special cover sheet assigned to a special employee number.

(1) This subsection has instructions for processing bankruptcy returns.

(2) The bankruptcy trustee or debtor in possession must file Form 1041 for the estate of an individual involved in bankruptcy proceedings under Chapter 7 or 11 of title 11 of the United States Code if the estate has gross income that exceeds the amount of:

• $13,850 for Tax Year 2023 (standard deduction of single or married filing separately)

• $12,950 for Tax Year 2022 (standard deduction of single or married filing separately)

• $12,550 for Tax Year 2021 (standard deduction of single or married filing separately)

• $12,400 for Tax Year 2020 (standard deduction of single or married filing separately)

• $12,200 for Tax Year 2019 (standard deduction of single or married filing separately)

• $12,000 for Tax Year 2018 (standard deduction of single or married filing separately)

• $10,400 for Tax Year 2017 (personal exemption plus the standard deduction of single or married filing separately)

(3) Prompt identification should be made of a bankruptcy related "Request for Prompt Assessment" or a "Quick Determination" of tax liability to ensure that the crucial 60-day and 180-day deadlines is met timely by Compliance. See IRM 3.11.14.10.3, Prompt Assessment/Prompt Determination (Form 4810).

(4) Edit Fiduciary Code "5" on all Chapter 7 Bankruptcy Estate returns or "6" on all Chapter 11 Bankruptcy Estate returns. If no boxes are checked, edit Fiduciary Code "5" if the return shows it is a bankruptcy. See IRM 3.11.14.13.3, Fiduciary and Trust Code Editing.

(5) All bankruptcy returns, except amended bankruptcy returns, must be routed to Entity. Completely edit the return except the name control prior to sending to Entity. See below for more editing instructions.

(6) If Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return, do not edit an Installment Sale Indicator Code. Form 6252 information will be added on the individual tax return.

3.11.14.10.2.2 (01-01-2024)

Individual Bankruptcy

(1) If Form 1040 is attached, all income and deductions must be reported, and the tax computed on Form 1040. Only the tax liability should be reported on Lines 23 through 30 of Form 1041.

(2) If the taxpayer has entered amounts in any of Lines 1 through 22 of Form 1041, place an "X" across lines 1 through 22.

(3) The amounts on Form 1041 should equal the information given on Form 1040.

1. If Form 1040 is attached, ensure that the amounts reported on Form 1041 equal the amounts reported on Form 1040 as follows: See Figure 3.11.14-6, Individual Bankruptcy Estate.

Form 1040	Edit to Form 1041	Description
Line 24	Line 24	Total Tax
Line 26	Line 10, Sch. G	Estimated Tax Payments
Schedule 3, Line 10	Line 13, Sch. G	Amount Paid with Extension
Line 25d	Line 14, Sch. G	Federal Income Tax Withheld
Schedule 3, Line 13a	Line 16, Sch. G	Credit from Form 2439
Schedule 3, Line 12	Line 17, Sch. G	Credit from Form 4136
Schedule 3, Line 13c	Line 18a, Sch. G	Elective Payment Election Amount from Form 3800
Schedule 3, Line 13z	Line 18b, Sch. G	Other Credits or Payments
Line 33	Line 26	Total Payments
Line 38	Line 27	Estimated Tax Penalty
Line 37	Line 28	Tax Due
Line 34	Line 29	Overpayment
Line 36	Line 30a	Credit Elect
Line 35a	Line 30b	Refund

Note: For prior year returns, match the Total Tax, Total Payments, Overpayment, and Tax Due to the same line descriptions on Form 1041.

2. Process deviations to each line compared above as follows:

If ...	Then ...
Form 1041 is blank, and Form 1040 is not attached,	Correspond.
Form 1041 equals Form 1040,	Continue editing the return.
Form 1041 has an entry, but Form 1040 is zero or blank,	Continue editing the return.
Form 1041 entry is zero or blank, and Form 1040 has an entry,	Edit the amount from Form 1040 to the applicable Line on Form 1041.
Entries are present on both Form 1041 and Form 1040, but the amounts on each form are different,	Correspond with Letter 177C to decide the correct amount.
Form 1040 is not attached and Lines 1 through 23 of Form 1041 are completed and Line 9 has Gross Income of less than the applicable tax year Exemption plus the Standard Deduction, see Exemption/Standard Deduction Chart in paragraph (3)c) below.	Process as a nontaxable return. Correspond with Letter 177C to inform the taxpayer there is no need to file Form 1041. Do not suspend. (Follow local procedures).
Form 1040 is not attached and Lines 1 through 23 are completed on Form 1041, and Line 9 has Gross Income of greater than the applicable tax year Exemption plus the Standard Deduction, see Exemption/Standard Deduction Chart in paragraph (3)c) below.	Correspond with Letter 177C using the correct paragraph to request a copy of Form 1040 for the applicable Tax Period.
Form 1040 is not attached and lines 24 through 30 of Form 1041 are present,	Correspond.

3. Exemption/Standard Deduction Chart:

   Note: For Tax Year 2018 and later a personal exemption is not valid.

Tax Year	Exemption	Standard Deduction	Combined Total
2023	$0	$13,850	N/A
2022	$0	$12,950	N/A
2021	$0	$12,550	N/A
2020	$0	$12,400	N/A
2019	$0	$12,200	N/A
2018	$0	$12,000	N/A
2017	$4,050	$6,350	$10,400
2016	$4,050	$6,300	$10,350
2015	$4,000	$6,300	$10,300
2014	$3,950	$6,200	$10,150
2013	$3,900	$6,100	$10,000
2012	$3,800	$5,950	$9,750
2011	$3,700	$5,800	$9,500
2010	$3,650	$5,700	$9,350
2009	$3,650	$5,700	$9,350
2008	$3,500	$5,450	$8,950
2007	$3,400	$5,350	$8,750

(1) Identification should be made for "Prompt Assessment" or "Prompt Determination" of tax liability to ensure that the crucial 60 and 180 day deadlines is met timely by Compliance.

(2) A Prompt Assessment is requested either in the form of a letter or on Form 4810 Request for Prompt Assessment Under IRC 6501(d):

(3) If a request for Prompt Determination under Section 505(b) of the U.S. Bankruptcy Code is attached to the return and addressed to the Submission Processing Campus, decide if the request and return was processed through the Centralized Insolvency Operation Rev. Proc. 2006-24:

(1) If Form 1041 is received with the notation "SEPARATE SHARE" and there are supporting returns shown as copies for information purposes:

1. Research (following local procedures) to decide if TC 150 is present. It is possible that the original return has become detached during batching.

(1) Process Form 1041 as an original return if it is received with all the following:

• No tax data entries and no tax data information attached.

• A notation on the return such as "NOT LIABLE."

• A taxpayer signature.

(1) A return posted to the wrong account or module or attempting to post must be reprocessed to post to the proper account or module.

(2) Some re-entry returns may have originally been filed electronically through Modernized E-file (MeF). These returns may be shown by the presence of Mod E-file printouts in lieu of an actual return. Do not correspond for missing signatures on these documents.

(3) Each re-entry return must have a Form 3893, Re-Entry Document Control, or Form 13596, Reprocessing Returns, attached.

• Form 3893 is used to re-input documents that have not posted to an account or module.

• Form 13596 is used to reprocess documents to the correct account or module, that had previously posted to the wrong account or module.

(4) Always leave Form 3893 or Form 13596 on the front of the return. It must remain as a permanent part of the document.

(5) Examine Form 3893 or Form 13596 to decide the editing needed to make the return processable.

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

(1) Compliance functions, Collection and Examination, secure returns from the taxpayer and also prepare returns if the taxpayer doesn't give them.

(2) Compliance notates:

1. Prepared tax returns are notated with 6020(b) or SFR (Substitute for Return).

2. Secured tax returns are notated with "TC 59X" or "ICS" (Integrated Collections System) or notated "Process as Original" with an attached Form 13133, Expedite Processing Cycle. The "Delinquent Return" box on Form 13133 should be checked.

(1) Section 965 (Repatriation Provision), Treatment of deferred foreign income upon transition to participating exemption systems of taxation for U.S. Shareholders of Specified Foreign Corporations per Tax Cuts Jobs Act (Tax Reform), Provision Section 14103, Public Law 115-97 (H.R.1).

(2) Taxpayers reporting a 965 tax on their return can elect one of the following two elections:

(3) Edit CCC "J" if the return shows a Section 965 as follows:

(4) Edit CCC "B" if the return has a Section 965(i) election listed as follows:

(5) If CCC "J" or "B" (Section 965(i) Election) was edited on a Tax Period 201712 - 201811 return, edit as follows:

(1) The trustee of a Designated or Qualified Settlement Fund (QSF) generally must file Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B), instead of Form 1041.

(2) If a QSF has only one transferrer, the transferrer may elect to treat the QSF as a grantor type trust. To make the grantor trust election, the transferrer must attach an election statement to a timely filed Form 1041. At the top of the election statement, should be the notation "SECTION 1.468B-1(K) ELECTION" and has the transferrer’s:

• Name,

• Address,

• TIN, and

• A statement that he or she will treat the QSF as a grantor type trust.

(3) If the filer notates that Form 1041 is for a "QUALIFIED SETTLEMENT FUND" or "SETTLEMENT FUND", but lacks all the information listed in the preceding paragraph, decide if the document is numbered or unnumbered:

(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) Route Statute returns to the Statute Control Unit daily or more often if needed.

(3) If any of the conditions listed below are present, do not route to Statute Control Unit for clearance. Instead, edit CCC "W", and continue processing:

• Compliance IRC 6020(b) returns.

• Secured by Examination/Collections, secured by TE/GE, secured by TE/GE Employee Plan (EP) Exam.

• Returns with Transaction Code (TC) 59X or "ICS" notated on the face of the return see IRM 3.11.14.43, Routing Guide for Attachments, for more information.

• Returns showing substitute returns prepared by Examination (SFR) in top margin of the return.

• Returns with a stamp showing a previous clearance by Statute Control within the last 90.

(4) If a return has any of the following computer paragraphs (CPs) or letters attached, do not route to Statute Control Unit for clearance. Edit CCC "W" if the return needs processing. See

• CP 259, Master File Generated 1st TDI Notice

• CP 959, Master File Generated 1st TDI Notice (Spanish version)

• CP 518, Final Notice - Return Delinquency

• Letter 112-C, Payment/Overpayment/Credit Applied; No Record of Return Filed

• Letter 282-C, Return Not Received: Copy Requested/Received

• Letter 2255-C, Delinquent Return (Forms 720, 1041, 1065, 1120)

• Letter 2284-C, Delinquent Return (Form 940, 941, 942, 943)

(5) If a return has a Form 12412, Operations Assistance Request (OAR), from TAS and the return is a potential statute control return but is not stamped cleared by Statute, give the return to your lead. The lead contacts the TAS employee listed on the OAR for rejection of the OAR back to TAS for clearance by the Statute Control Unit.

(6) Statute returns are unprocessable until cleared by Statute Control.

(7) Edit CCC "W" if the Statue Control Unit stamps or shows clearance on the front of the return. See Figure 3.11.14-11, Statute Return.

(8) Follow the chart below to decide if CCC "W" is needed:

(1) Ogden Submission Processing Campus (OSPC) will process all foreign address returns.

(2) A foreign address is any address other than the 50 states and the District of Columbia.

(3) An Army Post Office (APO), Diplomatic Post Office (DPO) or Fleet Post Office (FPO) is not considered a foreign address. See IRM 3.11.14.14.5, Entity Perfection - Domestic Addresses.

(4) The determination of an International foreign address is based only on the address of the estate or trust found on Page 1 of the return. Don’t consider a Form 1041 or Form 1041-QFT that has schedules or attachments showing that the beneficiary, trustee or shareholder has a foreign address.

(5) U.S. Possessions/Territories - The following U.S. Possessions/Territories are considered foreign addresses and must be shipped to OSPC for processing:

• American Samoa

• Federal States of Micronesia

• Guam

• Marshall Islands

• Northern Mariana Islands

• Palau

• Puerto Rico

• Virgin Islands (US)

(6) Consider a Form 1041 with any of the following attachments or indications to be an international return:

• Form 1040 with Form 2555 or Form 2555-EZ (Foreign Earned Income)

• Form 1040 with Form 4563 (Exclusion of Income for Bona Fide Residents of American Samoa)

• Form 1040 with Form 5074 (Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands)

• Form 8288B (Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests)

• Form 1040GUAM

• Form 1040 (PR)

• Form 1040-SS or Form 1040-SS(NMI)

• Exemption or exclusion of the Tax or Income due to an international treaty (not an American Indian Treaty)

  Note: An American Indian Treaty is not considered International.

• Section 911, 913, 931, or 933 of the Internal Revenue Code

• Treaty Trader or Fulbright Grantee

(7) Route all returns with a foreign address to OSPC for processing. Prepare Letter 86C to inform the fiduciary or trustee that the return was sent.

1. When an international return is shown, discontinue perfection.

2. Prepare Form 4227 and notate "PREPARE LETTER 86C IN DUPLICATE". If there is a credit on the return, also, notate "CREDIT TRANSFER" on Form 4227.

(1) Taxpayers who are presidential appointees are permitted to file their individual tax returns through a trustee of a blind trust.

(2) If there is any indication on the return or attachment, a General Power of Attorney, or Form 2848 attached that shows "Blind Trust", see IRM 3.28.3, Individual Income Tax Returns.

(3) The POA, Form 2848 must be processed to the CAF to reflect the Blind Trust Indicator on Master File to ensure that no correspondence is generated to the taxpayer.

(1) Effective July 1, 2014, the IRS started a new enhanced Streamlined Program for individual taxpayers who are voluntarily disclosing offshore accounts. Returns postmarked on or after July 1, 2014, will follow these Streamlined processing instructions.

(2) To be considered for the Streamlined Program, the package of returns must have any or all the following characteristics:

• Package of returns addressed to Mail Stop 6063 AUSC.

  Note: Austin will transship Form 1041 returns to Ogden.

• "Streamlined" is written on return,

• Form 14653, Certification by US Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, or Form 14654, Certification by US Person Residing I the United States for Streamlined Domestic Offshore Procedures, is attached.

• Taxpayer specifically mentions the "Streamlined" process in a letter.

Note: If multiple tax years are batched together and doesn’t have one of the above criteria, do not treat as streamlined. Re-batch, if necessary.

(3) If the items below are not submitted, correspond using the 177C letter:

• The taxpayer is required to submit delinquent tax returns for the year's listed on the certification when a U.S. tax return is due. They can submit more than 3 year's returns.

  Exception: It the taxpayer attaches copies of returns or a statement showing that the other years were already filed, do not correspond.

• A completed Streamlined Form 14653, Form 14654, or an attachment containing the information must be signed under penalty of perjury.

(4) The completed certification (Form 14653, Form 14654, or substitute certification) must have the following:

• Original signature(s) of taxpayer(s) under the jurat.

• Statement certifying that taxpayer meets the eligibility requirements for the Streamlined Filing Compliance.

• Information related to the taxpayer's financial interests in foreign financial accounts.

• Explanation of the specific reasons for the failure to comply with tax and financial account reporting obligations, this only applies to Form 14654.

(5) If the items are not submitted with a Streamlined package, correspond using Form 13459, Correspondence Action Sheet:

• Attach Form 13459 below the entity area.

• Check all proper boxes.

• Edit correct action code, i.e., AC 211 or AC 215.

(6) If one return needs to be cleared by Statute, send all Streamline returns received from the taxpayer, do not separate.

(7) Follow normal coding instructions and normal Attachment Guide procedures.

(8) If correspondence is necessary for any return submitted as part of the “Streamlined” process, it is important to ensure that all returns submitted by each taxpayer be kept together. This means that if one return needs correspondence, that all returns in the submission must be kept with the suspended return and held together in the Suspense area.

(9) Once it was decided that a Streamlined Package is complete, the package is separated.

(10) When a completed Streamlined filing is received, edit the following Computer Condition Codes (CCC) and edit an audit trail on the return showing that the package was complete:

• D

• P

• R

• 8

Caution: Do not edit CCC D, R, and 8 if corresponding for a Streamline issue.

(11) Amended Streamlined Form 1041 returns will not be processed. Instead, they will be scanned into CII in Austin and worked by Ogden's AM. If amended 1041 Streamlined returns are received in Ogden, they will be scanned into CII with a special cover sheet assigned to a special employee number.

(1) This section has instructions for coding other entries to Form 1041, Form 1041-QFT, and Form 1041-N.

(2) These entries are edited in the left margin next to:

• Line 10, Form 1041.

• Line 5, Form 1041-QFT.

• Line 6, Form 1041-N.

(3) Each entry will be preceded by the numeric for the applicable line.

(4) Edit entries in numeric order, such as "1 - 4", "6 - 2", and "7 - 3".

3.11.14.10.15.1 (01-01-2022)

Electing Small Business Trusts (ESBT)

(1) Edit "2 - 1" in the left margin next to Line 10 of Form 1041 for the Electing Small Business Trust (ESBT) Indicator if the "ESBT" box (in Section A) on page 1 of Form 1041 is checked or there is an indication of ESBT. See Figure 3.11.14-12, ESBT Indicator.

Note: When two Form 1041 returns are received, staple up the ESBT part only Form 1041 return along with its attachments, unless the Form 1041 has entity information only. Then put the ESBT part Form 1041 return on top.

(2) Delete any Schedule D with annotations such as alternative minimum tax, AMT, S-Corp part, EBST part, etc. Move deleted Schedule D out of the sequence order.

3.11.14.10.15.4 (01-01-2022)

Installment Sales Indicator

(1) Form 6252, Installment Sale Income, is used to report the sale of property on the Installment plan.

(2) Codes are based solely on the taxpayer response to Question "3" on Form 6252.

(3) Edit the Installment Sales Indicator in the left margin next to Line 10 of Form 1041 in "6 - N" format. See Figure 3.11.14-13, Installment Sales Indicator Code.

(4) Valid codes for Installment Sales Indicator are as follows:

Code	One Form 6252	Multiple Forms 6252
1	"YES" response to Question 3.	At least one form has a "YES" response.
2	"NO" response to Question 3.	All "NO" responses or a combination of "No" and/or blank responses.
3	"YES" and "NO" are both checked or Question 3 is blank.	Question 3 is blank on all forms.

(5) Do not edit an Installment Sales Indicator Code if Form 6252 is attached to a nontaxable Grantor Trust or Bankruptcy Estate return. The Form 6252 information will be added on the individual tax return.

3.11.14.10.15.5 (01-01-2024)

Historic Structure Code

(1) Edit Code "7 - 3" in the left margin next to Line 10 of Form 1041 if Form 3468, Investment Credit, is attached, and there are entries present on any of the following lines that are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡: See Figure 3.11.14-14, Editing Historic Structure Code for Form 3468.

1. TY 2023 and later: If there are entries under Part VII, Line 1; specifically, Lines h, i or j.

2. TY 2010 - 2022: If there are entries under Part III, Line 11; specifically, Lines e, f, or g.

3. TY 2008 and 2009: If there are entries under Part III, Line 10; specifically, Lines e, f, g, h, i or j.

4. TY 2006 and 2007: If there are entries on Line 1; specifically, Lines e, f, g, or h.

5. TY 1996 - 2005: If there are entries on Line 1, specifically, Lines b or c.

(1) Under the Inflation Reduction Act (IRA) of 2022 and CHIPS and Science Act of 2022, the taxpayer can elect to:

• Take certain credits as an "Elective or Deemed Payment Election."

• Transfer a credit to another taxpayer.

• Claim the credit as a General Business Credit.

(2) For Tax Periods 202212 - 202311 - Identify an Elective or Deemed Payment Election when the taxpayer writes "IRA22DPE" on Form 3800, an attachment or on any of the following lines:

(3) When a return is identified with an "Elective or Deemed Payment Election," do the following:

1. Completely edit the return.

2. Edit RPC "J."

3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

   Note: P&A will provide the pre-printed half-sheets for C&E to use.

4. Give the return to the lead.

5. The lead will have the returns re-batched with "DPE" in the batch ID.

(4) For Tax Periods 202212 - 202311 - Identify a "Credit Transfer" when the taxpayer writes "IRA22TRE" on Form 3800, an attachment, or at the top of the return or on an attachment. Do the following:

1. Completely edit the return.

2. Edit RPC "K."

3. Place a flag at the top of the return and attach the "IRA22 DPE/TRE Reminder" sheet to the return.

   Note: P&A will provide the pre-printed half-sheets for C&E to use.

4. Give the return to the lead.

5. The lead will have the returns re-batched with "TRE" in the batch ID.

(5) Treat taxpayers who claim the credit on Form 3800 with no other indication of claiming the "Elective or Deemed Payment Election" or "Credit Transfer" as normal. See IRM 3.11.14.22.2.2, Schedule G, Line 2b - General Business Credit Form 8300).

(1) All returns must have a tax period.

(2) Edit the Tax Period to the right of the preprinted calendar year in YYMM format.

(3) A Tax Period should end on the last day of a month. Ignore a minor discrepancy such as October 30 instead of October 31. The exceptions are a 52/53-week filer, and final and/or short period returns. The table below shows examples of tax periods:

(4) Tax periods reported under the 52/53-week rule may not end more than 6 days prior to, and not more than 3 days after, the end of a month. In the edit format, use the numeric designation of the month, the last day of which is closest to the actual ending date. See Figure 3.11.14-16, 52–53 Week Tax Periods.

(5) If the Tax Period is more than 12 months or 53 weeks, correspond.

(6) On a "Final" return if the Tax Period's month and year is equal to or later than the Received Date's month and year (future return), edit the Tax Period to be one month prior to the Received Date.

(7) On a "Final" return, if the Received Date is after the short period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, edit CCCs "R" and "F."

(8) Check all Tax Periods for the Statute of Limitation (2 years and 9 months from the normal due date of the return). See IRM 3.11.14.10.11, Statute Returns.

(9) A taxpayer is qualified to file a fiscal year return, when the return is for one of the following filers:

1. Estate.

2. Non-Exempt Charitable Trust under IRC 4947(a)(1) or IRC 501(a).

3. One of the following notations is shown on the return IRC 671 through IRC 678 and IRC 443(b)(2).

Note: Edit Audit Code "5" if the taxpayer is filing a Fiscal Year return and the return is not for one of the filers which are qualified to file on a Fiscal Year basis: Don’t edit Audit Code "5" on any Final Return or on a shown Initial Return that has a Tax Period ending date in December (Calendar Year filer).

(1) If the month of the Tax Period is equal to or later than the month of the Received Date (an early-filed return), edit the Tax Period using the month preceding the month of the Received Date. See Figure 3.11.14-17, Early Filed Final Return, and follow the table below:

(2) If the Received Date is after the short-period due date but on or prior to the regular full tax period due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡:

• Edit CCC "R" and "F". See Figure 3.11.14-18, Short-Period "Final" Balance Due Return.

  Note: Also, edit CCC "D" if the return is a Balance Due.

(1) Initial returns are decided by one of the following:

• The taxpayer has checked the "Initial Return" box, below the address information of Form 1041.

• The "Date Entity Created," Section "D" is the same as the "Fiscal Year Beginning," top of Form 1041.

(1) Never send an Early-Filed return back to the taxpayer.

(2) If the month of the Tax Period Ending (TPE) is the same or after the month of the Received Date, decide how early the return was filed:

(1) A Short Period Return is one which covers a period of less than 12 months or 52 weeks.

(2) Do not process "Initial" or "Final" returns as a Change of Accounting.

(3) Process all other Short Period Returns as a Change of Accounting Period. In such cases, proof of entitlement to the change is required.

(4) Use the table below to identify and edit proof of entitlement.

(1) If proof of entitlement is missing or the taxpayer states on the return or an attachment that an application was filed, but has not received a response, research IDRS using BMFOLE for approval or disapproval information and proceed as follows:

(1) If Form 1128 is disapproved, the return is considered unprocessable:

1. Edit Action Code 211 and correspond.

2. In the correspondence, instruct the taxpayer to file a return for the next regular full period due. Request a disposition of any remittance paid with the return or other credits which have posted to the short period module.