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Part 3. Submission Processing

Chapter 12. Error Resolution

Section 14. Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N) (Cont. 6)

3.12.14  Income Tax Returns for Estates and Trusts (Forms 1041, 1041-QFT, and 1041-N) (Cont. 6)

3.12.14.18 
Priority IV Errors – Error Codes 001 Through 999

3.12.14.18.55 
Error Code 896 – Total Payments

3.12.14.18.55.1  (01-01-2009)
Invalid Condition – Error Code 896

  1. Error Code 896 will generate when the Total Payments claimed by the taxpayer differ from Total Payments – Computer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Tax Due/Overpayment is in error.

    • If the invalid condition is associated with the reporting of Household Employment Tax on Line 6 of Schedule G (Form 1041), See IRM 3.12.14.15. (Section 07) and See IRM 3.12.14.18.50. (Error Code 884 – Field 05G06).

    • If the invalid condition is associated with Non-Business Credits: Qualified Electric Vehicle Credit (Form 8834), Non-conventional Source Fuel Credit (Form 8907 - Tax year 2005 only), Alternative Motor Vehicle Credit (Form 8910), Alternative Fuel Vehicle Refueling Property Credit (Form 8911) or Section 29, See IRM 3.12.14.13.8. (Field 05G2B).

  2. Field 05G2B (Other Non-business Credits):

    • Transcribed from Line 2b of Schedule G (Form 1041).

    • Line 2b is used to claim Other Non-Business Credits: Qualified Electric Vehicle Credit (Form 8834), Non-conventional Source Fuel Credit (Form 8907 - Tax year 2005 only), Alternative Motor Vehicle Credit (Form 8910), Alternative Fuel Vehicle Refueling Property Credit (Form 8911) or Section 29.

    • Filers must attach a form to Form 1041 to verify the credit amount claimed.

3.12.14.18.55.2  (01-01-2009)
Correction Procedures – Error Code 896

  1. Correct all misplaced entries, coding errors, and transcription errors.

  2. Field 0525 – Transcribed from Line 25 of Form 1041. This field is the total of Fields 0524C>, 0524D, 0524E, 0524F and Sections 15, 16, 17 and 18.

    If... Then...
    Field 0525 contains an entry, but there are no entries in Fields 0524A through 0524F and in Sections 15,16, 17 and 18. Enter the amount in Field 0524A.
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24h but no entry is present on Line 24f. 1) Enter the amount in Field 0524F if Form 2439 is attached.
    2) If Form 3800 is not attached, enter the amount in Field 0524F.
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24h but no entry is present on Line 24f. SSPND 211 Correspond using the appropriate paragraph for the missing information.
    • Upon reply, continue processing based on the information received.
    • If no reply, "X" the amount present on Line 24h of Form 1041, enter "3" in Field 01CCC and assign TPNC 43.

  3. Field 0524A – Transcribed from Line 24a of Form 1041.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Field 0524B – Transcribed from Line 24b of Form 1041. This field displays the amount of Estimated Tax Payments to be allocated among the beneficiaries.

    1. The amount allocated cannot exceed the amount in Field 0524A.

  5. Field 0524C> – This is a computer-generated field and is determined by subtracting Field 0525B from Field 0524A.

    1. If Error Code 896 displays because Field 0524B was reduced, assign TPNC 90 with the following literal:
       
      "THE AMOUNT YOU CREDITED TO BENEFICIARIES EXCEEDED YOUR ESTIMATED TAX PAYMENT AMOUNT. THEREFORE, WE REDUCED THAT AMOUNT TO AGREE WITH THE ACTUAL ESTIMATED TAX PAYMENT AMOUNT."

  6. Field 0524D – Transcribed from Line 24d of Form 1041. This amount is based on amounts paid with Extension Form 7004.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Field 0524E –Transcribed from Line 24e of Form 1041.

    • Amounts claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Form W–2, W–2G, 1099R, and/or a supporting statement.

    If... Then...
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24e but a supporting form or statement is not attached SSPND 211.

    Exception:

    Do not correspond if the "Form 1099" box is checked or "FORM 1099" is notated on the return.


    • Upon reply, continue processing based on the information received.
    • If no reply, delete the amount in Field 0524E, enter "3" in Field 01CCC, and assign TPNC 43.
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24e but a supporting form or statement is not attached Continue processing.

    Note:

    If backup withholding is claimed on Form W–2, W–2G, 1099R, and/or a supporting statement, that amount should also be included on Line 24e and in Field 0524E.

  8. Field 0524F – Transcribed from Line 24f of Form 1041. Amounts claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Copy B of Form 2439.

    If... Then...
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24f but Form 2439 is not attached SSPND 211.
    • Upon reply, continue processing based on the information received.
    If no reply, delete the amount in Field 0524F, enter "3" in Field 01CCC, and assign TPNC 40.
    An entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is present on Line 24f but Form 2439 is not attached GTSEC 05, ensure that the amount on Line 24f has been entered in Field 0524F and continue processing.

  9. Sections 15, 16, 17 and 18 (Gas and Oil Credits) – Field 15A01 through 18C07:

    1. The total of the fields in Sections 15, 16, 17 and 18 is claimed on Line 24g of Form 1041 and must be supported by Form 4136.

      If... Then...
      An entry is present on Line 24g but Form 4136 is not attached SSPND 211.
      • Upon reply, continue processing based on the information received.
      • If no reply, enter "3" in Field 01CCC; and assign TPNC 40.
      Form 4136 is attached and Sections 15, 16, 17 and 18 are present but the taxpayer is not claiming the credit on Line 24g of Form 1041 DLSEC Sections 15, 16, 17 and 18.

    2. Effective August 1, 1996, the Diesel Powered Highway Vehicle Credit was repealed. The Form 1041 computer program disallows this credit (CRN 318) if claimed on Form 1041 with a Tax Period Ending of 199708 or subsequent. This will result in a math error:

    1. Delete the entries from the CRN and the credit amount fields.
    2. Assign TPNC 90 with the following literal: "WE COMPUTED YOUR RETURN WITHOUT APPLYING YOUR DIESEL-POWERED HIGHWAY VEHICLE FUEL CREDIT. THIS CREDIT IS NOT VALID FOR TAX PERIODS AFTER 199707."

  10. Field 05TET - Transcribed from the dotted portion to the left of Line 25 of Form 1041. Amounts claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Form 8913.

    Caution:

    This credit is available for tax periods ending 200612 through 200711 only.

    If... And... Then...
    The entry present on Line 05TET ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ but Form 8913 is not attached. the taxpayer failed to reply to correspondence for Form 8913

    1. Enter .01 in Field 05TRV.

    2. Assign TPNC 89.
    A reply was received the taxpayers figures on Form 8913 are different than Field 05TET

    1. Enter total TETR amount from Form 8913 in Field 05TRV.

    2. Assign TPNC 88.

  11. Examples of Other Taxes are: Forms 4970, 8621, 8697; Section 453A(C); Section 641(C); Section 644; Section 1291; or "Small Business Trust" (a.k.a.: "Electing Small Business Trust" or "ESBT" ). If present, input to Field 05MCT.

3.12.14.18.55.3  (01-01-2009)
Valid Taxpayer Notice Codes – Error Code 896

  1. Valid TPNC's for Error Code 896 are: 10, 38, 40, 43, 88, 89 and 90. See Exhibit 3.12.14-15.

3.12.14.18.56  (01-01-2009)
Error Code 902 – Balance Due/Refund

  1. Error Code 902 will display as follows:

    Field
    Designator    		 Field Name
    TPNC Taxpayer Notice Code
    05B/D Tax Due/Overpayment
    >>>> Tax Due/Overpayment – Computer
    05QTX QFT Tax
    05QC QFT Credits
    0523 Total Tax
    >>>> Total Tax – Computer
    0525 Total Payments
    >>>> Total Payments – Computer
    0526 Estimated Tax Penalty
    0529A Credit Elect
    0529B Refund

3.12.14.18.56.1  (01-01-2009)
Invalid Condition – Error Code 902

  1. Error Code 902 will generate when the Tax Due/Overpayment claimed by the taxpayer differs from Tax Due/Overpayment—Computer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • If the invalid condition is in any way associated with the reporting of Household Employment Tax on Line 6 of Schedule G (Form 1041), See IRM 3.12.14.15. (Section 07) and See IRM 3.12.14.18.50. (Error Code 884 – Field 05G06).

    Reminder:

    Expediting refund returns is critical, if the 45-day interest free period is about to expire.

    See IRM 3.12.14.7.11.

3.12.14.18.56.2  (01-01-2009)
Correction Procedures – Error Code 902

  1. Correct all misplaced entries, coding errors, and transcription errors. Also check all attachments and Form 1041 entries to ensure that all amounts were brought forward correctly.

  2. If amounts are present in any of Fields 0523 through 0526 and Field 05B/D is blank, enter the computer underprint amount in Field 05B/D.

  3. Amounts for penalties and/or interest should not be included in Field 05B/D unless it is for Estimated Tax (ES) Penalty.

    Exception:

    ES penalty for Form 1041-N is entered in the bottom margin of Form 1041-N. If the ES penalty is included in Field 0523, reduce Field 0523 by the ES penalty amount.

  4. If the ES Penalty amount is present on Line 26 but has not been included in Fields 0526 and 05B/D, the amount may have been waived. Code & Edit may have "X" 'd out the amount and EC 902 occurred as a result. Correct as follows:

    1. Review Box "D" (Date Entity Created) in the upper right corner of Form 1041.

    If... Then...
    The Tax Period Ending is within two years after the Date Entity Created Assign TPNC 44.
    The Tax Period Ending is not within two years after the Date Entity Created but the amount of ES Penalty is present in Field 0526 but not in Field 05B/D Add the ES Penalty to the amount in Field 05B/D.
    The Tax Period Ending is not within two years after the Date Entity Created and the amount of ES Penalty is not present in Field 0526 and is not included in Field 05B/D Change Field 05B/D to agree with the underprint amount.

    Note:

    For Tax Periods 198712 to 198811, the ES Penalty was waived. If EC 902 is displayed because the taxpayer has claimed an amount for ES Penalty, assign TPNC 44.

  5. If all necessary corrections have been made and there is still a difference ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ between the taxpayer's and the computer's figures, assign TPNC 10.

3.12.14.18.56.3  (01-01-2009)
Valid Taxpayer Notice Codes – Error Code 902

  1. Valid TPNC's for Error Code 902 are: 10, 40, 44, 46 and 90. See Exhibit 3.12.14-15.

3.12.14.18.57  (01-01-2009)
Error Code 903 – $1 Million Refund

  1. Error Code 903 will display as follows:

    Field
    Designator    		 Field Name
    01RDD> Return Due Date – Computer
    01CCC Computer Condition Code
    0526 Estimated Tax Penalty
    05B/D Tax Due/Overpayment
    >>>> Tax Due/Overpayment – Computer
    0529A Credit Elect
    0529B Refund

3.12.14.18.57.1  (01-01-2009)
Invalid Condition – Error Code 903

  1. Error Code 903 will generate when the Refund amount (minus the Credit Elect amount) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

3.12.14.18.57.2  (01-01-2009)
Correction Procedures – Error Code 903

  1. Correct all misplaced entries, coding errors, and transcription errors.

  2. Determine if a manual refund is present:

    If... Then...
    TC 840 has posted (or is pending) to BMFOL or TXMOD or Form 3753 or 5792 is attached Enter CCC "O" in Field 01CCC.
    There is no indication that a manual refund has been issued

    1. SSPND 341 (Manual Refund).

    2. Flag the return for issuance of a manual refund.

3.12.14.18.58  (01-01-2009)
Error Code 904 – Total Tax Blank with Remittance

  1. Error Code 904 will display as follows:

    Field
    Designator    		 Field Name
    RMIT> Remittance
    01TXP Tax Period
    01CCC Computer Condition Code
    05QTX QFT Taxes
    05QC QFT Credits
    0523 Total Tax
    05B/D Tax Due/Overpayment
    >>>> Tax Due/Overpayment – Computer

    Note:

    The literal "SECTION 05 NOT PRESENT" will display if no entries are present in Section 05.

3.12.14.18.58.1  (01-01-2009)
Invalid Condition – Error Code 904

  1. Error Code 904 will generate when Total Tax is blank and either of the following conditions are present:

    1. A remittance amount is present; or

    2. The RRPS/ISRP indicator is present.

    Note:

    If the invalid condition is in any way associated with the reporting of Household Employment Tax on Line 6 of Schedule G (Form 1041), See IRM 3.12.14.15. (Section 07) and See IRM 3.12.14.18.50. (Error Code 884 – Field 05G06)

3.12.14.18.58.2  (01-01-2009)
Correction Procedures – Error Code 904

  1. Correct all misplaced entries, coding errors, and transcription errors.

  2. Check for a taxpayer explanation of the payment received.

    If... Then...
    The remittance amount equals the refund amount in Field 05B/D,

    1. Change Field 05B/D to become positive.

    2. When EC 902 generates, assign TPNC 10.
    Taxpayer states that the amount is for "PENALTY AND INTEREST" or the penalty and interest are present with a zero balance on a remittance return, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 0523 and 05B/D.
    No entries are present in Field RMIT> and Field 05B/D but the literal "RPS" is present on the top line of the screen display, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    No data is present, the taxpayer does not give an explanation for the remittance amount or indicates that it belongs on another tax module, SSPND 351.

3.12.14.18.58.3  (01-01-2009)
Suspense Correction – Error Code 904

  1. If no data is found, the tax examiner working the suspense inventory will correspond with the taxpayer. If no data is present and you can determine where to apply the remittance amount:

    1. Enter "X" in Field 01CCC.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. Prepare Form 3465 to indicate the amount and module to which the credit should be applied.

    4. Notate "FORM 3465 PREPARED" on Form 1041.

    5. Forward the return to Adjustments (follow local procedures).

3.12.14.18.59  (01-01-2009)
Error Code 999 – End of Year

  1. Error Code 999 will display as follows:

    Field
    Designator    		 Field Name
    01TXP Tax Period

3.12.14.18.59.1  (01-01-2009)
Invalid Condition – Error Code 999

  1. Error Code 999 will generate for all returns that are in error status at the end of the processing year.

3.12.14.18.59.2  (01-01-2009)
Correction Procedures – Error Code 999

  1. Since the system will re-validate the record and set validity checks and based on next processing year's program, the only correction procedure required for Error Code 999 is for the tax examiner to transmit.

3.12.14.18.60  (01-01-2009)
♦Error Code 074 - TETR Inconsistent With Tax Year♦

  1. General Information -

    1. For tax returns filed with tax period ending 200612 through 200711, a refund for the federal telephone excise tax paid on long-distance service may be claimed.

    2. The credit claimed is for the tax paid on service that was billed after February 28, 2003 and before August 1, 2006.

    3. Trusts claiming this credit must complete and submit Form 8913 (Credit for Federal Excise tax Paid) with their tax return.

  2. Fields Displayed - Error Code 074 will display as follows:

    Field Designator Field Name
    CL X Clear Code
    01TXP Tax Period
    05TET Telephone Excise Tax Refund
    05TC> Total Telephone Excise Tax Refund - Computer
       
    05TRV TETR Credit Verified
    20TTR Telephone Excise Tax Refund
    20TTI Telephone Excise Tax Credit Interest

  3. Invalid Condition - Error Code 074 will generate when any of the following conditions is present:

    • Tax period is before 200612 or after 200711.

    • There are entries in Fields 20TTR and 20TTI and there is no entry in Field 05TET

    • Field 20TTI is greater than Field 05TET and the total claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    • The transcribed amount for telephone excise tax refund amount (on return) differs from the computer amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  4. Correction Procedures:

    1. Correct all misplaced entries and transcription errors.

    2. Compare displayed fields with the return. If incorrect, overlay the screen with the correct information.

    3. If the tax period was entered incorrectly, enter the correct tax period in Field 01TXP.

      If... Then...
      Tax period is prior to 200612 or after 200711 and is not an "initial" or "final" return, 1) Enter $.01 in Field 03TRV.
      2) Send 105C letter explaining that the credit cannot be claimed on a return other than tax year 2006. ( See Exhibit 3.12.14-31.)
      The return is a "final" return and the normal tax period ending date is 200612 through 200711 Enter Field 05TET amount in Field 05TRV
      The return is a "final" return and the normal tax period ending date is prior to 200612 or after 200711 1) Enter $.01 in Field 05TRV.
      2) Send 105C letter explaining that the credit cannot be claimed on a return other than tax year 2006. ( See Exhibit 3.12.14-31.)
      The return is an "initial" return and the tax period is not prior to 200612 or after 200711 1) Research IDRS (INOLE) to determine if account was established prior to or during the allowable period (200304 through 200607) or prior year filings.
      Account was established prior to or during allowable period (200304 through 200607) Enter "C" in the clear field.
      No record of account prior to or during allowable period (200304 through 200607) 1) Enter $.01 in Field 03TRV.
      2) Send 105C letter explaining that the credit cannot be claimed since the business was not established prior to or during the allowable period. ( See Exhibit 3.12.14-31.)

    4. If Form 8913 is attached and the combined amount was not shown on the dotted portion to the left of Line 25 of Form 1041, Line 14 of Form 1041-QFTor Line 15 of Form 1041-N, enter the amount from Field 05TC> in Field 05TET .

    5. If Form 8913 is attached and Field 20TTI is greater than Field 05TET, correspond to inform the taxpayer that the interest amount cannot be more than the excise tax paid and request a corrected Form 8913.

      If... Then...
      Reply is received 1) Compare Form 8913 to entries in Fields 20TTR and 20TTI.
      2) If different, enter total from corrected Form 8913 in Field 05TRV.

      Note:

      If Error Code 074 reappears, enter "C" in clear field.


      3) If the amounts are the same, enter "C" in clear field.
      No reply received Enter "C" in clear field.

    6. If the computer amount (Field 05TC>) differs from the transcribed amount (Field 05TET on Form 1041≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , correspond and request a corrected Form 8913. ( See Exhibit 3.12.14-30.)

      If... Then...
      Reply is received 1) If different, enter total from corrected Form 8913 in Field 05TRV.
      2) If the amounts are the same, enter "C" in clear field.
      No reply received 1) Enter Field 05TC> amount in Field 05TRV.
      2) Send 106C letter advising the claim was partially not allowed because the refund amount was not computed correctly. ( See Exhibit 3.12.14-31.)

      Caution:

      DO NOT send the 106C letter if the amount in Field 05TC is greater than Field 05TET