Review the nature of the prior adjustment to determine whether or not the Form 1040X is a duplicate of the posted adjustment or if the taxpayer is requesting an additional action.

Check posted/pending: TC, RC(s), RN, CRN, etc. to determine what was previously adjusted

Compare the following items:

If a change has been discovered, input the adjustment following general processing procedures.

If there are no changes, or the adjustment is same adjustment previously posted, the return is a duplicate. Research the return packet for any correspondence indicating why the taxpayer is submitting a duplicate 1040X.

If one spouse did not previously file a return, adjust the established account of the taxpayer that has filed, to reflect the amended joint return.

Take the following actions on the established (now referred to as the primary) account:

Refer the following to CIS/AM, if any of the following conditions apply to the account of the taxpayer who did not previously file:

When entering a name change to update/correct a joint return filer, ensure the joint names are entered correctly.

The correct method to input name changes are shown below: The "bold print" indicates the primary taxpayers name control.

The entering of TWO brackets around the PRIMARY taxpayers last name is required when the SECONDARY taxpayers last name is different than the primary taxpayers last name (as in examples b. — e. above). This will reduce unnecessary Unpostable conditions.

The examples above will display on CC ENMOD as follows:

Before shortening taxpayer name(s), all necessary research must be conducted (i.e., CC INOLE, RTVUE, IMFOL, NAMES, NAMEI) under both segments of the Master File.

If the primary and/or secondary name(s) exceed the 35 character/space limit, use the table to correctly reduce the taxpayers name:

Abbreviate the primary taxpayers surname as the last step. Abbreviate the surname by removing the vowels (begin with the vowels in the end of the primary taxpayers surname).

When taxpayers file jointly and it is necessary to reduce the taxpayers Name Lines/Name Controls, it is important to retain the first four characters of the secondary taxpayers surname.

When a taxpayer requests an abatement with or without substantiation within 60 days of the math error, the Service must abate the assessment. For abatement requests with substantiation process normal. Abatement requests without substantiation should be referred to CIS/AM as" unsubstantiated math error protest" .

Do not recompute Estimated Payment (ES) penalties because the ES penalty computation is based on the original tax shown on the present or preceding year tax return.

An amended claims date is now required on every adjustment regardless of the 45 day period.

Taxpayers may file amended returns and not address the math error issue:

Whenever a math error is identified and there are 120 or less days left to the Assessment Statute Expiration Date (ASED), give to work leader to contact the Statute function.

If the taxpayer replies to a math error notice and additional changes are requested. It may be necessary to set another math error on the second adjustment if the taxpayer's additional changes are calculated incorrectly.

Reason Codes describe the adjustment action that will be printed on the notice of adjustment sent to the taxpayer. The Reason Code is a 3-digit field. Enter a leading zero, if the Reason Code is a 2-digit number.

The Reason Code should describe the area(s) of the return affected by the adjustment action. Use the Reason Code(s) which best describes the cause of the adjustment. You must enter at least one, but no more than three reason codes. No specific order is required.

Choose the Reason Code(s) which best describes the cause for the adjustment based on the taxpayer’s explanation and/or attachments.

Reason Code Chart, lists the common reason codes used in Submission Processing and the line reference number. The complete list of Reason Codes is contained in Document 6209, IRS Processing Codes and Information.

Source code selection designates which opening statement will be used on a taxpayer's notice.

Enter a"1" for the source code, except when setting a math error. When setting a math error, use "6" . When setting a non-math error use "2" . The source codes are as follows:

Priority Codes must be used to post adjustments to the Masterfile when certain conditions exist. Failure to use the priority code when specified will cause the transaction to unpost.

Use the following priority codes on REQ54 to bypass conditions at Masterfile to force returns to post correctly.

Category Codes are four letter codes to denote the type or source of an adjustment or correspondence case. Unless otherwise specified, Category Code "XRET" is to be used for inputting adjustments with IDRS Command Codes REQ77/ADJ54 for all Forms 1040X.

Category Codes EICX,EICN and EICC are used for updating the DUPOL database using IDRS Command Code DDBCK. See IRM 3.11.6.7.2.

Transaction which cannot post to Masterfile create an open unpostable case on IDRS. The open control base will be in "A" status with category NLUN which will represent the unpostable and will be assigned to the tax examiner who input the unpostable condition. Do not do an ACTON History Follow-up on your open unpostable case.

When an unpostable condition occurs, a Charge-Out sheet (Form 4251) is generated and the case is returned to the responsible employee or appropriate function. If the case is routed to the incorrect function, return the case to the employee shown on the Charge-Out sheet.

Form 4251 will contain an Unpostable Code (UPC) which will identify the condition that caused the transaction to unpost.

Determine the reason for the unpostable based on the " UPC" and/or "TC-S" code on the Charge-Out sheet, IDRS, and/or the return itself. Perform Masterfile Verification to determine if there are any other reasons the return may not be processable.

If there is a previous TC 160/161 (late filing penalty) on the account input a TC 160 .00 with your adjustment to by pass the unpostable condition number 179 0.

Cross out the DLN found on the CF 5147.

Use the following tables to take the appropriate corrective action. Be sure to adjust the correct amount and tax period

.

Turn in the Charge-Out sheet to the manager after you have completed the appropriate corrective action, or follow local procedures for the disposition of the charge out sheet.

Use these instructions when adding a dependent exemption or to add a new Form 2441 credit, or Form 8863, .

To add the record, type DUPEDA and the TIN of the person being added (DUPEDANNN-NN-NNNN).

When the edit screen is displayed, enter the record information on the edit screen and then transmit.

When the information is transmitted, the DUPED response screen is displayed to show the updated information.

Use these instructions to remove a dependent exemption or to add a Primary's exemption.

To change a record, use command code DUPED, without a definer, and the TIN of the person being claimed to display all the records for that TIN.

Enter a "C" in the request type field and the record number in the record number field and then transmit. This is equivalent to entering a DUPED with the definer "C" and the record number in line "1" of the command code.

When the edit screen is displayed, enter the appropriate corrected information and then transmit.

When the information is transmitted the display screen returns with the corrected information. The original record is marked as reversed (shown with a dash) and a new record is added showing the updated information.

Use these instructions to delete (reverse) an EITC, Form 2441 or Form 8863 record or when the credit for that exemption is reduced to zero.

When reversing a record, use command code DUPED with the TIN of the exemption for which the action is being taken to delete the record.

Delete records that you created in error.

Enter a "D" in the request type and the record number in the record number field and then transmit. This is equivalent to entering a DUPED with the definer "D" and the record number in line "1" of the command code.

The edit screen is displayed along with a delete confirmation message. Enter "Y" to delete the record, and then transmit. When the information is transmitted the display screen is displayed with the corrected information.

Internal Revenue Code Section 127 allows employers to exclude educational expenses from the employee's taxable income. The maximum annual exclusion is $5,250.

When corresponding, refer to IRM 3.11.6.9 and send either Form 8009-A or a 324C letter. For Form 8009-A, use box 20 and the fill-in: " Please provide a copy of your Form W-2 to substantiate your claim for a reduction of wages due to employer provided educational assistance benefits. We will accept a duplicate from your employer or a photocopy." For a 324C letter, use paragraphs A, W, Z, and the fill-in: Please provide a copy of your W-2 to substantiate your claim for a reduction of wages due to employer provided educational assistance benefits. We will accept a duplicate from your employer or a photocopy

On November 11, 2003, President Bush signed into law the Military Family Tax Relief Act of 2003. Taxpayers have been instructed to write " Military Family Tax Relief Act" in red in the top margin to identify the cases.

One provision of the Act allows the filer to exclude the gain on the Sale of a Personal Residence for a home sale after May 6, 1997. Route claims for this exclusion marked "Military Family Tax Relief Act" to AM. Any claim received after November 10, 2004 for tax periods 1997 through 2001 are to be disallowed. Do not send these prior year claims to Statute. Route Tax Year 1997 and subsequent to AM for processing.

Beginning in Tax Year 2003, Reservists who stayed overnight more than 100 miles from home for a drill or meeting may deduct unreimbursed travel expenses. For Tax Year 2006 and subsequent, it is claimed on the Form 2106 and reported on Line 24 of Form 1040. Process using RC 030 .

Nondeductible IRA contribution are those contributions made to a traditional IRA which are within the contribution limit but do not qualify as deductible.

Form 8606 must be attached if taxpayer is reporting or has indicated a change to IRA deduction in the explanation part of the Form 1040X. If Form 8606 is attached reporting or indicating a change to IRA deduction, process using RC 016. If Form 8606 is not attached, correspond per IRM 3.11.6.9 and use either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9.

If taxpayer has a Form 8606 and is removing a deductible IRA route to CIS/AM.

Taxpayers who paid tuition and fees expenses to an accredited educational institution (college, university or vocational school) for an eligible student may be eligible up to $4,000.

Taxpayers can claim Tuition and Fees deduction if they meet the following conditions:

If the taxpayer claims both the Education Credit and the Tuition and Fees Deduction and the Form 8917 indicates that the credits were for the same student, disallow Tuition and Fees per the table below. Also disallow for:

Form 8917 must be attached if taxpayer is claiming the Tuition and Fees Deduction. If not attached correspond per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9.

If Form 1098-T is being used to support the Tuition and Fees deductions on Line 1 of Form 1040X, correspond for Form 8917 per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9.

If present, process using RC 030.

When the taxpayer adds or deletes an exemption, review Form 1040X and any attachments for the exemption's name and TIN. Without a valid TIN, the taxpayer must provide documentation to add an exemption, (i.e. birth or death certificate, doctor/midwife statement) on letterhead with business address and telephone number, or copies of hospital medical records.

When adding an exemption, verify the exemptions name and TIN using Command Code INOLE. If a TIN is obviously inappropriate, for example (111-11-1111) or (123-45-6789) or a similar TIN configuration, correspond for the correct TIN per IRM 3.11.6.9 using either Form 8009-A or a 324C letter. For Form 8009-A, use box 12.: For a 324C letter, use paragraphs A, U, Z.

When adding or removing exemptions, verify the total number of exemptions amount claimed on Line 4, of Form 1040X corresponds to the number of exemptions on the "NUM-EXEMPT>" field on TXMOD or TOT Exemptions: field on IMFOL.

If taxpayer is adding, changing or deleting an exemption and you cannot determine the correct exemption, correspond per IRM 3.11.6.9 using either Form 8009-A or a 324C letter. For Form 8009-A, use box 20 and the fill-in: "The exemption’s name and/or TIN on Form 1040X was either missing, incomplete or did not match our records. Please verify your information." For use a 324C letter, use paragraphs A, U, Z.

A taxpayer who is claiming an exemption for a child who did not live with him/her under the rules for children of divorced or separated parents will indicate this by:

They must attach either Form 8332, or Form 2120, or a copy of the divorce decree. If one of the forms or the divorce decree is not attached, correspond.

If Form 8332 or Form 2120 is attached, continue processing, using RC 006.

Child Tax Credit (CTC) is a non-refundable credit which is used to reduce the taxpayers tax liability.

For Tax Year 2007 and subsequent, to qualify for the credit, the taxpayer must have qualifying child that is the taxpayer's:

For TY 2007 and 2008 ONLY, if the qualifying child is not the taxpayer's dependent and therefore not listed on the return, the taxpayer must file a Form 8901, Information on Qualifying Children Who Are Not Dependents, when claiming the child tax credit. The taxpayer must meet one of the three conditions listed under "Who Must File" on Form 8901. If the form is missing, correspond for the form per IRM 3.11.6.9.

If the taxpayer indicates a religious or conscience based objection to obtaining a TIN, route to CIS/AM

The maximum allowable amount per child is $1,000.

The child credit is reduced (phase out) by $50 for each $1,000 that AGI exceeds:

The taxpayer must furnish a valid Taxpayer Identification Number (TIN) for each qualifying child. This number may be:

Math verify the taxpayer's figures by completing the appropriate worksheet in the instructions booklets, publication, or electronic web-based worksheets on DI.

Update the DUPOL database using CC DDBCK prior to inputting adjustment.

Adjust the child tax credit with TC 291 to increase the credit (decreases the tax) and TC 290 to decrease a previously allowed credit (increases the tax) with RC 036.

Any portion of this credit that was not used to reduce the income tax to zero may be eligible to be used as a refundable credit (Additional Child Tax Credit).

If Child and Dependent Care Credit is claimed on Line 7B, Form 2441 must be attached for the initial claim for each dependent for form verification. The following items must be completed.

The provider's TIN is not required when the taxpayer has exercised "due diligence" in his/her attempt to comply with the requirement. Due diligence applies only to notations that indicate:

Line 2(a), Qualifying Person(s) name can be the taxpayers dependent child, or spouse or dependent claimed unable to care for himself or herself.

Line 2(b), Qualifying Person(s) TIN must be furnished. It can be a Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or an Adoption Taxpayer Identification Number (ATIN). If blank and the filer is claiming an additional exemption who appears to be the same child claimed for this credit, do not correspond.

A qualifying person has to be under the age of 13 years and be claimed as a dependent. If the child turns 13 during the year the child is a qualifying person for part of the year they were under 13. Expenses incurred during that time period can be claimed. Update using CC DUPED for current year only.

Line 3 cannot exceed $3,000 for one dependent or $6,000 for more than one dependent. If blank, see Line 2(c) of Form 2441 for an amount paid.

Line 4, If the amended return is Joint Filing Status (FS 2) the earned income is entered separately for each spouse. The primary taxpayer should enter his/her individual earned income on line 4. If there is no entry research RTVUE to verify if the primary had earned income. If unable to determine the amount, correspond per IRM 3.11.6.9 and send either Form 8009-A or a 324C letter. For Form 8009-A, use box 30 and the fill-in: "Please provide your Earned Income amount on Line 4, Part II. This line must be completed. " For a 324C letter, use paragraphs A, W, Z, and the fill-in: Please provide your Earned Income amount on Line 4, Part II. This line must be completed.

Line 5, Other Spouse’s Earned Income must be present on line 5 if Joint Filing Status (FS 2). If not present research RTVUE to verify other spouse had earned income. If unable to determine the amount, correspond per IRM 3.11.6.9 and send either Form 8009-A or a 324C letter. For Form 8009-A, use box 20 and the fill-in: "Please provide the spouse’s Earned Income amount on Line 5, Part II. This line must be completed when married filing a joint return." For a 324C letter, use paragraphs A, W, Z, and the fill-in: Please provide the spouse’s Earned Income amount on Line 5, Part II. This line must be completed when married filing a joint return.

Correspond for Lines 1(c) and 2(b) if missing and cannot be determined from NAMEI, NAMEB, NAMES, NAMEE, etc. See "NOTE" above for Line 1(c).

Update the DUPOL database using CC DDBCK if a TIN is being added, or deleted. (See IRM 3.11.6.7).

Correspond for Form 2441 if missing per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9. If attached, continue processing using RC 036.

The Energy Policy Act of 2005 (Tax Year 2006 and 2007) provides for a Non-business Energy Property Credit (Part I) and a Residential Energy Efficient Property Credit (Part II) to qualified taxpayers who made energy efficient purchases.

Part I -- Non-Business Energy Property Credit provides taxpayers a credit for improving the energy efficiency of an existing home and for costs relating to residential energy property expenses. The credit applies to property placed in service after December 31, 2005 and before January 1, 2007. The maximum amount allowable for this credit is $500. The nonbusiness energy credit will be available for property placed in service in 2009. The credit is available for items such as high efficiency heating and cooling systems, water heaters, windows, doors and insulation. The maximum amount of the credit is $1,500 but will be limited by the amount of any nonbusiness energy credit claimed in 2006 and 2007. The credit was not available in 2008. For 2009 & 2010 the credit is limited to $1,500 over both tax years.

Part II -- Residential Energy Efficient Property Credit provides taxpayer a credit for adding qualified solar panels, solar water heating equipment, or a fuel cell power plant to their homes in United States. The credit applies to property placed in service after December 31, 2005 and before January 1, 2009.

This credit is figured as follows:

If the taxpayer is claiming more than the maximum allowed for either credit, set the math error per 3.11.6.6.6. Use the following verbiage for the fill-in: " you claimed more than the maximum amount allowed on Form 5695, Residential Energy Credit and/or Residential Energy Efficient Property Credit." Continue to process the return for other issues.

If form 5695 is missing, correspond per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9. If present continue processing using RC 036.

To qualify for the Mortgage Interest Credit, the taxpayer should have received a Mortgage Credit Certificate (MCC) issued under a qualified MCC program in connection with their principal residence.

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If amount claimed is ≡ ≡ ≡ ≡ ≡ ≡ ≡ , route to CIS/AM this is Category A (exam) criteria and needs to be in a special sort with issue identified as Cat A and expedited to ICT for special scanning.

If Part II Mortgage Interest Credit Carryforward to 20XX, has entries, process as a carryforward credit. Taxpayer will be amending the tax year he wants the credit to be applied and will be providing Form 8396 from the year where the credit was created.

Qualified Adoption Expenses claimed on Form 8839 are now refundable credits instead of offsets against income taxes. The refundable credit has also been extended to prior year returns where taxpayers might have unused credit to carry forward.

The 1040X Units will not process the adoption credits for current year or prior years. Route all Form 8839 Qualified Adoption Expenses to CIS/AM.

Form 8863, Education Credit is for qualified education expenses paid to an eligible post secondary educational institution. This credit is composed of two separate credits: Part I, The Hope Credit and Part II, The Lifetime Learning Credit.

The maximum amount for each credit:

For TY 2008 and TY 2009 only, the Emergency Economic Stabilization Act of 2008, temporarily expanded the Hope and Lifetime Learning credits for students attending an eligible education institution located in the Midwestern disaster area. (Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin)

Refer to CIS/AM if the taxpayer Indicates a religious group (e.g. Amish/Mennonite) or conscience based objection to obtaining a TIN.

Taxpayer claims Education Credit and the adjusted gross income (AGI) is over:

Claims Education Credit and the adjusted gross income (AGI) is between these numbers.

Research TRDBV/RTVUE to determine if the student claimed on Form 8863 was claimed as an exemption on Form 1040X. Student(s) must be either the primary or secondary taxpayer or claimed as a dependent of the taxpayer. If the student was claimed as an exemption, continue processing the claim; otherwise see (4) below.

Use the following table to determine if the education credit claim must be disallowed:

If unable to determine for whom the credit is being claimed or if the student's name and/or TIN is illegible, missing, or cannot be determined, correspond per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9.

If Form 1098-T is being used as support for the Tuition and Fees deductions on Line 1 of Form 1040X, correspond for Form 8917)

If the taxpayer claims both the Education Credit and the Tuition and Fees Deduction and the Form 8917 indicates that the credits were for the same student, disallow Tuition and Fees. (see IRM 3.11.6.8.1.4(3)).

If the taxpayer claims more than the maximum credit allowed (see 2, 3 and 4 above) calculate and input the correct credit. Refer to 3.11.6.6.6. This section will provide all instructions including letters and paragraphs to use.

Form 8863 must be attached for the initial claim for each dependent if taxpayer is claiming the education credit. If form is present, process using RC 035, If missing correspond per IRM 3.11.6.9 using either Form 8009-A, box 5 or 7, or a 324C letter, paragraphs A, I, Z, 9.

The American Opportunity education tax credit (a modification of the Hope credit) is available for 2009 and 2010. The American Opportunity Tax Credit is a tax credit of up to $2,500 per student for the cost of tuition and related expenses paid during the taxpayer year. This credit is one of the credits reported on Form 8863, Education Credits (American Opportunity, Hope and Lifetime Learning Credits). Under the new tax credit, taxpayers will receive a tax credit based on hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxpayer year. Forty percent (40%) of the credit (up to $1,000) is refundable for many taxpayers.

The amount of the credit for 2009 is gradually reduced (phased out) if the taxpayer’s modified adjusted gross income (MAGI) is between $80,000 and $90,000 ($160,000 and $180,000 if married filing joint. The credit cannot be claimed if the MAGI is $90,000 or more ($180,000 or more if married filing joint).

Taxpayers with at least one student attending an eligible educational institution in a Midwestern disaster area may elect to continue the Hope credit for all students based on the previous Hope credit.

Adjusting the tax account

The credit for Qualified Retirement Savings Contributions is a non-refundable income tax credit for taxpayers whose AGI is equal to or less than:

An eligible individual must:

Taxpayers may be able to take a credit of up to $1,000 ($2,000 if married filing jointly) for making eligible contributions to an employer-sponsored retirement plan or to an Individual Retirement Arrangement (IRA). The credit is a percentage of the qualifying contributions. See Form 8880.

Qualified retirement savings contributions are the sum of participant contributions and elective deferrals made to qualified plans, traditional IRAs and Roth IRAs.

If present, math verify the taxpayer's figure Correspond if form is missing. If form is present, continue processing using RC 036 If missing, correspond using either Form 8009-A, box 5 or 7; or a 324C letter, paragraphs A, I, Z, 9.

If claim is being disallowed for any reason, route to CIS/AM.

To qualify for the credit, taxpayer must be:

A taxpayer under the age of 65 must be considered permanently and totally disabled in order to take this credit, and all of the following conditions must be met:

Schedule R (Form 1040) or Schedule 3 (Form 1040A) must be submitted and the following must be present. If missing or incomplete, correspond:

Taxpayers may qualify for this credit, but cannot take the credit if the following applies:

If present, continue processing with RC 036.

If claim is being disallowed for any reason, route to CIS/AM.

Taxpayers use Form 3800 to report General Business credits. The following tridocs provide instructions for the specific credits that can be claimed on this form that are found on Line 7 of the Form 1040X.

Taxpayers can file the Form 3800 and/or the specific form for the credit they are claiming, but at least one must be present. If not present, correspond following instructions in IRM 3.11.6.9 requesting the specific form. Use Form 8009-A, box 5 or a 324C letter, paragraphs A, I, Z, 9 to request the correct form(s).

If the taxpayer has entries on Line 7 of Form 3800, treat as a carryback claim. Identify as carryback claim and expedite to CIS/AM.

If the taxpayer claims $500 or more on Forms 6765 or 8586, route to CIS/AM.