The Federal Unemployment Tax Act established the Federal Unemployment Tax (FUTA) and required cooperation between the States, Internal Revenue Service, and the Department of Labor to determine an employer's contribution to the Unemployment System.

Revenue collected from the Forms 940, and 940-PR, and previously the 940-EZ, go into a FUTA Trust Fund and are eventually passed on to the States by the Department of Labor (DOL) to help them administer their unemployment programs.

Credit Reduction States are named by the Department of Labor.

After the return is processed, the FUTA Certification Program verifies the credit claimed by the employer on their Form 940 returns. Information is exchanged with the states to certify the amount.

The Internal Revenue Service Restructuring and Reform Act of 1998, Section 3705, provides identification requirements for all IRS employees working tax related matters.

IRS employees are required to give their name and unique identification number during taxpayer telephone, face to face and written contact. In addition, the employee's name and unique identification number are required on all manually generated taxpayer correspondence. Other correspondence must include a telephone number that the taxpayer may contact. This will provide taxpayers with enough information to identify an IRS employee who has previously assisted with tax related matters.

A referral to a TAS office should be made if the IRS employee receives a taxpayer contact that meets TAS acceptance criteria (IRM 3.11.154.1.3 (5)) and the employee cannot initiate action to resolve the taxpayer's inquiry or provide the relief requested by the taxpayer. A taxpayer should not have to specifically request TAS assistance to be referred to TAS. IRS employees will advise taxpayers of the option to seek TAS assistance when appropriate. TAS will generally accept the taxpayer's problem at a face value, and will not require documentation from the taxpayer unless it is needed by the IRS to provide the requested relief, or required by the IRM for TAS to provide the relief.

A referral to a TAS office is not necessary even if TAS Case Criteria are met if the IRS employee can resolve a taxpayer's inquiry or provide the relief requested, as outlined in IRM 13.1.7.4 Same Day Resolution. The definition of "Same Day Resolution" "is within 24 hours" . However, although you cannot completely resolve the issue within 24 hours, if you have taken steps within 24 hours to resolve the taxpayer's issue, these cases also meet the definition of "same day" . Do not refer these cases to TAS unless the taxpayer asks to be transferred to TAS.

Refer also to IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, for more information. The National Taxpayer Advocate (NTA) toll-free number, 1-877-777-4778 or TTY/TDD 1-800-829-4059, should be provided to the taxpayer and the taxpayer should be advised that TAS is available if the taxpayer is not satisfied with the service he or she received.

The following types of cases should not be referred to TAS:

TAS Case Acceptance Criteria:

The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage & Investment(W&I) Division, Small Business & Self Employed (SB/SE) Division, Tax Exempt & Government Entities (TE/GE) Division, Criminal Investigation, (CI), Appeals and Large & International(LB&I) Division, that outline the procedures and responsibilities for the processing of Taxpayer Advocate Service (TAS) casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. These agreements are known as Service Level Agreements (SLAs).

The SLAs are located at http://tas.web.irs.gov under the heading "Policy/Procedures/Guidance " .

Some Submission Processing Centers have developed local use Desk Procedures.

Such procedures are only to be used:

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

All existing local information and procedural issuances should be reviewed by the Operations Manager upon receipt of the new IRM revision to ensure conformance with Headquarters procedures.

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

Topics for the BMF Consistency have been identified and developed as a coordinated effort between Cincinnati, Ogden, and W&I (Paper Processing Branch BMF Code & Edit /ERS Section).

BMF Consistency subsections are identified by a diamond (♦) symbol before and after the title.

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.

The purpose of Document Perfection is to code and edit returns and other documents for input to the Master File.

Both the Service Center Recognition Image Processing System (SCRIPS) and the Integrated Submission and Remittance Processing System (ISRP) are used in processing Form 940 Series Returns. IRM 3.11.154.2.2 for specific information regarding Form 940, Form 940-PR and Form 940-EZ (Obsolete).

Some lines on the return are correctly entered as zero "-0-" , dash "–" "N/A" or "none" and do not need to be edited.

Edit all money amounts in dollars and cents, if the distinction between dollars and cents is not clear.

Edit any misplaced or illegible transcription entry to the proper transcription line. The entry may have to be computed from other figures on the return or attachment.

If the taxpayer submits 2006, 2007, 2008, 2009, 2010 or 2011 tax information on a form other than the latest revision, edit the return, as necessary. IRM 3.11.154.2.2

Prior year tax information submitted on the appropriate revision of Form 940 or Form 940-PR, do not require conversion. Some editing may be required. IRM 3.11.154.2.2

Beginning with Processing Year 2010, Form 940-EZ Forms should be converted to Form 940. Exhibit 3.11.154-8. for conversion procedures.

The following Form 940 returns will be processed through the Service Center Recognition Image Processing System (SCRIPS):

The Integrated Submission and Remittance Processing System (ISRP) will be used for those forms that cannot be input via SCRIPS. ISRP will process the following returns:

Form 940 returns (Revisions 2006 through 2011), will be processed through SCRIPS. See IRM 3.41.277 for SCRIPS procedures.

2006 tax year information that is submitted on a 2007, 2008, 2009, 2010 or 2011 Revision will be processed through SCRIPS.

2007 tax year information that is submitted on a 2006 ,2008, 2009, 2010 or 2011 Revision will be processed through SCRIPS.

2008 tax year information that is submitted on a 2006, 2007, 2009, 2010 or 2011 Revision will be processed through SCRIPS.

Form 940-PR (All Revisions) will be processed through ISRP.

Returns that are processed through SCRIPS are batched and prepared separately as "Perfects" or "Imperfects" .

Form 940 returns (Revisions 2006 through 2011), which are batched as "Perfects" , must be prepared as follows:

When Code and Edit reviews the Form 940, determine:

Code and Edit examiners should ensure the jurat and authorized signature are shown and are in their proper location on the return.

Exhibit 3.11.154-1 for transcription lines of the Form 940 ( Revision 2011). The same transcription lines will apply for Revisions 2006, 2007, 2008 and 2009. These returns will be processed through SCRIPS.

Form 940-PR (Revisions 2006 through 2011) will be processed through ISRP. The same transcription lines will apply. Exhibit 3.11.154-2 for transcription lines.

After editing, and when placing in a batch, Form 940 and Schedule A or attachments should be in sequential order:

This will assist SCRIPS and ISRP during data transcription.

When a SCRIPS return is submitted typed or with blue or black ink and any check box or the signature is in orange, or pink, recheck the boxes in red or place an asterisk (*) in the left most position in the signature box.

Form 940 Schedule R/Schedule R Continuation Sheet:

Edit marks are edited on the return for transcription to the Automated Data Processing (ADP) System through ISRP.

The editing must be entered in red pen only.

The only items edited on the return are those to be transcribed except where specific instructions require editing of a non-transcribed item. Lines are left blank if the entry would be a zero amount unless otherwise instructed.

The original entry on a return is never obliterated, altered, or erased when deleting or correcting an entry. Always exercise care to ensure that the original entry remains legible. Perfected entries provide a legible "edit trail" for anyone who may work with the return later.

The return line format on all returns must correspond to the current year's revision, unless otherwise directed. To convert a return to the current format, you must renumber the lines on the prior revision to the current revision, unless otherwise directed.

The table below provides a description of edit marks for SCRIPS and ISRP processing:

The following action will be edited on the Unemployment Returns in the Code & Edit program:

Action Codes are used to indicate whether correspondence, research, or some other action is needed. The Action Code will set the suspense period to be assigned to the return and place the return in the workable or unworkable suspense inventory. Exhibit 3.11.154-17 for suspense periods.

When necessary, a three-digit Action Code will be assigned by the tax examiner.

Edit the Action Code in the bottom left margin of the return (Revision 2005 and prior). Edit Action Codes for Form 940 and Form 940-PR (Revisions 2006 through 2010) just below the line that states "For Privacy Act....." . Do not extend into the left margin.

Assign Action Codes in the following priority order:

Attach Form 4227 when more than one Action Code is needed. Edit the Action Code with the shortest suspense period on the form and edit the second Action Code on Form 4227.

Edit the following Action Codes when a return cannot be perfected from the information present:

Continue perfecting the return after editing the Action Codes.

For a list of the valid Action Codes, Exhibit 3.11.154-17.

Editing of CAF codes is no longer required.

The Centralized Authorization File (CAF) contains the type of authorization that taxpayers give to representatives regarding the taxpayers' accounts. Representatives may submit Form 2848, Power of Attorney (POA) and Declaration of Representative, or Form 8821, Tax Information Authorization (TIA).

All attachments to the return must be reviewed before the return can be considered processable.

Attachments should only be detached when specifically instructed.

Before detaching an attachment for routing, verify that it contains the Name, EIN (Employer Identification Number) or SSN (Social Security Number). Edit if missing.

When a document is detached, also edit the Received Date in the lower left corner, ( for example Rec'd MM/DD/YY).

For Form 940 and Form 940-PR returns Code and Edit must insure the taxpayer's EIN is on all attachments, in case they are separated from the return during processing. If the EIN is not shown on an attachment, (to be processed with the return), edit the last 4 digits of the taxpayer’s EIN. Routed attachments should show the Name, full EIN, and a Received Date.

Imperfect Form 940 and 940-PR (Rev 2005 and subsequent) - After detaching a document from the return, and only page(s) 1, 2, and (if applicable) Schedule A and Schedule R remain, Do Not pull the return, leave in “Imperfect” batch.

Edit Action Trail(s) in the lower left corner going vertically up the side of the return.

Follow the general guidelines below for each attachment:

If an attachment explains a special credit as a successor employer, do not detach. If it is attached to Form 940-EZ (Obsolete), convert to Form 940. If conversion is not possible, correspond using 142C Letter, requesting the taxpayer to complete Form 940. Local management may determine conversion procedure of Form 940-EZ to Form 940.

Computer Condition Codes (CCC) are used to identify a special condition or computation to post to the Master File.

For Secured and Prepared Returns, edit the applicable CCC as indicated on the return, attachment, or Form 13133.

Edit Computer Condition Codes in the following locations:

Code & Edit will no longer edit the Penalty and Interest code "1" on the Form 940, 940-PR or 940-EZ (Obsolete).

Code & Edit will no longer edit the FTD Penalty on Form 940, 940-PR or 940-EZ (Obsolete).

The Internal Revenue Code (IRC) provides for other penalties to be assessed against taxpayers. Those penalties are explained in IRC Sections 6663 and 6674.

Provisions have not been made for assessing these penalties on the original input of the return. Therefore, they should not be included in the penalty and interest box.

Pre-Computed penalties other than Delinquency (Late Filing Penalty), Failure To Deposit Penalty (FTD) or Failure to Pay (FTP) should be handled as follows:

Failure to Deposit - When a pre-computed Failure to Deposit penalty is shown on the return, add the penalty amount to the balance due amount or, subtract the amount of the penalty from the overpayment (refund) amount claimed .

Delinquency, Failure to Pay and Minimum Penalty - When a Delinquency, Failure to Pay, or Minimum Penalty is shown on the return, subtract the penalty from the balance due amount if the taxpayer has computed the penalty and interest, and added it to the balance due amount.

A return must contain specific items before it is considered processable and timely filed. Perfect all documents to the extent possible from schedules and other attachments. The specific items needed are:

Conditions which make a document unprocessable are:

Procedures for Unprocessable Documents

DO NOT send the following unprocessable returns to the Hold File:

Issue correspondence to resolve any conditions causing the return to be unworkable or unprocessable.

.

Examine the return so that all of the conditions can be included in the same correspondence.

Conditions requiring correspondence and the suggested correspondence action: Exhibit 3.11.154-11.

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

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

Code & Edit examiners will indicate the fax paragraph on the Form 12522, Correspondence Action Sheet, to advise taxpayers of the option to fax their response.

The Third Party Designee election was created to allow a designated individual to disclose information about the taxpayer regarding Form 940, Form 940-PR, or Form 940-EZ (Obsolete), with the IRS should questions arise during processing.

The Third Party Designee information is located in Part 6 of the redesigned Form 940 and Form 940-PR (Revisions 2006 through 2011). In prior year returns (Revision 2005 and prior), the Third Party Designee information was located above the signature line.