text:
- 18.104.22.168 International BMF/NMF and CADE Overview
- 18.104.22.168 Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusions Provided by § 911
- 188.8.131.52 United States Territories
- 126.96.36.199 Household Employment Taxes - BMF Procedures
- 220.127.116.11 Deposit Requirements
- 188.8.131.52 Excess FICA
- 22.214.171.124 Visa Holders - General
Manual Transmittal
September 06, 2013
(1) This transmits revised IRM 21.8.2, International, BMF International Adjustments.
Material Changes
(1) This IRM was revised to reflect various editorial and grammatical changes as well as the following changes:
|IRM subsection
|Updated the NMF IRM reference because IRM 21.8.3 is obsolete and the information was moved to IRM 21.7.12.
|Deleted old information.
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work and added an "Exception" .
|Updated the "Exception" and removed the second "Note" . The procedures in the "Note" were moved to IRM 21.7.5, Estate And Gift Tax Returns, because PAMC has not worked Estate and Gift Tax Returns since Sept. 2007. Added Form 5472.
|IPU 13U0377 issued 02-19-2013. Updated the extension years for the American Samoa Economic Development Credit in the first "Note" .
|Deleted Paragraph (4) and renumbered the remaining paragraphs. These returns were moved to IRM 21.7.5, Estate And Gift Tax Returns, because PAMC has not worked Estate and Gift Tax Returns since Sept. 2007.
|IPU 13U0607 issued 03-22-2013. Added Paragraph 2 to include information about International Assistors DO NOT use the Telephone Transfer Guide (TTG) and renumbered the remaining paragraphs.
|Updated the link in the second bullet.
|IPU 13U0377 issued 02-19-2013. Updated the fax number because of the transition of BMF International work.
|Clarified and updated the information.
|Updated the "Title" and Paragraph 1, and deleted the remaining paragraphs since the information is not BMF related.
|Updated IRM reference.
|Clarified TAS authority.
|IPU 13U0377 issued 02-19-2013. Updated the information because the HQ Analyst is no longer located at the Philadelphia IRS campus.
|IPU 13U0377 issued 02-19-2013. Updated the Filing Location Code information because of the transition of BMF International work. Added "Caution" for CAMC International AM employees.
|IPU 13U0377 issued 02-19-2013. Updated the Filing Location Code information because of the transition of BMF International work. Added a "Caution" because Cincinnati Accounts Management employees must use CC CMODE.
|Added an IRM reference to link to IRM 22.214.171.124.44, Carryback of Foreign Tax Credit (FTC), procedures. Removed Form 706-NA information because these procedures have been moved to IRM 21.7.5, Estate And Gift Tax Returns, because PAMC has not worked Estate and Gift Tax Returns since Sept. 2007.
|IPU 13U0607 issued 03-22-2013. Removed the chart and deleted Paragraphs 8 and 9.
|IPU 13U0607 issued 03-22-2013. Deleted the information in Paragraph 8, added a link to IRM 126.96.36.199.3 and a bullet list, and deleted Paragraphs 9 & 10.
|Added Paragraph.
|IPU 13U0607 issued 03-22-2013. Updated the paragraphs and deleted the bullet list since there is a link to the same information and FLC codes 66/98.
|Removed outdated information in Paragraph (6) & (7) and renumbered the remaining paragraphs.
|Added a "Note" , deleted Paragraph (3), and renumbered the remaining paragraphs.
|IPU 13U0607 issued 03-22-2013. Added a bullet for the new IRN 074 - Taxable Wages & Tips subject to Additional Medicare Tax (AdMT) withholding (valid for tax periods beginning after December 31, 2012.)
|IRM 18.104.22.168.3(2)(e)
|Clarified interest computation date and a "Reminder" .
|Deleted Paragraph because returns are no longer edited with Computer Condition Code J and renumbered the remaining paragraphs.
|Added a paragraph to explain EFTPS, renumbered Paragraph (1), added a link to EFT and removed outdated information.
|Updated the Blocking Series information to include cases worked in CIS.
|Updated the information to include in the statement.
|IPU 13U0930 issued 05-14-2013. Clarified the procedures and the date to use when inputting TC 820 & 700.
|IPU 13U0930 issued 05-14-2013. Clarified procedures and corrected the transaction codes used for tax withheld from refund interest.
|Updated the Blocking Series information to include cases worked in CIS.
|IPU 13U0930 issued 05-14-2013. Updated claim procedures, added a link to IRM 188.8.131.52.11.2, deleted Paragraph (2), and renumbered the existing paragraphs.
|Removed Paragraph (2) and (3) because all the procedures for processing claims from the employer are in IRM 21.7.2.
|Updated procedures in Paragraph (1), removed Paragraph (2), renumbered Paragraph (3), and added a link to IRM 22.214.171.124.9, Technical Issues.
|Added a Note.
|Added link to IRM 188.8.131.52.1.1.4.
|Added a "Caution" concerning disregarded entities. Moved information from Paragraph (2) and made it a new Paragraph (3), added a "Note" , and renumbered the remaining paragraphs. Clarified the information in Paragraph (4) and added links to IRM 21.8.1 in Paragraphs (4) and (7).
|Deleted Paragraph 3.
|IPU 13U0607 issued 03-22-2013. Updated the "Note" to include original return overpayments and links to the Interest IRM.
|Added paragraph and renumbered the remaining paragraphs.
|Clarified the "45-day interest-free period" .
|Added a "Note" .
|IPU 13U0607 issued 03-22-2013. Included an "If" and "Then" table when computing credit interest. Deleted Paragraphs 4, 5 and 6 and renumbered the remaining paragraphs.
|IRM 22.214.171.124.13(9)(c)
|Updated the Blocking Series information to include cases worked in CIS.
|Deleted the "Note" .
|Added a "Note" .
|IPU 13U0377 issued 02-19-2013. Updated the fax number and Mail Stop because of the transition of BMF International work.
|IPU 13U0607 issued 03-22-2013. Clarified Form 8288 is worked in Cincinnati and Ogden Accounts Management Center and updated the Ogden Mail Stop.
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|IRM 188.8.131.52(9)(e) & (f)
|IPU 13U0607 issued 03-22-2013. Added a Note and information to provide clarification when computing interest.
|IRM 188.8.131.52(9)(e)
|Added a link to IRM 220.127.116.11 in the second "Note" .
|IRM 184.108.40.206(10) Note
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|Deleted the "Note" .
|Added a link to IRM 22.214.171.124.
|IPU 13U0607 issued 03-22-2013. Added information and a Note to provide clarification when computing interest.
|Deleted the "Reminder" .
|IPU 13U0377 issued 02-19-2013. Updated the information on FIRPTA Credits.
|Updated information and deleted Paragraph (11) and (13) and renumbered the remaining paragraphs.
|Added a "Reminder" .
|IPU 13U0377 issued 02-19-2013. Updated the fax number and Mail Stop information because of the transition of BMF International work.
|IPU 13U0930 issued 05-14-2013. Updated the Mail Stop.
|Clarified Form 1042 is worked in Cincinnati and Ogden Accounts Management Center.
|Corrected information and added a "Caution" .
|IRM 18.104.22.168.8(1)(b)
|Updated information and added a link for deposit rules.
|Updated the Blocking Series information to include cases worked in CIS in the first "Then" . Clarified procedures and added a link to IRM 184.108.40.206.3 in the fourth "Then" . Updated the "Reminder" .
|Updated the Blocking Series information to include cases worked in CIS.
|Updated the "Reminder" .
|Deleted information, there are no current plans for RCA to be available for MFT 12.
|Updated the "Reminder" .
|Deleted subsection and renumbered the remaining subsections.
|Clarified where to send loose Forms 1042-S for processing and added number of days to suspend the case.
|Updated CWA address and link.
|Removed the entire subsection because the process does not exist and renumbered the remaining subsections.
|Updated information.
|Removed old information, clarified requirements, and deleted Paragraph (10).
|Updated the Blocking Series information to include cases worked in CIS.
|Deleted Paragraph (3) and renumbered the remaining paragraphs.
|Updated information.
|Updated the "Title" and the information.
|Updated information.
|Updated information.
|Clarified interest on the failure to file penalty for partnership returns and deleted information that did not belong. Added link to CP 282 procedures.
|Clarified Paragraph (3).
|Moved the information from Paragraph (7) to (1).
|Updated information.
|Removed the entire subsection and renumbered all remaining subsections beginning with IRM 126.96.36.199. The IRM 188.8.131.52 procedures have been moved to IRM 21.7.5, Estate And Gift Tax Returns, because PAMC has not worked Estate and Gift Tax Returns since Sept. 2007.
|Added the title of Form 5471.
|Removed old information.
|Added Document Code 54.
|Clarified systemically assessed penalties are identified the same way as they were identified in 2009.
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|Clarified the procedures to forward all requests for abatement of Examination assessed penalties to the area that assessed the penalty.
|Added Document Code 54 to the "Caution" .
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work.
|IPU 13U1155 issued 06-26-2013. Added a "Note" requiring all Form 5471 FTF penalty abatements be reviewed and approved by a manager prior to removing and a CIS case note added.
|Clarified OAMC (Ogden Accounts Management Center) only works Form 5471 Failure to File systemically assessed penalty abatement requests.
|IRM 18.104.22.168.2(3)(b)
|Added a Caution explaining "related Form 1120" and clarified the Note.
|IRM 22.214.171.124.2(3)(b)
|IPU 13U0377 issued 02-19-2013. Added a Caution under the first "Then" in the "If And Then Table" .
|IPU 13U0377 issued 02-19-2013. Updated the campus information because of the transition of BMF International work. Removed the link to the SERP Job Aid because the Job Aid is not used.
|IPU 13U1149 issued 06-24-2013. Updated the procedures in the second Note to notate the same information in a CIS case note instead of notating it in the remarks section of the ADJ54.
|Added a Note to clarify First-Time Abatement and a Reminder explaining "related Form 1120" . Removed the zero from Blocking Series 052 and added a zero to the Reason Code 62 in the "Then" information. Added a "Caution" to clarify when the penalty should not be removed.
|Clarified ALL Form 5471 manually assessed penalty abatement requests are routed to the area that assessed the penalty.
|IPU 13U0377 issued 02-19-2013. Added new subsection for Form 5472 - Information Return of U.S. Persons with Respect to Certain Foreign Corporations.
|Added the title of Form 5472.
|IPU 13U0377 issued 02-19-2013. Added new subsection for Form 5472 Penalties.
|Added Document Code 54.
|Added additional information to identify systemically assessed penalties.
|Clarified the procedures to forward all requests for abatement of Examination assessed penalties to the area that assessed the penalty.
|IPU 13U0377 issued 02-19-2013. Added new subsection for Form 5472 Penalties Systemically Assessed from Late-Filed Form 1120.
|Added Document Code 54 to the "Caution" .
|IPU 13U1155 issued 06-26-2013. Added a "Note" requiring all Form 5472 FTF penalty abatements be reviewed and approved by a manager prior to removing and a CIS case note added.
|Clarified OAMC (Ogden Accounts Management Center) only works Form 5472 Failure to File systemically assessed penalty abatement requests.
|IRM 220.127.116.11.2(3)(b)
|Added a Caution explaining "related Form 1120" and clarified the Note.
|IPU 13U1149 issued 06-24-2013. Updated the procedures in the second Note to notate the same information in a CIS case note instead of notating it in the remarks section of the ADJ54.
|Added a Note to clarify First-Time Abatement and a Reminder explaining "related Form 1120" . Removed the zero from Blocking Series 052 and added a zero to the Reason Code 62 in the "Then" information. Added a "Caution" to clarify when the penalty should not be removed.
|Clarified ALL Form 5472 manually assessed penalty abatement requests are routed to the area that assessed the penalty.
|Exhibit 21.8.2-1
|IPU 12U1869 issued 11-23-2012. Updated the title of the Exhibit to provide clarification.
|Exhibit 21.8.2-1(4)
|Added TAS and the IRM reference.
|Exhibit 21.8.2-2
|IPU 13U0377 issued 02-19-2013. Added a new exhibit for Failure To File or Late-Filed Form 5472 - Decision Tree.
|Exhibit 21.8.2-2
|IPU 13U1347 issued 08-13-2013. Added Paragraph 1b, a link to the Instructions for Form 5472, and a "Caution" .
|Exhibit 21.8.2-2(4)
|Added TAS and the IRM reference.
Effect on Other DocumentsIRM 21.8.2, dated August 31, 2012 (effective October 1, 2012), is superseded. Interim Guidance Number 12U1869 dated 11-23-2012, Interim Guidance Number 13U0377 dated 02-19-2013, Interim Guidance Number 13U0607 dated 03-22-2013, Interim Guidance Number 13U0930 dated 05-14-2013, Interim Guidance Number 13U1149 dated 06-24-2013, Interim Guidance Number 13U1155 dated 06-26-2013, and Interim Guidance Number 13U1347 dated 08-13-2013 is incorporated into this IRM.
AudienceThe primary users of this IRM are employees in Wage and Investment, Accounts Management, Taxpayer Advocate Service, and all others who perform International adjustment work.
Effective Date(10-01-2013)
Ivy S. McChesney
Director, Accounts Management
Wage and Investment Division
This IRM provides adjustment procedures for International returns processed to the Business Master File (BMF). As an additional reference, the basic BMF account resolution/adjustment procedures are found in IRM 21.7, Business Tax Returns and Non-Master File Accounts. Non-Master File (NMF) International Adjustments procedures can be found in IRM 21.7.12, Business Tax Returns and Non-Master File Accounts (NMF) Adjustments.
Individual Master File (IMF) International Adjustments are found in IRM 21.8.1
, IMF International DP Adjustments.
CADE is the Customer Account Data Engine. CADE will gradually mesh with Master File functionality. Through a number of incremental increases, CADE will ultimately replace the Master File and enable daily processing of eligible accounts. Taxpayer records are being moved from the current processing environment to CADE using a release-based approach starting with the simplest taxpayer accounts.
Use the general processing procedures outlined in this IRM in conjunction with the following IRMs:
IRM 13, Taxpayer Advocate Service
IRM 21, Customer Account Services
IRM 25, Special Topics
IRM 20, Penalty and Interest
Contact representatives using this IRM must have had basic BMF Adjustments, Integrated Data Retrieval System (IDRS), Correspondence Imaging System (CIS), and AMS (Account Management Services) training to effectively use the material presented in this International Manual.
Integrated Automation Technologies (IAT) are tools that assist employees with IDRS research. The screens access numerous IDRS control codes multiple times to improve quality by simplifying and standardizing research paths and consolidating IDRS Command Code responses on one screen.
"IRC Sections" and "Regulation numbers" are not the same but you may find them used interchangeably in Publications, Form Instructions, or IRMs.
See IRM 184.108.40.206.2, for the forms addressed in this IRM.
As a result of the ramp-down of the Philadelphia Submission Processing Campus (PSPC), International Business Master File (BMF) return processing moved in its entirety to the Ogden Submission Processing Campus (OSPC) on January 1, 2007. However, Philadelphia Accounts Management Campus (PAMC) continued to process BMF International Accounts Management work until the work was moved to the Cincinnati and Ogden Accounts Management Campus in February 2013.
Correspondence and/or amended returns involving the following issues are considered "BMF International Issues" and are worked at CAMC and OAMC:
Inquiries and notices on Form 3520/3520-A and requests for reasonable cause relief from systemically assessed Form 5471/5472 penalties are considered "BMF International Issues" but are worked at OAMC only.
Form 1120–F, Form 1120-FSC, Form 940-PR, Form 941-PR, Form 941-SS, Form 943-PR, Form 944-PR, and Form 944-SS
Form 944-PR and Form 944-SS were discontinued beginning with tax year 2012. Taxpayers who previously filed these forms can file Form 944/Form 944(SP) or request to file Form 941-PR or Form 941-SS.
Form 8288 series
Form 8804, Form 8805, and Form 8813
Foreign Withholding Form 1042 series
Form 843 Visa claims
Form 1120X with Document Locator Number (DLN) Filing Location Codes 98, 66, 60 or 78
Form 8873 Extraterritorial Income Exclusion
Form 1120X Foreign Tax Credit carryback claims
Form 1118 Foreign Tax Credit attached to Form 1120-F or Form 1120-FSC
Amended Form 1040NR Fiduciary
Form 8891
Spanish language correspondence related to BMF International
Non-Master File (NMF) account processing also ceased at the Philadelphia Submission Processing Campus (PSPC) in 2006. NMF is now centralized at the Cincinnati Submission Processing Campus (CSPC).
The Campus Program Locator Guide provides information on the continuing (Wage and Investment) W&I and Small Business Self Employed (SBSE) program consolidation and centralization. The guide is on SERP at: http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/01_cplg_toc.htm
BMF International Corporate Income Tax Returns:
Form 1120 and Form 1120-C with Form 1118, Form 5712, Form 5712-A, Form 5735, and Schedule P
American Samoa Economic Development Credit, reported on Form 5735, was extended to the first eight taxable years which begin after December 31, 2006 and before January 1, 2014 by H.R. 8, American Taxpayer Relief Act of 2012. Schedule P (Form 5735) is now obsolete and will not be revised.
Form 1120-F, U.S. Income Tax Return of a Foreign Corporation
Form 1120-FSC (Foreign Sales Corporation) and Form 8279 (FSC election)
Form 1120-FSC is being phased out. For new elections, Form 8873, Extraterritorial Income Exclusion, can be filed as an attachment to an income tax return.
BMF International Employment Tax Returns:
Form 940-PR
Form 941-PR
Form 941-SS
Schedule H (PR) (estate or church employees)
Form 943-PR
Form 944-PR
Form 944-SS
Form 944-PR and Form 944-SS were discontinued beginning with tax year 2012. Taxpayers who previously filed these forms can file Form 944/Form 944(SP) or request to file Form 941-PR or Form 941-SS.
BMF Foreign Withholding Tax Returns:
Form 1042
Form 8288
Form 8804
Foreign Trust and Estate Tax Returns:
Form 1040NR (Fiduciary)
Form 3520
Form 3520-A
BMF Foreign Exempt Organization Returns:
Foreign and territory addressed Form 990
Form 990-PF and Form 990-T with Form 1118, Form 5712, Form 5712-A, Form 5735, or Schedule P attached. See Note in (1) above regarding Form 5735 and Schedule P.
BMF Foreign Information Statements:
Form 8805
Form 8813
Alien Exemption Certificate Form W-8 , Form 1001, Form 1078, Form 4224, Form 8233, and Form 8709
These Alien Certification Forms, except Form 8233, became obsolete on December 31, 2000.
Alien Exemption Certificate Form W-8BEN, Form W-8ECI, Form W-8EXP, Form W-8IMY, and Form W-8CE.
NMF International Income Tax Returns:
Form 1120-IC-DISC K-1
Form 926
Form 8404
Form 1040NR Fiduciary
Forms Associated with Foreign Withholding Tax Returns:
Form 8288A
Form 8805, Form 8813
Form 1042-S, Form 1042-T
The following websites are helpful when researching international issues:
Submission Processing website at http://win.web.irs.gov/SP/index.htm
IRC listed by Code section number at http://www.law.cornell.edu/uscode/text
Tax treaties on line at http://www.irs.gov/business/international/article/0,,id=96739,00.html
various international topics at http://www.irs.gov/business/international/index.html
IRS Bulletins, Notices, Announcements, etc. at http://www.irs.gov/irb/
U.S. Citizenship and Immigration Services (USCIS) website at http://www.uscis.gov
Lexis-Nexis at http://www.lexisnexis.com/clients/irshome/
The Social Security Administration website http://www.ssa.gov/
Qualified Intermediaries at http://www.irs.gov/business/corporations/article/0,,id=150934,00.html
Electronic Tax Law Assistance at http://www.irs.gov/help/page/0,,id=133197,00.html
United States Department of State at http//www.state.gov/
International dialing codes at http://www.countrycallingcodes.com/
IR Web research center at http://rnet.web.irs.gov/index1.htm
Assistors staffing the international taxpayer customer service line DO NOT use the Telephone Transfer Guide (TTG) to transfer calls. International Assistors can use "The Source for Telephone Numbers" at: http://gatekeeper.web.irs.gov/plList.asp to advise domestic taxpayers of the correct toll-free number to call. If these taxpayers do not want to call back follow the Form 4442 referral process, see Paragraph (3) below.
International assistors may transfer calls to other international applications if necessary.
Assistors staffing any toll-free application should not transfer to the international taxpayer customer service line (267-941-1000). They can provide the following helpful telephone numbers to international taxpayers for working international issues if they tell the taxpayers the numbers are non toll-free telephone numbers. If these taxpayers do not want to call back follow the Form 4442 referral process. For more information on the referral process see IRM 220.127.116.11, Referral Procedures.
Phone Fax International (Taxpayer Customer Service) 267-941-1000** 801-620-4457 Automated Collection System (ACS) 267-941-1004** 267-941-1031 Automated Underreporter (AUR) 267-941-1026** 267-941-1023 Electronic Federal Tax Payment System (EFTPS) 303-967-5916 Excise Tax (Form 720, Form 730, Form 2290 and Form 8849) 859–669–5733 International Examination 267-941-1037** 267-941-1463 Offer in Compromise (OIC) - General 267-941-1004** 787-759-5466 (OIC) - Accepted Offers Only 631-447-4018 Taxpayer Advocate Service - English speaking 787-622-8940 787-622-8933 Taxpayer Advocate Service - Spanish speaking only 787-622-8930 U.S. Certification Program 267-941-1000** 267-941-1035
Numbers marked with (**) CANNOT be accessed using IRS phones.
Current International Post contact information can be found on the Large Business and International Division, (LB&I) website at http://www.lmsb.irs.gov/international/dir_treaty/eoi_overseas/posts.asp
These phone numbers are for International taxpayers that send packages and documentation to the different campuses. If the courier service (FED EX, UPS, etc.) requests a phone number for the destination use:
Campus Telephone number Andover (978) 474-9822 Atlanta (678) 530-6616 Austin (512) 460-7948 Brookhaven (631) 654-6334 Cincinnati (859) 669-5250 Fresno (559) 454-6168 Kansas City (816) 325-3019 Memphis (901) 546-3700 Ogden (801) 620-3738 Philadelphia (267) 941-1832
The telephone numbers listed above are for use on express mail air bills only. These numbers are not to be used for technical issues.
The Office of the Deputy Commissioner, International, LB&I, will translate documents written in French, German, Italian, Portuguese, and Spanish into English for any IRS office.
To have a document translated, download a Translation Request Sheet at http://www.lmsb.irs.goc/international/dir_treaty/treaty/translate.asp. If you mail or fax your document, send two copies of each item to be translated. Hard copies of translations will be kept on file for six months, and electronic copies will be kept for one year.
If the document is more than 10 pages, submit requests in 10 page increments.
Fax translation requests to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or e-mail ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . This number and name is for internal use only.
Based on Rev. Rul. 2002-23, treat a document mailed from a foreign country, with a timely official postmark of the foreign country, as timely filed.
This rule applies to all documents required or permitted to be filed with the Service, including returns, payments made with returns, claims, or requests for filing extensions.
If the last day for filing falls on a Saturday, Sunday or a legal holiday, then a document with an official postmark of the foreign country dated on or before the next succeeding day that is not a Saturday, Sunday, or legal holiday is treated as timely filed under IRC § 7503. "The term legal holiday" is defined under Rev. Rul. 2002-23 and IRC § 7503 as a legal holiday in the District of Columbia in the United States, or a statewide legal holiday in the state where the federal tax return, claim for refund or other document is required to be filed or sent. The term does not include legal holidays in foreign countries, unless such holidays are also legal holidays in the District of Columbia or applicable state, as described above. See Rev. Rul. 2002–23 for additional requirements when foreign mail is received later than such mail is ordinarily received.
The postmark determination for documents sent from a foreign country also applies to designated international Private Delivery Services (PDS). The list of PDS's, both international and domestic, are only updated if a new delivery service is added to the current list.
The current types of delivery services through designated PDS's per Notice 2004-83 are:
DHL Express (DHL): DHL Same Day Service
Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day, FedEx International Priority, and FedEx International First
United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express
Currently, only Fed Ex International Priority, Fed Ex International First, UPS Worldwide Express Plus, and UPS Worldwide Express are authorized as designated PDS's for documents sent to the IRS from a foreign country.
The following publications are used for International issues. They can be used as technical reference material or provided to taxpayers when necessary. These publications are available for reference on SERP and on the internet at http://www.irs.gov.
Publication 15, (Circular E), Employer's Tax Guide
Publication 51, (Circular A), Agricultural Employer's Tax Guide
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
Publication 80, (Circular SS), Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.
Publication 179, Circular PR, Federal Tax Guide for Employers in Puerto Rico
Publication 514, Foreign Tax Credit for Individuals (Form 1116 issues)
Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
Publication 516, U.S. Government Civilian Employees Stationed Abroad
Publication 519, U.S. Tax Guide for Aliens
Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts
Publication 541, Partnerships
Publication 542, Corporations
Publication 597, Information on the United States-Canada Income Tax Treaty
Publication 570, Tax Guide for Individuals with Income from U.S. territories
Publication 850 series - A series of publications that provide glossaries of words and phrases in various languages for translation of federal tax terminology
Publication 901, U.S. Tax Treaties
In addition to these publications, some general information publications are also printed in Spanish for the convenience of taxpayers. On SERP, they are located under Forms/Letters/Pubs, then Spanish Tax Products. The letters "SP" follow the publication number.
Publication 1SP, Publication 17SP, Publication 579SP, and Publication 596SP.
IRC § 6103 establishes the taxpayer's (T/P's) right to privacy of tax information. You must be sure that you provide correct information to the correct T/P or authorized representative. Check the Integrated Data Retrieval System (IDRS) Command Code (CC) CFINK for the Power of Attorney (POA).
IRC § 7213, IRC § 7213A, and IRC § 7431 provide criminal and civil penalties to ensure that taxpayers' returns and return information remain confidential.
For more information on General Disclosure Guidelines, refer to IRM 126.96.36.199, General Disclosure Guidelines. For a full discussion of disclosure, refer to IRM 11.3.1 through IRM 11.3.40, Disclosure of Official Information.
For information on the use of FAX and Signature Stamps, refer to IRM 126.96.36.199.8, Use of FAX for Taxpayer Submissions.
When contacting taxpayers, follow procedures in IRM 126.96.36.199.3, Required Taxpayer Authentication, for purposes of identification and to prevent unauthorized disclosures of tax information. Also, use caution when leaving information on answering machines or voice mails. (See IRM 18.104.22.168.1, Leaving Information on Answering Machines/Voice Mail). For information concerning unauthorized disclosures, see IRM 184.108.40.206, Reporting Unauthorized Accesses or Disclosures of Returns or Return Information.
Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, TAS Case Criteria) and you can't resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS, unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 184.108.40.206, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS in accordance with your local procedures. Preparation instructions for the Form 911 are available on the Form and in IRM 18.104.22.168, Taxpayer Advocate Service (TAS) Guidelines.
The National Taxpayer Advocate has reached agreements with the Commissioners of the Wage & Investment (W&I) Division, Small Business & Self-Employed Division (SB/SE), Tax Exempt & Government Entities (TEGE) Division, Criminal Investigation (CI), Appeals, and Large Business and International, (LB&I) Division, that outline procedures and responsibilities for the processing of 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 (SLA's). The SLA's are located on the Intranet at http://tas.web.irs.gov.
When referring cases to TAS, keep in mind that although TAS employees can address certain issues for international taxpayers (e.g., request copy of a tax return or a payment tracer), TAS employees do not have the delegated authority to make international adjustments. For more information about TAS's delegated authorities, see IRM 13.1.4, Taxpayer Advocate Case Procedures - TAS Authorities.
For taxpayers who prefer to contact TAS directly, provide the toll-free number 1-877-777-4778. International callers who cannot dial toll-free may call 787-622-8940 (English assistance) and 787-622-8930 (Spanish assistance). Publication 1546, Taxpayer Advocate Services - Your Voice at the IRS, contains addresses and phone contact information for each Taxpayer Advocate office.
Follow procedures in IRM 184.108.40.206.7.2.1, Examination Technical Assistance Request, regarding technical questions or assistance requests needed from Examination when a technical or tax law issue is unclear and does not meet CAT A criteria as specified in this IRM. See IRM 22.214.171.124.13, Examination Criteria.
Refer all technical issues to campus management that cannot be resolved using the IRMs and publications referenced in this IRM. See IRM 184.108.40.206 and IRM 220.127.116.11.6. If management is unable to make a determination, use local assistance procedures that involve coordinating the resolution through the Planning & Analysis Section.
When necessary, the analyst from the Planning & Analysis Section reviews and forwards any international adjustment problems requiring the attention of the Headquarters International Analyst.
Follow the steps in IRM 21.1.2, Reference Materials Overview, as the BMF International Adjustments IRM is now on SERP.
Rev. Proc. 2006-54 updated and revised the procedures that allow a U.S. citizen or resident to request a determination by the U.S. Competent Authority on issues arising under a tax treaty between the United States and a foreign country. For procedures for requesting assistance from the U.S. Competent Authority under the provisions of a tax coordination agreement between the United States and a U.S. Territory, refer to Rev. Proc. 2006-23 and the subsection titled "Double Taxation" in this IRM. See IRM 18.104.22.168.1.
Usually, an adjustment to tax is requested when the foreign tax administration creates a double taxation issue.
The IRS Deputy Commissioner (International), Large Business and International Division (LB&I) is the U.S. Competent Authority charged with administering the provision of tax treaties, interpreting and applying the treaties, and reaching mutual agreement in specific cases.
Written requests for, or any inquiries regarding competent authority assistance, are sent to:
Deputy Commissioner (International), LB&I
Attn: Office of Tax Treaty
Internal Revenue Service
1111 Constitution Ave, NW
Routing: MA3-322A
Washington, DC 20224
Direct any questions regarding competent authority claims to the Office of Tax Treaty at the above address.
Nonresident aliens need to contact the competent authority within their foreign government with their inquiries.
When adjusting Business Master File (BMF) international tax accounts using Command Code (CC) REQ54, or transferring credits using CCs ADD24/ADD34/ADD48, input a Filing Location Code (FLC) of 78 or 60 according to the primary location code shown on CC TXMOD or ENMOD. Input FLC 78 for primary location code 78 and FLC 60 for primary location code 60.
Cincinnati Accounts Management employees must use Command Code CMODE, to access the Ogden campus, when adjusting BMF international accounts.
An FLC of 78 or 60 should be input on any BMF international tax adjustment or credit transfer for audit trail purposes, regardless of the location code shown on CC TXMOD or ENMOD.
When preparing a Form 13596, Reprocessing Returns, to reinput a document with an FLC of 78 or 60 Document Locator Number (DLN), line out the stamped DLN and request a new DLN.
The IRS is involved in a significant number of taxpayer contacts to perfect returns during the filing process, to resolve issues identified in post-filing, and to secure delinquent returns.
When contacting taxpayers, follow procedures in IRM 188.8.131.52.3, Required Taxpayer Authentication, for purposes of identification and to prevent unauthorized disclosures of tax information. Also, use caution when leaving information on answering machines or voice mails. (See IRM 220.127.116.11.1, Leaving Information on Answering Machines/Voice Mail).
Based on requests from practitioners and other stakeholders, the Service developed guidance on the acceptance of faxes and signature stamps that was approved for Servicewide adoption.
Refer to IRM 18.104.22.168.5, Use of FAX for Taxpayer Submissions, for current procedures for the acceptance of fax and signature stamps.
The Domestic Examination Criteria are divided into two groups, Category A and Category B. For Domestic claims, refer to criteria contained in Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.
Category A criteria are issues that have highest examination potential and must be routed to Examination Classification prior to resolution of the taxpayer's issue. Some tax decrease cases with an open TC 420 ("-L" freeze) are CAT "A" criteria. Refer to IRM 21.5.3-1, Claim Processing with Examination Involvement.
Refer to IRM 188.8.131.52.12, Category B Criteria (BMF Only), for Category B criteria.
International Examination criteria are generally CAT "A" only.
Only send case(s) meeting CAT "A" criteria or technical inquiries to Examination. Criteria used for international claims referral to Examination is found in the list below.
Forward the following types of international claims and issues to Examination for classification:
Foreign Tax Credit Carryback in excess of ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 220.127.116.11.44(7), Carryback of Foreign Tax Credit (FTC), for specific procedures.
Adjustments to foreign tax credit in excess of ≡ ≡ ≡
Decreases in excess of ≡ ≡ ≡ for Form 1120-F, Form 1120-FSC, and Form 1120 with international characteristics
Decreases in excess of ≡ ≡ ≡ ≡ ≡ for Form 1040NR Fiduciaries
Amended Form 1041 changing income from taxable to non-taxable that result in the original tax liability being reduced to zero and the tax decrease is ≡ ≡ ≡ or more.
Form 1042 claims for tax decrease filed after the due date of the return
Form 926, only if attached to any claim per IRM 18.104.22.168.19, Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation
Amended, corrected, and superseding Form 1065 is Cat A if any of the conditions in IRM 18.104.22.168.2.9, Duplicate Filing Conditions on Form 1065 exist.
If the taxpayer cites an IRC, Regulation, Tax Treaty, etc., research the reference, attempt to secure an explanation, unless the claim meets other Examination Criteria. This information may be available on-line through Lexis-Nexis at http://www.lexisnexis.com/clients/irshome/ or on Westlaw at https://web2.westlaw.com/signon/default.wl?bhcp=1.
When a claim is sent to Examination Classification, procedures consistent with IRM 4.19.11, Examination Classification of Work, must be followed. This IRM requirement is that the sender must ensure that pages 1 and 2 of Form 1120X are complete, including verification of all needed schedules and forms required for making a determination, before referring to Examination. If the classifier determines that an additional schedule(s) is necessary, the case file will be returned to the sender to secure the necessary information (e.g., Form 1116 or Form 1118 is required to verify a foreign tax credit).
Normal research required when routing paper cases to Exam Classification. For CIS cases refer to IRM 184.108.40.206, Correspondence Imaging System (CIS) Procedures :
Form Doc(s) Required IDRS Research Form 1042
Form 1042 original (or T/P copy) & amended returns
Form 1042-S (voided original (or T/P copy) and amended 1042-S forms)
TC 29X adjustment documents
Form 1042 Filer
ENMOD, TXMOD, BMFOLI, BRTVU, and AMDIS
ENMOD/INOLE, NAMEI/NAMES, TXMOD, RTVUE/BRTVU, and BMFOL/IMFOL
Form 1120-FSC
Form 1120-FSC original (or T/P copy) and amended returns or Form 1120X with explanation
TC 29X or TC 30X adjustment document
Form 1120-FSC
TXMOD, BMFOLI, AMDIS and ENMOD
Parent Corporation Form 1120
TXMOD, BRTVU, BMFOL, AMDIS and ENMOD
Form 1120-F
Form 1120 original (or T/P copy) and amended or Form 1120X
TC 29X or TC 30X adjustment documents
Form 1120-F
TXMOD, BMFOLI, BRTVU, AMDIS and ENMOD
Form 1041 & Form 1040NR Fiduciary (Estate / Trust)
Form 1041 or Form 1040NR original (or T/P copy) and amended
TC 29X or TC 30X adjustment documents
Form 1041 or Form 1040NR
TXMOD, BMFOL, BRTVU, AMDIS and ENMOD
Form 1065
Form 1065 original (or T/P copy) and amended
TC 29X or TC 30X adjustment documents
Form 1065
TXMOD, BMFOLI, BRTVU, AMDIS and ENMOD
TXMOD, BMFOLI, BRTVU, AMDIS and ENMOD
Prior to sending for Classification, an IDRS control must be placed on the account under a designated profile number, e.g., 05XXX33333. IRM 126.96.36.199.7, Processing Claims and Amended Returns With Examination Involvement, lists the control follow-up time frame. Assigning the case to CAT-A in CIS automatically creates the IDRS control.
If the case contains CAT "A" criteria, and the amended return or claim shows an additional tax, assess the tax with TC 290 prior to sending to Examination. Use the appropriate blocking series, hold code, and priority code.
Make sure that the classification sheet contains complete and accurate information (including Building and Drop Points).
Category A claims involving multiple tax periods must be worked by the same Customer Service Representative (CSR). Send these claims to classification as one package. Do not send them as separate claims.
When the case is returned from Examination, follow the steps in the table below.
If Examination Classifier: CSR Should: Rejects the claim
Resolve the reason for the rejection, e.g., additional documentation or IDRS research.
Initiate telephone call to taxpayer, or
Correspond with taxpayer using Letter 916C, input TC 290.00 Blocking Series 18 or 00 if the original return is in hand.
Accepts the claim Input necessary transactions, TC 291/290, Blocking Series 15 or 00 and reverse the TC 470. Disallows the claim in part
Input necessary transactions, TC 291/290, Blocking Series 18, or 00 if the original return is attached
Send Letter 106C. Include the complete and exact disallowance explanation provided by the classifier. Use an open paragraph, if necessary, and include the taxpayer's appeal rights.
Disallows the claim in full
Input necessary transactions, TC 290 .00, Blocking Series 98, or 99 if the original return is attached
Send Letter 105C. Include the complete and exact disallowance explanation provided by the classifier. Use an open paragraph if necessary and include the taxpayer's appeal rights, even for statutory disallowances.
Selects the claim
Send Letter 86C explaining that the claim has been selected for further review by the Examination Department and that they will be contacted by their office once a determination has been made. See IRM 220.127.116.11.2.1, Use of 86C Letter - Referring Taxpayer Inquiry/Forms to Another Office, for further instruction on cases forwarded within the same campus.
Input TC 971, Action Code 013, using the TC 976 date or the received date of the claim (if no TC 976 is present on the account).
If a copy of the disallowance letter is returned for association, attach the copy to the original return.
Copies of disallowance letters on CIS cases that are forwarded to the Centralized Print Site will not be returned for association. These letters will be available on CTRL-D if they are needed at a future date. See IRM 188.8.131.52.6.1, Disallowance and Partial Disallowance Procedures.
Protective Claims are formal claims or amended returns for credit or refund normally based on expected changes in:
A current IRC §
A current regulation
Pending legislation, or
A current litigation
These claims are filed to protect the claimant's right to recover an Internal Revenue Tax before the expiration of the statute of limitations. For this reason, they are all considered to meet CAT "A" criteria. See IRM 188.8.131.52.7.3.2, Processing Protective Claims, for additional information.
All Protective Claims must be sent to Examination Classification as Category A. All processable Protective Claims are selected by Examination Classification.
Protective Claims must be processable before sending to Examination Classification. Screen all protective claims for:
Statute timeliness
Completeness, and
If the claim is not processable, call or correspond with taxpayer for missing information. If no reply is received, follow normal adjustment procedures for rejecting the claim.
A period of limitation is a time period established by law to review, analyze, and resolve taxpayer and/or IRS related issues.
The Internal Revenue Code (IRC) states that the Internal Revenue Service (IRS) will assess, refund/credit, and collect taxes within specific time limits. These limits are known as the Period of Limitations. When they expire, we cannot assess additional tax, allow a claim for refund by the taxpayer, or take collection action. The determination of Statute expiration dates differs for Assessment, Refund, and Collection.
The Statute function reviews amended returns which reflect an increase in tax, and documents that unpost or are rejected for statute imminent or expired periods.
Statute imminent cases are those cases requiring either an original assessment or a subsequent assessment and the Assessment Statute Expiration Date (ASED) is within 90 days, or expired.
The following are categories that meet the criteria for possible statute imminent cases:
Statute period original returns for input through processing
Additional assessments on cases that have an ASED within 90 days
Additional assessments on cases with an expired ASED
Statute period returns to be re-input with a received date more than 2 1/2 years old
Once it is determined that an assessment of tax is necessary, take the following action when a claim is filed indicating a tax increase and the statute for assessing will expire within 90 days:
Prepare Form 10959, Statute Control Transmittal, and hand-carry the case with current research, i.e., BMFOL print, to the Statute coordinator on a Form 3210, Document Transmittal.
When routing these cases to the Statute function, leave the control base open to the originator and update the activity to "statute" .
The control base can be closed only after receiving notification from the statute function that they will keep the case.
When the case is returned stamped "CLEARED BY STATUTES" , it can be input or adjusted following normal adjustment procedures found in IRM 21.5.3, General Claims Procedures.
Once it is determined that a timely claim to decrease tax has been filed (check the postmark date), the case is resolved by Accounts Management, even if the statute is imminent or expired. Follow normal adjustment procedures.
Allow the claim if it was received before the Refund Statute Expiration Date (RSED), additional information was requested to process the claim, and the taxpayer submits the information after the RSED but within 45 days ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the IRS request.
If a claim for tax decrease is not timely, deny the claim sending a formal disallowance letter (Letter 105C), stating that the statute for refund has expired. Input TC 290 .00 with Blocking Series 98 (complete claim disallowance without original return) or 99 (complete claim disallowance with original return). Provide appeal rights to the taxpayer.
Do not use expired credits to offset liabilities for other tax periods.
In general, amounts are refundable if they were paid within three years plus the period of any extension of time to file the tax return, or the filing of the refund claim.
This means all advance payments expire for refund 3 years after the return due date or extended due date, whichever is later. For more information regarding advance payments, see IRM 220.127.116.11, Credits and Payments
Alternatively, payments received after the return filing date are refundable for 2 years from the payment received date.
Credits transferred to a balance due module are refundable for 2 years from the corresponding date of the cycle in which the transfer occurred. Refer to IRM 18.104.22.168, Claims, Abatements and Refunds, for additional information.
Unpostables are transactions which cannot post to the Master File. A transaction that fails to post to an account at the Enterprise Computing Center at Martinsburg (ECC-MTB) is returned to the campus (SC) for corrective action.
There are two types of unpostables:
The Customer Service Representative:
Is responsible for preventing unpostable conditions when transferring payments and making changes to taxpayer's accounts, and
Should have a thorough understanding of the reason for unpostable conditions, and
Is responsible for resolving unpostable conditions created by adjustment actions. See IRM 22.214.171.124.2, Resolving Unpostables.
To resolve an unpostable, analyze each case, perform research and decide the proper corrective action. The unpostable condition shows on IDRS just below the transactions with an indicator before the transaction code such as: DU, NU, Unnn, CU, DN, DJ, RJ or DC. See Document 6209 for explanations of these codes.
CU (corrected unpostable) indicates a corrected transaction and no further action is needed.
Knowledge of the following information contained in Document 6209 is necessary to analyze and correct the unpostable:
Transaction Codes (TC)
971 Action Codes (AC)
Item Adjustment Codes
Credit Reference Numbers
Reason Codes (RC)
Priority Codes (PC)
Freeze Codes (FC)
Hold Codes (HC)
Math Error Notice Codes
Use Command Codes UPTIN, UPDIS, UPRES, and UPCASZ to research/resolve unpostable conditions per IRM 22.214.171.124.2, Researching Unpostables on IDRS. There is also useful information in IRM 18.104.22.168.3.3, Preventing Unpostable Transactions.
The telephone excise tax refund is a one-time credit that eligible taxpayers can request on their 2006 federal income tax returns. The refund is a credit that gives back long-distance federal excise taxes paid by individuals and businesses in previous years.
For additional information on TETR and a list of BMF forms on which the credit can be claimed, refer to IRM 184.108.40.206.23, Telephone Excise Tax Refund (TETR).
IRC § 3402(a) requires employers to withhold taxes from wages as they are earned at the "source " . However, if certain conditions are met, an employer may discontinue the withholding of income tax from the wages of an employee who is a citizen or resident alien employed abroad.
IRC § 3401(a)(8)(A) exempts certain compensation paid from wages, and allows employees to file a signed statement including a declaration under penalties of perjury, along with a current Form W-4, declaring that they meet or will meet the qualifications of IRC § 911(d)(1) (qualified individual) for the taxable year. As a result, they are exempt from tax on the first $92,900 of earned income for tax year 2011 ($91,500 for 2010).
The Form W-4 must specify either:
Exempt status, and the taxable year for which the Form W-4 is effective, or
The number of withholding allowances allowed, based on exemptions, deductions (including the IRC § 911 deduction), and credits.
The Internal Revenue Service provides Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusions Provided by § 911. A statement can be accepted in lieu of Form 673 if the taxpayer indicates to their employer that they will meet either the bona fide residence test or the physical presence test and indicates their estimated housing cost exclusion. (See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for bona fide and physical presence requirements).
Employers are required to withhold income tax from any wages the employee earns in the U.S. and any income exceeding the IRC § 911 limitations.
For questions involving the Form W-4 penalty program, contact the Campus Collection Branch.
Form 673 can only be used by a U.S. Citizen.
Form 673 is not filed with the IRS. The U.S. employer receives the completed Form 673 from the employee. Send loose Form 673 documents that are received to the employer.
The following are the principal United States Territories that have independent tax administrations:
Commonwealth of Puerto Rico (PR)
U.S. Virgin Islands (USVI)
American Samoa (AS)
Commonwealth of the Northern Mariana Islands (CNMI)
Individuals born in a U.S. territory are generally U.S. Citizens, except in the case of American Samoa, where such individuals are U.S. Nationals who are treated the same as U.S. Citizens for purposes of many income tax provisions of the Internal Revenue Code. Individuals residing in a U.S. territory may also be treated as U.S. residents if they are lawfully admitted for permanent residence (that is, if they have a "green card") or if they are substantially present in the United States, which generally does not include their time in the territory. For tax purposes, U.S. residents are taxed the same as U.S. Citizens.
Individuals deriving income from one or more of the above U.S. territories may be required to file a territory income tax return, a U.S. income tax return, or both, depending on their residency status, the source of their income, and the particular filing rules applicable to the relevant territory. See IRM 18.104.22.168, Territories of the United States, for additional information on filing requirement for bona fide resident of U.S. territories.
Procedures to settle cases of inconsistent tax treatment by the United States and a U.S. territory are provided in tax coordination agreements between the United States and the following U.S. territories:
Puerto Rico (PR)
U.S. Virgin Islands (USVI)
American Samoa (AS)
Commonwealth of the Northern Mariana Islands (CNMI)
Refer written requests for the assistance provided under the mutual agreement procedures to:
Deputy Commissioner (International), LB&I
Attn: Office of Tax Treaty
Internal Revenue Service
1111 Constitution Ave, NW
Routing: MA3-322A
Washington, DC 20224
Requests for assistance must contain the necessary information outlined in Rev. Proc. 2006-23 and Publication 570, under the heading "Double Taxation." Taxpayers may be referred to the following offices for special information regarding each U.S. Territory:
Negociado de Asistencia
Departamento de Hacienda
P.O. Box 9024140
San Juan, Puerto Rico 00902–6265
Virgin Islands Bureau of Internal Revenue
6115 Estate Smith Bay, Suite 225
St. Thomas, U.S. Virgin Islands 00802
Department of Revenue and Taxation
Government of Guam
P.O. Box 23607
Tax Division
Executive Office Building First Floor
PagoPago, American Samoa 96799
Division of Revenue and Taxation
P.O. Box 5234 CHRB
Saipan, MP 96950
Residency rules - IRC § 937(a) generally provides that, except as provided in regulations, the term bona fide resident of a territory means an individual who:
Is present for at least 183 days during the taxable year in the relevant territory,
Does not have a tax home outside of the territory, and
Does not have a closer connection to the United States, or a foreign country, than to the territory.
See Treas. Reg. 1.937-1 for further details and exceptions to these tests. See IRM 220.127.116.11.2, Bona Fide Residency Defined, for more information on bona fide residency rules.
Source rules - In general, IRC § 937(b)(1) and the regulations provide that the principles for determining whether income is U.S. sourced are generally applicable for determining whether income is territory sourced. The principles for determining whether income is effectively connected with the conduct of a U.S. trade or business are generally applicable for purposes of determining whether income is effectively connected to a territory trade or business. In addition, the "U.S. Income Rule" of IRC § 937(b)(2) provides that:
Income from U.S. sources is not considered income that is territory sourced or effectively connected with the conduct of a possession trade or business, and
Income that is effectively connected with the conduct of a U.S. trade or business is not treated as territory sourced income or effectively connected with the conduct of a trade or business in a territory.
The regulations provide special source rules for certain items of income, including:
Gain from the sale of goods manufactured in a territory,
Gain from dispositions of property owned prior to, and sold or exchanged within 10 years after, becoming a bona fide resident,
Dividends and interest from closely held territory corporations, and
Other specific types of income such as that derived from space and ocean activities, and international communications. For additional information concerning territory source and effectively connected income rules, refer to Publication 570, Treas. Reg. § 1.937-2, and Treas. Reg. 1.937-3.
Puerto Rico is a self-governing commonwealth in association with the United States. The major differences between Puerto Rico and the 50 states are its local taxation system and the exemption from U.S. income tax provided in IRC § 933 for Puerto Rico source income.
Puerto Rico's tax system is patterned after the U.S. tax system, but there are variations in law and tax rates.
Employers in Puerto Rico are liable for social security and Medicare taxes (collectively Federal Insurance Contributions Act (FICA) taxes). They must file Form 941-PR or Form 944-PR (see the "Note" in IRM 18.104.22.168.1) with the IRS. They are also required to file Form 940-PR with the IRS to report unemployment taxes (FUTA tax).
Employers with both domestic and territory employees can file one Form 941 or Form 944 to include all wages.
This section provides specific tax information as it relates to the following U.S. Territories: U.S. Virgin Islands (USVI), Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands (CNMI).
The British Virgin Islands fall within the jurisdiction of the United Kingdom and are in no way connected with the U.S. or its political subdivisions or territories. Any returns or inquiries received with addresses from the British Virgin Islands are handled as international cases.
Each territory has its own separate and independent tax system and they have income tax laws and rates that are substantially the same as or are a "mirror" of the Internal Revenue Code (USVI, Guam and CNMI), or are generally similar to provisions of the Internal Revenue Code (American Samoa).
Employers who have resident employees in the above specified territories must file Form 941-SS or Form 944-SS (see the "Note" in IRM 22.214.171.124.1) with the IRS to report FICA taxes on wages earned by their employees.
As with Puerto Rico, employers with both domestic and territory employees can file one Form 941 or 944 to include all wages.
Penalty and interest charged to a CNMI employer on Form 941-SS or Form 944-SS (see the "Note" in IRM 184.108.40.206.1) must be computed according to tax regulations as applicable to the CNMI.
Form 941-SS is due by the last day of the month following the quarter for which wages were earned.
When a return posts to the incorrect tax period, follow the procedures in IRM 18.104.22.168.1, Resolving TRNS 193s and Amended/Corrected/Supplemental Returns.
General procedures for processing penalty and interest cases are outlined in IRM 20.1, Penalty Handbook, and IRM 20.2, Interest.
Information on Employment tax may be found in the following publications:
Publication 15, Circular E, Employer's Tax Guide and Publication 15-A, Employer's Supplemental Tax Guide
Publication 51, Circular A, Agricultural Employer's Tax Guide for the types of agricultural work subject to social security and Medicare taxes
Publication 179Circular PR - Federal Tax Guide for Employers in Puerto Rico
Publication 80, Circular SS, Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.
Employers filing Form 941-PR, Form 941-SS, Form 944-PR, Form 944-SS, Schedule H (PR), and Form 943-PR generally also file the following forms with the corresponding U.S. Territory (see the "Note" in IRM 184.108.40.206.1):
Form W-2 AS (American Samoa)
Form W-2 GU (Guam)
Form W-2 VI (Virgin Islands)
Form W-2 CM (Commonwealth of the Northern Mariana Islands)
Form W-2 PR (Puerto Rico)
Form 499R-2 (Puerto Rico)
Beginning in 1991, separate reporting of withheld FICA tax is required. The wage bases for the two parts of the tax (Social Security and Medicare) are different.
The employers are also required to file with the Social Security Administration a copy of the appropriate Form W-2 for each of their employees along with Forms:
Form W-3 SS, or
Form W-3 (PR)
When there is a centralized payroll with U.S. residents and territory residents working for the employer, the Form 941-SS , Form 941-PR, Form 944-SS and Form 944-PR are not filed.
The employer includes the FICA payments from territory employees on Form 941 or Form 944 along with U.S. resident employees.
The employer prepares the appropriate Form W-2 for each employee based upon the government to which the withheld income taxes were paid.
Each type of Form W-2 must be accompanied by the Form W-3, Form W-3 SS, or Form W-3 (PR), as appropriate, when transmitting the data to SSA.
If taxpayers inquire about this process, refer them to:
Publication 80
Publication 179
Form W-2 AS
Form W-2 GU
Form W-2 VI
Form W-2 CM
Form W-2 PR / Form 499R-2
If an employer has an employee who changes residence between territories, or between a territory and the United States during the year, a separate Form W-2 must be prepared for each jurisdiction of the employee's residency.
If an employer inquires about FICA tax reporting, tell them to keep a record of the combined wages and stop withholding the social security tax when total wages equal the maximum taxable wage figure for the employee for the year in question (there is no ceiling on Medicare tax wages).
Refer taxpayers to Publication 15, Circular E, Employer's Tax Guide.
Form 940-PR, Planilla para la Declaración Federal Anual del Patrono de la Contribución Federal para el Desempleo (FUTA), is an annual return filed by employers in Puerto Rico to report unemployment taxes.
Form 941-PR, Planilla Para La Declaración Trimestral Del Patrono -La Contribución Federal Al Seguro Social Y Al Seguro Medicare, is a quarterly tax return filed by employers to report FICA taxes expected. The return is filed by employers whose principal place of business is in Puerto Rico.
Form 941-SS, Employers Quarterly Federal Tax Return - American Samoa, Guam, The Commonwealth of the Northern Marianna Islands, and the U.S. Virgin Islands, is a quarterly tax return filed by employers in the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands to report social security and medicare taxes for their workers.
ANEXO H-PR, Form 1040 Schedule H (PR),Contribuciones sobre el Empleo de Empleados Domésticos, is an annual return used by employers in Puerto Rico to report Federal employment taxes on wages paid to household employees. This form replaced Form 942 after 1994. Schedule H-PR is also filed by individuals as an attachment to Form 1040 or 1040-PR using their Social Security Number (SSN) to report wages paid to their household employees. It can also be filed as a "stand-alone" document.
Form 943-PR, ,Planilla para la Declaración Anual de la Contribución Federal del Patrono de Empleados Agrícolas, is an annual return filed by agricultural employers in Puerto Rico to report income tax withheld and FICA taxes paid to farm workers, including household employees working in a private home on a for-profit farm.
Form 944-PR, ,Planilla para la Declaración Federal ANUAL del Patrono, is an annual tax return filed by employers to report FICA taxes whose expected annual liability is $1,000 or less. The return is filed by employers whose principal place of business is in Puerto Rico. See the "Note" in IRM 188.8.131.52.1. Form 944-PR will no longer be issued by the IRS after 2011. Employers can continue to file annually on Form 944(SP).
Form 944-SS, Employers Annual Federal Tax Return, is an annual tax return for employers in the U.S. Virgin Islands, Guam, American Samoa and the Commonwealth of the Northern Mariana Islands to report FICA tax whose expected annual liability for social security and Medicare taxes is $1,000 or less. See the "Note" in IRM 126.96.36.199.1. Form 944-SS will no longer be issued by the IRS after 2011. Beginning with the Tax Year 2012, taxpayers who previously filed Form 944-SS will continue to file annually on Form 944, Employer's Annual Federal Tax Return, or Form 944(SP).
See IRM 126.96.36.199.3, FICA Taxes (including Additional Medicare Tax), for information on:
Social security wage limits and tax rates
Medicare tax rates
Tax rate and other information for Additional Medicare Tax (AdMT) which is effective for tax periods ending after December 31, 2012.
Legislative impact on these taxes.
See IRM 20.1, Penalty Handbook and IRM 20.2, Interest). Follow normal procedures to adjust penalties and interest (see
Adjustments required on these forms are made using normal BMF procedures found in IRM 188.8.131.52, Employment Tax Returns Procedures.
The Master File Tax Code (MFT) for Form 941-PR and Form 941-SS is 01.
The MFT for Form 943-PR is 11.
The MFT for Form 944-PR and Form 944-SS is 14.
The due dates are as follows:
Form Due Date Form 941-PR April 30, July 31, October 31, and, January 31 Form 941-SS April 30, July 31, October 31, and, January 31 Form 943-PR, Form 944-PR, and Form 944-SS. See the "Note" in IRM 220.127.116.11.1. January 31
Blocking Series 00 is used with the original return; 15 without the original return.
Item Adjustment Codes (see IRM 18.104.22.168.1, Item Reference Numbers (IRN's) and Credit Reference Numbers (CRN's) - Employment Taxes.
IRN 111 (total income tax withheld) is not used with Form 941-PR, Form 941-SS, and Form 943-PR. Any income tax withheld is paid separately to their government, unless they have an employee in the United States.
CP 175/185 notices, which were generated for unexplained adjustments to withholding, tips, or FICA, are no longer issued beginning in January, 2009.
When agricultural employers file Form 941-PR, but should file Form 943-PR, refer to IRM 220.127.116.11.8.2, Incorrect Type of Return Filed - Form 941 and 943.
Prior to tax year 2009, employers could file Form 944 series returns, instead of Form 941 series returns, only if the IRS notified them in writing. Beginning with tax year 2009, in order to file Form 944 series returns, taxpayers will be identified during EIN assignment or will contact the Service directly to inquire about the Form 944 program. Refer to IRM 126.96.36.199.9, Form 944, Employer's Annual Federal Tax Return, for instructions on adjusting accounts where Form 944 filers file Form 941. Beginning in calendar year 2010, the Form 944 program is voluntary. Beginning with tax year 2012 Form 944-PR and Form 944-SS are obsolete. See the "Note" in IRM 188.8.131.52.1.
When adjusting a tax account using REQ54, or transferring credits using ADD24/ADD34/ADD48, input a filing location code (FLC) of 78 or 60 according to the primary location code shown on TXMOD or ENMOD. Input FLC 78 for primary location code 78 and FLC 60 for primary location code 60.
An FLC 78 or 60 should be input on any BMF international tax adjustment or credit transfer for audit trail purposes, regardless of the location code shown on TXMOD or ENMOD.
Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, a new tax benefit is available to employers who hire certain previously unemployed workers ("qualified employees") in their trade or business. The act provides employers with an exemption from the employers 6.2 percent share of social security tax on wages paid to qualified employees, effective for wages paid from March 19, 2010, through December 31, 2010. See IRM 220.127.116.11.20, HIRE — Payroll Tax Exemption.
Premium assistance for The Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits can be claimed on Form 941-PR and Form 941-SS for 2009. The forms contain new lines 12A for COBRA premium assistance payments and 12B for the number of individuals provided COBRA assistance. Additional information on COBRA and procedures for adjusting COBRA amounts can be found in IRM 188.8.131.52.19, Premium Assistance for COBRA Benefits.
Form 941-X(PR), Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund (Puerto Rico version), is filed to correct FICA tax information previously reported on Form 941-PR.
Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, is filed to correct FICA tax information previously reported on Form 941-SS.
Refer to the following IRM sections for instructions for processing Form 941-X(PR) and Form 941-X:
Form 941-X Tax Decreases - Adjusted Employment Tax Return, see IRM 188.8.131.52.7.8.1, Form 941-X Tax Decreases - Adjusted Employment Tax Return
Form 941-X Tax Decrease - Claim for Refund, see IRM 220.127.116.11.7.8.2, Form 941-X Tax Decrease - Claim
Form 941-X Tax Increases - Adjusted Employment Tax Return, see IRM 18.104.22.168.7.8.3, Form 941-X Tax Increases - Adjusted Employment Tax Return
For FTD penalty calculation for Form 941-X tax increases and decreases refer to IRM 126.96.36.199.5, Adjusted Returns (Forms 941-X, 943-X, 944-X, 945-X, and CT-1X.
Prior to January 1, 2009, Form 941C or Form 941CPR was filed to correct withholding of FICA information previously reported on Form 941-PR, Form 941-SS, Form 943-PR, or Form 945.
Employers and third-party payers who have employees that are residents of territories must withhold from these employees and pay employer FICA taxes on most sick pay.
Employers that make their own sick pay (SINOT) payments report the payment subject to FICA tax on Form 941-PR, Form 941-SS, Form 944-PR, or Form 944-SS. See the "Note" in IRM 126.96.36.199.1.
The third party is responsible for informing the employer of the amount of benefits paid and what portion is taxable.
Employers reduce the tax liability by subtracting the sick pay (SINOT) paid portion in the Tax Adjustments section.
Third party payer of sick pay (SINOT) must withhold and deposit the employee's portion of Social Security and Medicare taxes on their Form 941-PR, Form 941-SS, Form 944-PR, or Form 944-SS returns. See the "Note" in IRM 184.108.40.206.1.
If the employer sends a computer printout and payment, assess the additional tax. See IRM 21.7.2, Employment and Railroad Tax Returns Overview, for instructions on how to adjust the taxpayer's account.
The MFT for Form 940-PR and Form 940-EZ is 10.
Form 940-EZ is obsolete as of 1-1-2007.
The return is filed once a year with the tax period ending on December 31. The return is due on January 31.
The Blocking Series are 00 with original return; 15 without original return; 50 when the state certifies wages/contributions; 51 when the state certifies no record of wages/contributions.
When adjusting an account that contains a previous FUTA adjustment, and resolution is based on the state certification data, a specific Blocking Series must be used. Refer to IRM 126.96.36.199.7.4, Special Adjustment Blocking Series
Item references are:
TPR (state code) followed by a dollar amount for tax increase or decrease
WPR (state code) followed by a dollar amount for wage increase or decease
The total of the item reference code amounts for tax must equal the TC 290 or 291 tax adjustment. If no increase or decrease to tax or wages is made, item reference codes are not needed.
Only the first $7,000 paid to each employee is subject to FUTA tax.
Some organizations, such as religious, charitable, and educational organizations, are exempt from FUTA taxes. If an organization claims to be exempt from FUTA taxes, refer to IRM 21.7.7, Exempt Organizations and Tax Exempt Bonds. Exempt organizations can be identified on the Entity module by Employment Code (EC) "W" .
The FUTA certification program is the method IRS uses to verify with the states that the credit claimed on the Form 940-PR or Form 940-EZ and or Schedule H was actually paid into the states' unemployment funds. Puerto Rico and the U.S. Virgin Islands participate in this program. On recertification cases:
If.... Then.... The 940-PR account has an additional TC 290 assessment (with Blocking Series 50 or 51) and the state certification is provided 1. Recompute tax based on the recertification figures see (9) below. See IRM 220.127.116.11.6.1, Computation of the FTD Penalty (CAWR and FUTA Notices.)
2. Input the adjustment with Blocking Series 50.
3. Adjust TC 180 if applicable.
The taxpayer is not aware of the FUTA assessment or disagrees or does not understand the additional assessment 1. Use Letter 3064SP or Letter 380C to explain the adjustment to the taxpayer and request that they obtain a recertification from the territory. See note below.
2. Input STAUP for eight cycles.
3. Do not adjust account at this time.
The Department of Labor in PR can be contacted at 787-754-5270 or 787-754-5272. The Department of Labor in the U.S. Virgin Islands can be contacted at 340-776-3700 or by writing to:
Employment Security Agency
P.O. Box 789
St. Croix, U.S. Virgin Islands
Complete Form 940 adjustment procedures are found in IRM 220.127.116.11, Unemployment Taxes Procedures. Form 940-PR is adjusted in the same manner.
The Form 944 was developed to reduce burden for small business taxpayers. It became available beginning with calendar year 2006 along with Form 944-PR, for employers in Puerto Rico and Form 944-SS, for employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. See the "Note" in IRM 184.108.40.206.1.
In 2006, the Form 944 program was a new filing requirement for all Form 941 series taxpayers to whom one of the following apply:
The taxpayer would have had to report $1,000 or less in total tax liability on their Form 941 accounts during the periods beginning July 1st and ending the following June 30th (this is referred to as the eligibility extract period), or
The taxpayer applied for a new EIN, who has never filed previously, would qualify to file Form 944 if they believed their total liability would not exceed $1,000.
See IRM 20.1.4-5, Form 944 De Minimis Exception, and IRM 184.108.40.206.1, Extension of Time to Deposit for Form 941 Filers who Filed Form 944 in the Preceding Year.
Employers in U.S. territories who pay $6,536 or less in wages subject to social security and Medicare taxes will pay $1,000 or less in employment taxes.
For tax years 2006 through 2008, Form 944 filers were identified using a Master File extract. Beginning in 2009, taxpayers will self-identify during EIN assignment or by contacting the Service about the Form 944 program, since the extract will no longer be run. Beginning in calendar year 2010, the 944 program is voluntary.
MFT 14 was established for Form 944-PR and Form 944-SS.
Form 945 is used to report federal income tax withheld or backup withholding. All non-payroll items, namely pensions, annuities, Individual Retirement Annuities (IRAs), military retirement, gambling winnings, Back-up Withholding (BUWH), and Indian Gaming Profits, are reported on Form 945. As a general rule, all income tax and BUWH reported on Form 1099 or Form W-2G must be reported on Form 945.
Some taxpayers file Form 945 when a Form 1042 should have been filed. However, a Form 1042-S is provided to the recipient instead of a Form 1099.
Form 945 is subject to Federal Tax Deposit requirements. The periodic liabilities are reported on Form 945A. Form 945 tax deposit requirements are separate from Form 941-PR or Form 941-SS; they cannot be combined. Taxpayers follow either semi-weekly or monthly deposit schedules. For additional information see IRM 22.214.171.124,Employment Tax (Forms 941, 943, 944, 945, and CT-1, and see Publication 15, Circular E, for Federal Tax Deposit Requirements.
The threshold for making deposits is currently $2,500, see IRM 126.96.36.199, De Minimis Exception to Deposit Requirements.
The return is filed annually with tax period ending on December 31 and the return is due on January 31, following the close of the calendar year.
The MFT for Form 945 is 16.
The taxpayer is required to file only for a calendar year in which withholding tax must be reported on Form 945.
Blocking Series 00 is used with an original return; 15 without the original return.
Item reference numbers are:
003 - Federal Income Tax Withheld
008 - Backup Withholding
184 - Adjustments to correct administrative errors
Adjustments on Form 945 can only be made if they are the result of an administrative error.
On January 1, 1995, the Social Security Domestic Employment Reform Act (SSDERA) of 1994 was enacted. As a result, domestic service employment taxes are now collected with income tax rather than employment taxes.
See IRM 184.108.40.206.8.1, Wages Subject to FICA and Income Tax Withholding, for the cash wages thresholds not subject to FICA and Income Tax Withholding.
Domestic employees under the age of 18 are excluded from coverage beginning in 1995, if being a "Domestic Employee" is not their principal occupation. This provision is effective regardless of the amount of wages paid to the employee under 18.
A "student" is considered an occupation.
Wages paid after December 31, 1994 are reported on the employer's Schedule H/H-PR attached to Form 1040, Form 1040A, Form-NR, Form-PR, Form 1040-SS, or Form 1041. Employers not liable for a Form 1040/A/NR/PR/SS must file a "stand-alone" Schedule H/H-PR.
On a "stand-alone" Schedule H/H-PR, Submission Processing prepares a dummy Form 1040/A/NR/PR/SS with a Return Processing Code of "Y" or Form 1041 for BMF accounts.
Employers claiming the additional tax with their individual taxes report the tax on Line 59a on the Form 1040, Line 58a on the Form 1040NR, or Line 4 on the Form 1040-PR or Form 1040-SS. Employers claim the additional tax on Form 1041 using line 23.
This additional tax is included in the TC 150 amount.
Use the appropriate Blocking Series and RC 050 for IMF to adjust employment taxes from Schedule H/H-PR.
SSDERA requires the Schedule H/H-PR be filed for a calendar year. Fiscal year filers must report wages paid on a calendar year basis.
Schedule H/H–PR has four parts:
Part I is social security, Medicare, and Federal Income Taxes (Contribuciones al Seguro Social y al Medicare).
Part II is Federal Unemployment (FUTA) Tax (Contribucion Federal para el Desempleo (FUTA).
Part III Total Household Employment Taxes (Total de Contribuciones sobre el Empleo de Empleados Domesticos).
Part IV is Address and Signature (Direccion y Firma) Part IV is completed ONLY if the employer is not required to file a tax return or is filing a Form 1041.
Schedule H/H-PR may be filed by a Trust or Church etc., either by itself or with Form 1041.
Use the following Item Adjustment Code list to determine the appropriate reference numbers to use to adjust Part I, social security, Medicare, and Federal income taxes:
003 - Federal Income Tax Withheld
004 - Taxable Social Security Wages
007 - Adjusted total of SSA/Medicare tax
073 - Medicare Wages
074 - Taxable Wages & Tips subject to Additional Medicare Tax (AdMT) withholding (valid for tax periods beginning after December 31, 2012.)
FUTA State Codes currently valid with MFT 10 must be input for adjusting the primary taxpayer information. The FUTA State Code is a three character code made up of T or W, followed by a two character state code. See a list of state abbreviations in Exhibit 3.11.3-9, State Codes and Zip Codes Perfection Chart.
The three character State Code is input systemically and converted to the applicable reference number.
FUTA taxes are due on wages paid to domestic employees if the employer paid total cash wages of $1,000 or more (for all household employees) in any quarter in the current or preceding calendar year.
State Code Input Computer Generated Reference Number Reference TPR 997 Taxes WPR 998 Wages
After "T" or "W" , the appropriate two digit state abbreviation is used.
The taxpayer reports $1,300 FUTA tax paid to Puerto Rico. The tax examiner inputs State Code TPR for $1,300 and the computer generates a TC 997 for $1,300.
For adjustments involving Form 1041 with Schedule H, refer to IRM 126.96.36.199.1.10, Form 1041 Claims and Requests for Adjustments.
When processing a loose Schedule H/H-PR, use the procedures in this IRM in conjunction with the procedures outlined in IRM 21 listed below. See IRM 18.104.22.168, Household Employment Taxes - BMF Procedures.
If... Then... The Taxpayer Identification Number (TIN) is a SSN Follow the procedures in IRM 22.214.171.124.8.10, Schedule H, Household Employment Taxes, Received Without Form 1040, U.S. Individual Income Tax Return. The TIN is an Employer Identification Number (EIN) Follow the procedures in IRM 126.96.36.199.1.11, Social Security Domestic Employment Reform Act (SSDERA) of 1994 and BMF Schedules H. The Schedule H does not have a TIN Research for a TIN using NAMEE or NAMEB for an EIN, NAMES or NAMEI for an SSN.
The interest-free provisions for adjustments on employment taxes are in effect for errors discovered on the Schedule H/H-PR. The provisions were revised and apply to errors discovered on or after January 1, 2009. See Treas. Reg. §§ 31.6205-1, 31.6413(a)-1, and 31.6413(a)-2. Additional information can also be found in TD 9405 and Publication 926.
The interest-free provisions may apply to adjusted returns and original returns in certain cases of worker mis-classification. The adjustment to Schedule H is made by filing a Form 1040X with a corrected Schedule H (together being an adjusted return), or just an amended Schedule H if the employer has no Form 1040 filing requirement.
Taxes imposed under the Federal Unemployment Tax Act FUTA (Part II, Schedule H) are not subject to the interest-free provision. As a result, when adjusting Schedule H taxes, it is sometimes necessary to use both TC 298 (for interest-free income and FICA adjustments, Part I, Schedule H) and TC 290 for the FUTA portion.
Underpayment adjustments to income tax withholding, social security and Medicare taxes may be made interest-free if reported by the due date of the return for the return period the error is ascertained.
Generally, adjustments to income tax withholding errors may only be made for quarters during the same calendar year. Adjustments to amounts reported as income tax withheld in a prior calendar year may only be made to correct an administrative error. An administrative error occurs if the amount entered on Schedule H/H-PR as income tax withheld is not the amount the employer actually withheld.
Income taxes are only required to be withheld from wages for domestic employment if the employer and employee agree to the withholding.
For Schedule H/H-PR, the due date of the period the error is ascertained is the due date of the income tax return for the period the taxpayer discovered the error.
An error is ascertained when the employer has sufficient knowledge of the error to be able to correct it.
For underpayment errors discovered on or after January 1, 2009, the new provisions require that the underpayment be paid at the time the adjusted return is filed or interest will begin to accrue. The interest computation date to be used is the received date of the adjusted return.
Ascertained dates are not needed for tax decreases.
A statement (could be an amended Schedule H) must be attached to the return on which the adjustment is reported explaining the correction and designating the return period in which the error was ascertained and the return period to which the error relates.
Use the following chart to assist in determining when to use a TC 298.
If the amended return is filed for the immediate preceding tax period, it is not necessary to contact the taxpayer for an ascertained date. Input TC 298 with the applicable interest computation date. See the EXCEPTION in IRM 220.127.116.11.7.6.3(3), Form 941-X Tax Increases-Adjusted Employment Tax Return
If... Then... An ascertained date is provided and the amended Schedule H/H-PR is filed by the due date of the return for the return period, in which the error was ascertained Assess the increase using TC 298 with an interest computation date which will be the same date as the ascertained date or the return due date, whichever is later. The ascertained date is not provided Contact the taxpayer by telephone to obtain the information.
Do not correspond for the ascertained date unless corresponding for other information.
The ascertained date is not provided and is unable to be secured Assess the increase using a TC 290.
When contacting taxpayers, follow procedures in IRM 126.96.36.199.3, Required Taxpayer Authentication, for purposes of identification and to prevent unauthorized disclosures of tax information. Also, use caution when leaving information on answering machines or voice mails. (See IRM 126.96.36.199.1, Leaving Information on Answering Machines/Voice Mail).
Interest-free adjustments provisions.
If... Then... The adjusted Schedule H is filed and the tax paid by the due date of the return for the return period in which the error was ascertained and the underpayment is paid at the same time No interest is due. For increases in tax liability, the amended Schedule H is filed by the due date of the return for the return period in which the error was ascertained, but the tax is not paid at the same time Interest is computed from the received date.
Deposit requirements for the PR series returns are the same as for their domestic counterparts.
Form 941-PR deposit requirements are the same as for Form 941 and are shown in IRM 220.127.116.11, Employment Tax Form 941, Form 943, Form 944, Form 945, and CT-1.
Form 940-PR deposit requirements are different from the Form 941 requirements. The unemployment tax deposit requirements are:
If the tax liability is $500 or less and it is the end of the first, second, or third quarter, the tax is carried over to the next quarter.
If the fourth quarter tax liability is $500 or less, the tax is due by the due date of Form 940-PR or 940-PR/EZ, which is January 31, or it and can be mailed in with the return.
If the tax liability is over $500, and it is the end of any quarter, then the tax must be deposited by the last day of the following month.
For further information refer to IRM 22.214.171.124, Form 940.
When to deposit FUTA Taxes:
Quarter Ending Due Date Jan.-Feb.-Mar March 31 April 30 Apr.-May-June June 30 July 31 July-Aug.-Sep September 30 October 31 Oct.-Nov.-Dec December 31 January 31
Form 943-PR annual return deposit requirements: In general, when the employer and employee portions of social security, Medicare and withholding taxes are $2,500 or more, the taxpayers must periodically deposit their employment taxes using their required monthly or semiweekly deposit schedule. When the total tax amount is less than $2,500, the tax is considered de minimis, and can be remitted with a timely filed return.
Beginning in 2001, the threshold for the deposit requirement was increased from $1,000 to $2,500.
Circular A, Agricultural employers Tax Guide, Section 7 has more information on the deposit rules.
Form 945, Annual Return of Withheld Federal Income Tax, withholding tax deposits must be made separately from FICA and Medicare taxes. The 941 and 945 tax liabilities cannot be combined when making deposits. The $2,500 deposit threshold requirement also applies to Form 945.
Taxpayers who file Form 941-PR, Form 943-PR, or Form 945 are required to pay the tax on these returns by making Federal Tax Deposit (FTD) payments if the liability equals or exceeds a designated threshold amount during the tax period for which the return is filed. The table below lists the applicable thresholds.
Form Tax Period Ending $ Threshold 941 200103 and subsequent 2,500 (See Note below table.) 943 200112 and subsequent 2,500 945 200112 and subsequent 2,500
For tax periods beginning January 1, 2010 and subsequent, if the Form 941 total tax liability is $2,500 or less for the current quarter or the preceding quarter is less than $2,500 and the taxpayer did not incur a $100,000 next-day deposit obligation during the current quarter, the tax due can be paid when the return is filed.
These deposits are paid using one of the electronic payment options.
Regulation 153340-09 stipulates that beginning January 1, 2011 taxpayers must use an electronic payment option for all Federal Tax Deposits.
When a taxpayer makes a deposit the bank transmits the deposit to the Treasury Financial Agent (TFA). If the TFA delays transmitting the deposit to the Treasury, the employers account may be charged an FTD penalty for a late deposit. Do not initiate a credit transfer to change the date of the deposit. See IRM 22.214.171.124.1, Treasury Financial Agent Mishandling, for case resolution instructions.
Penalties are imposed if deposits are:
Insufficient amounts
Made directly to IRS
Not made electronically, if so required
(See IRM 20.1.4, Failure to Deposit Penalties, for more information.)
The FTD penalty must be considered anytime there is an adjustment to tax whether an increase or decrease. See IRM 18.104.22.168, Manual Adjustments, for complete instructions.
Research IDRS to determine if a CP 194 or CP 207 was previously generated, whenever tax or periodic liability information is being adjusted. See IRM 184.108.40.206.6, Schedule Indicator Codes (SIC).
The taxpayer may create a duplicate filing condition by filing a separate return with each FTD. Resolve these "A" freeze conditions using TRNS 193 procedures in IRM 21.7.9, BMF Duplicate Filing Conditions. Notify taxpayers to make deposits electronically when necessary
For more information on deposits and FTD penalties, see:
Circular E
Circular A
IRM 20.1.4, Failure to Deposit Penalty
Electronic Federal Tax Payment System (EFTPS) is a tax payment system offered free by the U.S. Department of the Treasury. EFTPS enables taxpayers to pay their federal taxes electronically using the internet or telephone. Both business and individual taxpayers can use EFTPS. See IRM 188.8.131.52.8.1, Electronic Federal Tax Payment System (EFTPS), for more information.
Treasury Decision (TD) 9507 (REG-153340-09) ended the use of paper federal tax deposit (FTD) coupons beyond December 31, 2010. Therefore, beginning January 1, 2011, businesses not already required to use Electronic Funds Transfer (EFT) that have a deposit requirement (such as employment tax, excise tax, and corporate income tax) are required to make their federal tax deposits via an EFT system. For further information see IRM 220.127.116.11, Authorized Deposit Methods, and IRM 126.96.36.199.1, Electronic Funds Transfer (EFT).
Taxpayers are required to make electronic deposits and are subject to FTD penalties, including a 10% penalty for avoiding the required deposit method. (See IRM 220.127.116.11., Authorized Deposit Methods and IRM 22.214.171.124.1, Time Sensitive Four Tier Penalty System.)
Reasonable cause penalty relief is available to taxpayers who have been assessed deposit penalties. See IRM 20.1.1, Introduction and Penalty Relief, and IRM 20.1.4, Failure to Deposit Penalty, for information on penalty relief.
Excess FICA claims (not Foreign Student Visa Claims) are IMF Criteria.
Route cases received in the BMF inventory to Philadelphia Accounts Management - IMF International Department.
A visa is assigned to an individual by the United States Citizenship and Immigration Services (USCIS) based on the individual's U.S. immigrant or non-immigrant status. Visas are assigned to non-immigrant aliens who are admitted temporarily to the U.S. for specific reasons and periods of time.
The USCIS Web site at http://www.uscis.gov contains specific information on the various visas available.
The method of taxation of a visa holder depends primarily upon whether the individual is defined as a resident or nonresident. If the visa holder is determined to be a nonresident alien, he or she is taxed on all United States source income and on all income that is effectively connected with the conduct of a trade or business in the United States (see IRM 126.96.36.199.10, Effectively Connected Income). Non-effectively connected foreign source income is not taxed (see IRM 220.127.116.11.11, Non-Effectively Connected Income). Resident aliens are taxed the same as citizens.
The following are types and definitions of visas most frequently recognized by IRS:
Visa Type Definition "H-1" Are issued to alien temporary workers in a specialty occupation (profession). "TN" Are issued to alien Canadian and Mexican professionals entering under the North American Free Trade Agreement (NAFTA) "F" Are issued to alien students accepted as registered students by an educational institution or language learning program approved by the Attorney General. "J" Are issued to an alien entering for the purpose of teaching, instructing, lecturing, studying, observing, conducting research, consulting, demonstrating special skills, or receiving training. These individuals are commonly referred to as "exchange visitors" . An alien temporarily present in the United States on a J Visa is admitted for an initial period of two years. "M" Are issued to an alien accepted as a registered student by an established vocational or other recognized nonacademic institution (other than in a language training programs) approved by the Attorney General. "Q" Are issued to an alien participating (for a period not to exceed 15 months) in an international cultural exchange program approved by the Attorney General for the purpose of providing practical training, employment, and the sharing of history, culture, and traditions of the country of the alien's nationality.
There are special rules for "F" , "J" , "M" , and "Q" visa holders.
Subject to certain limitations, "F" , "J" , "M" , and "Q" visa holders are treated as exempt individuals for purposes of the substantial presence test. The result of this is that they are frequently determined to be non-resident aliens without regard to the number of days spent in the United States.
"F" , "J" , "M" , and "Q" visa holders are treated as engaged in a trade or business in the United States even if they are nonresident aliens. They are able to exclude pay received from a foreign employer from U.S. gross income.
These types of visa holders, together with certain scholarship and fellowship holders, are afforded a lower rate of withholding.
These four types of visa holders are exempt from social security and Medicare taxes (FICA) on wages as long as the visa holder is classified a nonresident alien and the services are performed to carry out the purpose for which the visa holder was admitted to the United States. Restrictions on the type of work and the number of hours worked apply according to the type of visa held.
One important limitation applies to teachers or trainees who are temporarily present in the United States under "J" or "Q" visas. After two years, such individuals generally are classified as resident aliens under the substantial presence test.
The following is a list of immigration forms and descriptions:
Form Description Citizenship Field Permanent Resident Alien AR-3 and AR-3a Alien Registration Receipt Card. Evidence of lawful admission for permanent residence. Legal alien allowed to work Y DSP-150 B-1/B-2 Visa and Border Crossing Card.
Form DFP-150 replaces Form I-186 and Form I-586.
DS-2019 Certificate of Eligibility for Exchange Visitor (J-1) Status. Evidence the alien is an exchange visitor. Must also show an I-94 with J-1 alien classification. I-20 Certificate of Eligibility for Nonimmigrant Student Status. Must also show an I-94 showing either F-1 or M-1 alien classification. I-94 or I-94A Arrival/Departure Record. Evidence the alien is a non-immigrant. There are different versions of the form. I-94W Non-immigrant Visa Waiver Arrival/ Departure Form. Evidence that the alien is a visitor from a visa waiver country. I-95 or I-95A Crewman's Landing Permit. Issued to foreign crewman. Legal alien not allowed to work N I-184 Alien Crewman Landing Permit and Identification Card. Issued to foreign crewmen. Legal alien not allowed to work N I-185 Nonresident Alien Canadian Border Crossing Card. Issued to Canadian citizens. Legal alien not allowed to work N I-194 Notice of Approval of Advance Permission to Enter the United States as a Nonimmigrant. I-508 Waiver of Rights, Privileges, Exemptions and Immunities This form includes an "IRS COPY" . Route all IRS COPIES received to:
Large Business & International
1111 Constitution Ave. NW
Washington, DC 20224
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . This name is for internal use only.
I-551 Alien Registration Receipt Card (Green Card). Evidence of lawful admission for permanent residence. Legal alien allowed to work Y I-551 STAMP Temporary I-551. Evidence of lawful admission for permanent residence until the I-551 card is received. Legal alien allowed to work Y I-688 Temporary Resident Identification Card. Issued to legalization applicants. Legal alien allowed to work N I-688A Employment Authorization Card. Evidence of work authorization. Legal alien allowed to work N I-688 EXT Extended Temporary Resident Card. Evidence of lawful admission for permanent residence until the I-551 card is received. Legal alien allowed to work N I-766 Employment Authorization Document. Evidence of work authorization. Legal alien allowed to work N I-797 Notice of Action. Accept only for Family Unity program aliens. Legal alien N
Forms that begin with "I" (such as Form I-551) come from the United States Citizenship and Immigration Services (See the USCIS Web site at http://www.uscis.gov). Forms that begin with "DS" (such as DS-2019) come from the U. S. Department of State (See the State Department Web site at http://state.gov).
The following table lists the various types of visas with a description of each:
Visa Symbol Class (Description) Section of the Law A-1 Ambassador, public minister, career diplomat or consular officer, and immediate family 101(a)(15)(A)(i) A-2 Other foreign government official or employee, and immediate family 101(a)(15)(A)(ii) A-3 Attendant, servant or personal employee of principal A-1 or A-2, and immediate family 101(a)(15)(A)(iii) B-1 Temporary visitor for business 101(a)(15)(B) B-2 Temporary visitor for pleasure 101(a)(15)(B) C-1 Alien in transit directly through U.S. 101(a)(15)(C) C-1D Combined transit and crewman visa 101(a)(15)(C)&(D) C-2 Alien in transit to United Nations Headquarters district under Section 11.(3), (4), or (5) of the Headquarters Agreement 101(a)(15)(C) C-3 Foreign government official, immediate family attendant, servant or personal employee, in transit 212(d)(8) C-4 Transit without Visa, see TWOV 212(d)(3) & 212(d)(5) D-1 Crew member departing on same vessel of arrival 101(a)(15)(D) D-2 Crew member departing by means other than vessel of arrival 101(a)(15)(D) E-1 Treaty trader spouse and children 101(a)(15)(E)(i) E-2 Treaty investor, spouse and children 101(a)(15)(E)(ii) E-3 Australian Specialty Occupation Workers 101(a)(15)(E)(iii) F-1 Academic student 101(a)(15)(F)(i) F-2 Spouse or child of F-1 101(a)(15)(F)(ii) G-1 Principal resident representative of recognized foreign member government to international organization, staff and immediate family 101(a)(15)(G)(i) G-2 Other representative of recognized foreign member government to international organization and immediate family 101(a)(15)(G)(ii) G-3 Representative of non-recognized or nonmember government to international organization, and immediate family 101(a)(15)(G)(iii) G-4 International organization officer or employee, and immediate family 101(a)(15)(G)(iv) G-5 Attendant, servant, or personal employee of G-1, through G-4 and immediate family 101(a)(15)(G)(v) H-1B Specialty Occupations, Department of Defense (DOD) workers, fashion models 101(a)(15)(H)(i)(b) H-1B1 Free traded nonimmigrant professional from Chile or Singapore 101(a)(15)(H)(i)(b)(1) H-1C Nurses going to work up to three years in health professional shortage areas 101(a)(15)(H)(i)(c) H-2A Temporary Agricultural Worker 101(a)(15)(H)(ii)(a) H-2B Temporary worker: skilled and unskilled 101(a)(15)(H)(ii)(b) H-3 Trainee 101(a)(15)(H)(iii) H-4 Spouse or child of an alien classified H-1, H-2, or H-3 101(a)(15)(H)(iv) I Foreign media Representatives 101(a)(15)(I) J-1 Exchange visitor 101(a)(15)(J)(i) J-2 Spouse or child J-1 101(a)(15)(J)(ii) K-1 Fiance(e) 101(a)(15)(K) K-2 Minor child of K-1 101(a)(15)(K) K-3 Spouse of a U.S. Citizen (LIFE Act) 101(a)(15)(K)(ii) K-4 Child of K-3 (LIFE Act) 101(a)(15)(K)(iii) L-1A Executive, managerial 101(a)(15)(L) L-1B Specialized knowledge 101(a)(15)(L) L-2 Spouse or child L-1 101(a)(15)(L) M-1 Vocational student or other nonacademic student 101(a)(15)(M)(i) M-2 Spouse or child of M-1 101(a)(15)(M)(ii) M-3 Canadian or Mexican national commuter students –vocational/non academic institutions 104(a)(15)(M)(iii) N-8 Parent of an alien classified SK-3 "Special Immigrant " 101(a)(15)(N)(i) N-9 Child of N-8 or of an SK-1, SK-2 or SK-4 "Special immigrant " 101(a)(15)(N)(ii) through (iv) NATO-1 Principal Permanent Representative of Member State to NATO and resident members of official staff or immediate family Art. 12, 5 U.S.T. 1094, Art. 20, 5, U.S.T. 1098 NATO-2 Other representatives of member State; Dependents of members of a force entering in accordance with the provisions of the NATO Status-of-Forces agreement; Members of such a Force if issued visas Art. 13, 5 U.S.T. 1094, Art. 1, 4 U.S.T. 1794, Art. 3, 4 U.S.T. 1796 NATO-3 Official clerical staff accompanying a representative of member state NATO and immediate family Art. 14, 5 U.S.T. 1096 NATO-4 Official of NATO other than those qualified as NATO-1 and immediate family Art. 18, 5 U.S.T. 1096 NATO-5 Expert other than NATO officials qualified under NATO-4, employed on behalf of NATO and immediate family Art. 21, 5 U.S.T. 1100 NATO-6 Member of a civilian component who is either accompanying a Force entering in accordance with the provisions of the NATO Status-of-Forces agreement; attached to an Allied headquarters under the protocol on the Status of International Military headquarters set up pursuant to the North Atlantic Treaty; and their dependents Art. 1, 4 U.S.T. 1794, Art. 3, 5 U.S.T. 877 NATO-7 Servant, or other personal employee of NATO-1 through NATO-6 classes or immediate family Arts. 12-20, 5 U.S.T. 1094-1098 O-1 Extraordinary ability in sciences, arts, education, business or athletics 101(a)(15(O)(i) O-2 Alien's (support) accompanying O-1 101(a)(15(O)(ii) O-3 Spouse/child of O-1 or O-2 101(a)(15(O)(iii) P-1 Entertainment groups 101(a)(15)(P)(i) P-2 Artist and entertainers in reciprocal Exchange programs 101(a)(15(P)(ii) P-3 Artists and entertainers in culturally unique programs 101(a)(15(P)(iii) P-4 Spouse or child of P-1, 2, or 3 101(a)(15(P)(iv) Q-1 International cultural exchange visitors 101(a)(15(Q)(i) Q-2 Irish Peace Process Cultural and Training Program (Walsh Visas) 101(a)(15(Q)(ii)(I) Q-3 Spouse or child Q-2 101(a)(15(Q)(ii)(II) R-1 Religious workers 101(a)(15)(R) R-2 Spouse/child of R-1 101(a)(15)(R) S-5 Informant of criminal organization information 101(a)(15)(S)(i) S-6 Informant of terrorism information 101(a)(15)(S)(ii) T-1 Victim of a severe form of trafficking in persons 101(a)(15)(T)(i) T-2 Spouse of a victim of severe form of trafficking in persons 101(a)(15)(T)(ii) T-3 Child of victim of a severe form of trafficking in persons 101(a)(15)(T)(ii) T-4 Parent of a victim of severe form of trafficking in persons (If victim is under 21 years of age) 101(a)(15)(T)(ii) TN Trade visas for Canadians and Mexicans 214(e)(2) TD Spouse or child accompanying TN 214(e)(2) TWOV Passenger 212(d)(3)&(5) TWOV Crew 212(d)(3)&(5) U-1 Victim of Certain Criminal Activity 101(a)(15)(U) U-2 Spouse of U-1 101(a)(15)(U) U-3 Child of U-1 101(a)(15)(U) U-4 Parent of U-1, if U-1 is under the age of 21 101(a)(15)(U) V-1 Spouse of an LPR who is the principal beneficiary of a family-based petition (Form I-130) which was filed prior to December 21, 2000, and has been pending for at least three years 101(a)(15)(V) V-2 Child of an LPR who is the principal beneficiary of a family-based visa petition (Form I-130) that was filed prior to December 21, 2000, and has been pending for at least three years 101(a)(15)(V) V-3 The derivative child of a V-1 or V-2 101(a)(15)(V) TPS Temporary Protected Status INA Section 244
Per IRC § 3121(b)(19), certain nonresident alien individuals temporarily present in the United States are exempt from FICA tax for services performed as specified in § 101(a)(15)(F), (J), (M), and (Q) of the Immigration and Nationality Act.
The following documentation substantiates the exemption from FICA tax for the individual holding an F, J, M or Q visa:
A copy of the Visa
Immigration and Naturalization Form I-94 (Arrival - Departure Record), or other documentation showing the dates of arrival and departure.
Overseas filers will no longer have a Form I-94 in their possession, since the USCIS keeps this document when the student/visitor leaves the United States.
In addition to (2) above:
F-1 students need Form I-20 (Certificate of Eligibility for Non-Immigrant (F-1) Students Status), or
J-1 visa holders need Form IAP-66/DS-2019 (Certificate of Eligibility for Exchange Visitor (J-1) Status). Form DS-2019 replaced IAP-66 as of August 31, 2002.
Form I-766 or I-688B (Employment Authorization Document) is needed only if the student is engaged in optional practical training (OPT) which is part of a curriculum such as work study or an internship. Copies of pay statements showing the amount of FICA tax erroneously withheld are also needed to verify claims involving students employed in OPT and those in M-1 status who have completed a course of study and are employed for practical training for up to 6 months.
Copies of pay statements in cases involving visa status changes from exempt type to substantiate the amount of FICA withheld prior to the change in visa status.
Regulations interpreting the elements of the student FICA exception became effective on April 1, 2005. Under the new regulations, the employer qualifies as a "school, college or university" if:
Its "primary function" is the presentation of formal education
It maintains a regular faculty and curriculum, and
It has a regularly enrolled student body attending classes where the entity regularly conducts educational activities.
This "primary function test" was added to prevent hospitals, museums, and other non-school entities from benefiting from the Student FICA Exception.
Under the regulations, to be considered a "student," an employee must be:
Enrolled in credit courses leading to an education credential and regularly attending classes at the employing school, college or university or affiliated organization, and
Pursuing a course of study required for an educational credential or necessary for an examination or certification required in the field of study.
Refer to Rev. Proc. 2005-11 for rules regarding the safe harbor for students carrying a half-time workload.
Foreign agricultural workers temporarily admitted to the United States on H-2A visas are always exempt from U.S. social security and Medicare taxes, whether they are resident aliens or nonresident aliens. Allow claims from H-2A visa holders requesting refunds of erroneously withheld FICA tax provided they submit the information listed below. Process claim using procedures in Processing Employee Claims. See IRM 220.127.116.11.3.
W-2(s) showing the tax withheld
A copy of the visa showing the immigration status H-2A.
Correspond with taxpayer for missing information using normal case suspense procedures.