Vr-217 Instructions

[Vinay Pettyjohn]

ThisIRM section provides instructions for Wage and Investment Error Resolution Tax Examiners to correct errors for Form 1120-S, U.S. Income Tax Return for an S Corporation. For tax years before 2018, the form number was Form 1120S. In May 2019, the form number was changed to Form 1120-S due to Tax Forms and Publications hyphen standardization.

The purpose of Error Resolution is to resolve validity, field , consistency, and math errors in returns and other documents for posting to the Master File. Returns fall out in Error Resolution System (ERS) due to the Generalized Mainline Framework (GMF). The entries from transcription are transferred to ERS fields. GMF programming causes a return to fall out to ERS if it does not meet certain criteria, including:

This IRM cannot address every possibility that occurs while correcting tax returns. Take taxpayer intent into consideration. Refer issues not addressed in this IRM to the Subject Matter Expert (SME), Lead or Manager to decide the proper corrective action.

All existing local information and procedural issuances must be reviewed periodically by the Operation Manager level (at least 2 times a year or with each IRM revision) to ensure conformance with Headquarters procedures (make necessary changes, secure necessary approvals, etc.).

Taxpayer Advocate Service (TAS) Manual Refunds - any return hand walked by a W&I Submission Processing (SP) liaison for Taxpayer Advocate Service must be processed by a Lead Tax Examiner or designated tax examiner using the following procedures in the order listed:

If Balance Due/Overpayment Math Error Code regenerates because the taxpayer made a math error when computing their refund, then make a screen print of the Error Code Screen Display and highlight the computer generated refund amount. Attach the print to the front of the return keeping the entity area visible and assign the correct TPNC.

Refer taxpayers to TAS when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), or when Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), is attached and steps cannot be taken to resolve the taxpayers issue the same day.

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

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

Criminal Investigation (CI) investigates potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes. Criminal violations of the IRC include willful attempts to evade or defeat the income tax. Criminal tax violations also include the willful failure to collect or pay over tax and false claims for refunds based on bogus return information.

Because of the repetitive nature of the ERS/Rejects function, ERS/Rejects Tax Examining Technicians often recognize income tax return data that are outside of the norm for data found on similar returns for each income tax return type. If ERS finds return characteristics not meeting Audit Code or Exam referral criteria it deems suspicious, CI is available to review the referral.

The primary goal in identifying tax returns for examination is to promote the highest degree of voluntary compliance. Examination gives support and helps Submission Processing (SP) with any questionable return found during processing. Exam has a vast multitude of programs and tolerance criteria already found in several IRM sections. SP can refer any questionable return to Exam, unless prohibited by instructions currently found in several IRMs.

Businesses use frivolous arguments for expressing dissatisfaction with the substance, form, or administration of the tax laws by trying to illegally avoid or reduce tax liabilities. See IRM 25.25.10, Frivolous Return Program, and Exhibit 3.12.217-22, Potential Frivolous Arguments for Examination Review, for a list of recognized frivolous arguments made by businesses.

All IRS employees who communicate by telephone, face-to-face, or any other method of correspondence with taxpayers or their personal representatives on tax related matters must give (at a minimum) the following information:

Telephone Contact - Their title (e.g., Mr., Mrs., Ms., Miss), last name and badge identification (ID Card) number. Toll-free employees may also give their location for identification purposes. Treat faxes to taxpayers on tax-related matters as correspondence and include the required information.

Correspondex letters - Specific employee name and telephone number if the employee initiating the correspondence is in the best position to respond to any questions the taxpayer may have or if the taxpayer is being asked to give more case-related information. If the taxpayer does not need to contact a specific employee, the correspondence needs only an IRS telephone number and standard signature.

Secretaries, receptionists, or other people who answer the telephone in functional offices need to identify themselves. They should provide their badge identification (ID Card) number only if they are answering telephones which are routinely used to give tax or account information.

It is not necessary to repeat the badge identification (ID Card) number on a subsequent contact, when the nature of an employee's work involves multiple contacts with the same taxpayer and the employee has given the taxpayer (either telephone or in-person) their badge identification (ID Card) number on the first contact.

The Customer Account Data Engine (CADE) 2 Program Office in Headquarters is charged with the primary goal of implementing a single, modernized programming solution that gives daily processing of taxpayer accounts.

This error is caused by a section with variable length input fields having an erroneous size field. This type of error will show all input fields of the terminus section. Transcribed data is present. Computer generated fields or Remittance Field for Section 01 will not be present.

The final two positions of the Status Code will consist of the first two positions of the Action Code. This will put similar work together on the Workable Suspense Inventory. For example, Action Code "321" = suspense period expired or no response to taxpayer correspondence. If a return was selected for Quality Review, the second and third positions are "QA" . For example, "1QA" , "3QA" , or "4QA" reflect Quality Review Status Codes.

The ERS Tax Examiner may enter an AC on a return, delete or correct an invalid code or overlay the present AC with another to either re-suspend or reject from ERS. This is done by entering a valid AC with a Command Code (CC) SSPND, NWDLN, or RJECT. See IRM 3.12.38, BMF General Instructions, for an explanation of these codes.

A Reject Tax Examiner entering a valid AC with CC RJECT will reject the return from ERS. Generally, Service Center Control File (SCCF) will automatically update the rejected returns. In cases where the AC cannot describe the required action, attach an explanation to the return using Form 4227, Intra-SC Reject or Routing Slip.

The Action Code (AC) shows that specific information is missing or that the return is to be rejected from processing. The code will show if taxpayer correspondence is needed or if specific in-house research or other action is required. This chart describes each AC, their functional use (CE = Code and Edit, EC = Error Correction, S = Suspense Correction and GEN = computer generated) and the suspense period.

The letter "C" is used as a "Clear Code" for the Error Codes when the resolution does not require a change or correction to the return. The display includes a Clear Code Field labeled "CL" . CC CRECT is used to enter the "C" .

Code "C" is also used for clearing the Action Code from the screen after corrections for the Action Code have been completed. For example, Action Code "410" must be cleared so other errors can be resolved. The presence of the "C" with a Priority I Error shows that you have made corrections to the Action Code and now other errors on the return can display.

The "000" is also used as a Clear Code when deleting Action Codes. It is used for erroneous Action Codes when you determine there is no reason to suspend the return. The "000" cannot be used in Suspense Correction.

Programming erases all "C" Clear Codes for Error Codes and Action Codes in the new Error Inventory and Workable Suspense Inventory. Unfinished returns from the previous day will not show the "C" Clear Codes that were assigned to a return but not completely worked.

Error Codes (including the ones which may require a "C" Clear Code) are numbered consecutively for correcting. There may be instances when the ERS tax examiner will create an Error Code with a higher priority than those cleared with a Taxpayer Notice Code or "C" Clear Code. Should this occur, programming will erase all "C" Clear Codes and Taxpayer Notice Codes for Error Codes with a lower priority.

There may be instances when you will make a correction erasing an Error Code previously cleared with a "C" and now the error condition no longer exists. Should this occur, the "C" Clear Code for this error and all "C" and TPNC for subsequent errors in the return are deleted.

The "C" Clear Code will prevent any other corrections to the return. If a correction must be entered but you have already entered the "C" Clear Code, and the error is no longer displayed, create a higher priority error. If the return has cleared, then use CC GTRECW to make corrections.

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