Paper returns and schedules are sent to the IRS by filers to fulfill their requirement to file a paper return and provide their taxpayer identification number (TIN). IRS must convert these returns to an electronic data record for use. Validation of the paper return information and conversion to electronic data is required.

The following provides authority for the procedures in this IRM to be performed in support of completing compliance functions to make credits or refunds of any internal revenue tax, processing of non-revenue forms, and administrative support forms.

The Operation manager secures, assigns, and provides training for the staff needed to perform the duties presented in this IRM.

The Planning and Analysis staff provides feedback and support to local management to monitor and achieve scheduled goals.

The team manager assigns, monitors, and controls the workflow to accomplish timely completion of the duties presented in this IRM.

The employee applies the instruction for the duties presented in this IRM on the SCRIPS system to accurately convert paper data to an electronic data record for proper posting for use by the IRS.

Program Reports: The reports listed below show receipts, production, and inventory for conversion of paper returns to electronic data. Management uses these reports to monitor the daily and weekly status of the program through completion.

Program Effectiveness: Management measures weekly goals using the above reports for each function compared to the established completion schedule. Each function is expected to complete the inventory on or before the program completion date, and to meet or exceed schedule prior to the program completion date as stated in IRM 3.30.123, Work Planning and Control Processing Timeliness: Cycles, Criteria, and Critical Dates.

Annual Review: Management reviews the processes in this manual annually to ensure accuracy and promote consistent tax administration.

Local reports may be used to establish more information for keeping daily program control. Local reports do not replace the established official reports and required production reporting.

The following list of acronyms are used in this IRM. Definition of data entry prompts are in the charts.

Listed below are terms and their definitions related to SCRIPS processing.

The following table lists the IRM primary sources of guidance for processing paper filed Schedules K-1.

The IRS adopted the Taxpayer Bill of Rights in June 2014. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), and the following site for additional information about the Taxpayer Bill of Rights.

When documents are severely torn, cut, or separated, the ink is to light, or for any other reason can’t pass through the scanner they will need to be processed as OE Paper.

Instructions for batching "OE Paper" returns:

The criteria for unprocessable Schedules K-1 are as follows:

Discontinue processing any Schedules K-1 if income reported is for a different tax year than the form.

When processing is discontinued attach the unprocessable form(s) to the parent return.

To be processable, the Schedules K-1 must meet all the following requirements:

If the Schedules K-1 don’t meet the requirements listed above, research the return and attachments, if information isn’t found, research Integrated Data Retrieval System (IDRS). If unable to find the missing information, and the payee is not a foreign entity correspond to request a valid Schedule K-1 using:

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See Exhibit 3.0.101-1, Form 1041 Schedule K-1, Exhibit 3.0.101-2, Form 1065 Schedule K-1, and/or Exhibit 3.0.101-3, Form 1120-S Schedule K-1, for examples of standard Schedules K-1.

Schedules K-1 can be submitted in substitute format (e.g., 2D Bar Code).

Edit Section 16 to tell clerks where to put payer information.

To be processable, substitute Schedules K-1 must meet all the following requirements:

If the substitute Schedules K-1 don’t meet the requirements listed above, research the return and attachments, if information isn’t found research IDRS. If unable to find the missing information, and the payee is not a foreign entity correspond to request a valid Schedule K-1 using:

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Schedules K-1 can be submitted in non-standard format. A non-standard Schedule K-1 has missing lines.

Edit Section 16 to tell clerks where to put payer information.

For all processable non-standard Schedules K-1, DO NOT black out the Forms Identification Number found in the upper right corner of the Schedule K-1.

To be processable, non-standard Schedules K-1 must meet all the following requirements:

If the non-standard Schedules K-1 don’t meet the requirements listed above, research the return and attachments, if information isn’t found research IDRS. If unable to find the missing information, and the payee is not a foreign entity, correspond to request a valid Schedule K-1 using:

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When a loose Schedule K-1 is received from Code and Edit, research to determine if the Schedule K-1 is filed electronically with the parent return.

Schedules K-1 are form specific and should not be converted to match the parent return (i.e., Form 1065 must have a Form 1065 Schedule K-1, Form 1041 must have a Form 1041 Schedule K-1, or Form 1120-S must have a Form 1120-S Schedule K-1). If the Schedule does not match the parent form, don’t send the Schedules K-1 for processing. Take the necessary steps to have them attached to the parent return.

For all others do the following when correspondence is received in Error Resolution.

All current year, one-year prior to current year and two-years prior to current year Schedules K-1 on a prior year form must be reformatted to current year format. See Exhibit 3.0.101-8, Conversion Chart.

If there is a bar code present on the prior year revision (2012 and prior for Form 1120-S Schedule K-1, Form 1065 Schedule K-1 and Form 1041 Schedule K-1), using a marker, black out the straight lines on both sides of the bar code. See Figure 3.0.101-1, Black Out Bar Code on Prior Year Documents.

Figure 3.0.101-1

Black Out Bar Code on Prior Year Documents

Please click here for the text description of the image.

Batching keeps loose Schedules K-1 in a colored folder, and notates "Re-file" on the outside, routes to the Pre-Doc Prep Unit.

Loose Schedules K-1 are received from Batching in a colored folder.

Sort by document type, then sort each document type by future year, current year, one-year prior to current year and two-years prior to current year.

After preparing Schedules K-1, route to SCRIPS.

Duplex (Carbon Copy) Schedules K-1, cannot be processed through SCRIPS. When you receive a duplex take the following actions:

Two-sided Schedules K-1 (two different Schedules K-1 on the front and back of a page) cannot be processed through SCRIPS. When you receive a two-sided Schedule K-1, take the following actions:

Use the program codes listed below when entering Schedules K-1 through SCRIPS.

The scanner prints a one-character reject code to the left of the DLN area on any form that is routed to the Reject Bin. The rejected form then is sent back to Batching.

Loose Schedules K-1 are received in a colored folder.

After scanning, the SCRIPS operators place the loose Schedules K-1 back in blue gusset folders labeled "RE-FILE" and sends to Post-Doc Prep.

Refer to IRM 3.41.274, General Instructions for Processing via Service Center Recognition/Image Processing System, for a description of these and other items:

Whenever IRM 3.41.274, General Instructions for Processing via Service Center Recognition/Image Processing System, and this IRM conflict, this IRM takes precedence.

The scanner doesn’t recognize all documents. These documents are called non-conforming forms. They range from photocopies of official documents, that might be official forms but for some reason don’t meet the official specification for measurement, homemade documents of varying formats, to non-Schedule K-1 forms. The Form Identification (FI) function allows the workstation operator to identify the form to avoid rework at the scanner. The FI screen has an image on the left and an entry template on the right. The entry template permits the operator to select what form type the image is, or to delete a single image or an entire submission from further processing. The menus shown on the screen vary depending on how your supervisor profiled you. For instance, if you are not profiled for the FI function, this option isn’t present on the OE Function Menu.

The Original Entry (OE) function is used to manually enter data from both scanned images and from paper documents. The menus shown on the screen vary depending on your operator profile. For instance, if you are not profiled for the OE function, this option isn’t listed, or is grayed on the Workstation Main Menu.

The DV function is used to manually correct data from scanned images. Menu options vary depending on your profile set by your supervisor. For instance, if you are not profiled for the DV function, this option isn’t listed or is grayed on the Workstation Main Menu.

The Status Line at the bottom of the screen displays the following information:

Use these procedures as a guide during the Original Entry (OE) and Data Validation (DV) functions. Not all the items are always applied to specific situations in either function. If the scanned information is correct, no action is necessary. If the scanner reads the information and it is incorrect, or if scanned information is put into the wrong field, remove from incorrect field and input the information in the correct field.

If you reach the maximum field length while entering data, the cursor, in most cases, automatically moves to the next field. Therefore, incorrect characters can be inadvertently entered into the next field. Remove or correct these characters. Use standard abbreviations as shown in Exhibit 3.0.101-4, Standard Abbreviations, and Exhibit 3.0.101-5, Street Address Abbreviations, to avoid this situation.

Error Messages - Error messages with information are often helpful to correct the error and may be found in the Status Line. Most error messages are two lines with the first line being the error message and the second line containing information that may help resolve the error condition.

While working in OE Image or DV Image, if you can’t determine the data for any field (except the street address or city fields) from the image because it is illegible or the image is incomplete, suspend the UW and pull the paper document for verification.

In certain situations, the scanner may read a name or address or even a city without spaces. If the name and/or address can be determined, leave as is.

When validating an address change, ensure the system read the correct ZIP Code. If the address, city, and state on the template doesn’t match the information on the image and a correct ZIP Code isn’t present on the template, correct the information to match what is on the image.

If a document is received and appears totally blank (no payer/payee entity or tax data), suspend UW and pull the paper document for verification.

While working in OE Image or DV Image, don’t enter data marked out or crossed through by the filer.

The <Ctrl>-<F7> combination provides the operator the ability to access the last edited field or the last flagged field of the previous document.

After DV is complete the system runs a verification of parent DLNs. If the parent DLN is missing from any of the documents within the UW the error message, "Blank Parent DLN still exists after DV. Press <Enter> to review possible parent matched." Another window appears stating "Possible Parent Match 1 of (however many) is this the same payer?" If the operator selects "YES," SCRIPS populates the payer information. If the operator selects "NO," the system continues to ask until it has gone through all payers in the UW.

For more information on Function Keys refer to the table in Exhibit 3.0.101-13, Key Function Table or IRM 3.41.274, Optical Character Recognition Scanning Operations, General Instructions for Processing via Service Center Recognition/Image Processing System, Exhibit 3.41.274-1, Function Key Use and Description by Form Type.

Tax Year and Tax Period dates must meet the following criteria:

Name and Address Block Reader is referred to as NABR. NABR is used to improve the accuracy of addresses captured by the scanner from Schedule K-1 documents. The NABR accomplishes this improvement by comparing the address captured by the scanner with a database of addresses used by the United States Postal Service. SCRIPS processes the NABR through a Postal Database.

When validating a NABR change, ensure the system read the correct ZIP Code. If address, city, and state changes are made and a correct ZIP Code is not present in the data field, correct the information to match what is on the image.

The system prompts an operator to "Please verify" the following conditions:

Enter the information as shown on the document with as many characters as permitted in the provided name line, except as instructed below. Refer to Exhibit 3.0.101-4, Standard Abbreviations and Exhibit 3.0.101-5, Street Address Abbreviations for a list of valid abbreviations. If the scanned information is correct, no action is necessary.

Enter a space before and after an ampersand (&). In the payer’s name line enter "and" or "&" as shown.

Omit punctuation, except for hyphens (-). Do not enter a space before or after hyphens. The hyphen is keyed using the MINUS (-).

Space within a true last name if shown.

In the second name line change "and" to "&."

If there are two or more names in Name 2, separate them with the word "OR" , unless "and" (&) or "C/O" (%) are present. Enter "&C" when edited as the last two characters of Name 2 data (no space between the two characters) when the taxpayer entry is too long for the field.

Second Name Line data, such as DBA, C/O, or % should be entered on the second line if placed on the address line, and clerk intervention is required.

If the payer’s name line is illegible, suspend for "Poor Quality Image."

If payer name is missing, leave blank.

If payer or payee Name Line 2 is illegible or not present, leave blank.

If payee name is missing or illegible, enter a "Z" in the payee’s name line field.

IMF Only - Do not enter titles such as Mr., Mrs., Capt., Dr., Rev., etc., in any individual's name.

BMF Only

Should be input and validated as a seven-position field and must be in the format XXX.XXX.

Must be positive only.

Must be between 000 - 100.

Percentage fields can be blank.

If there are more than three numeric to the left of the decimal point enter 100. If there are more than three numeric to the right of the decimal point, enter the first three numeric closest to the decimal point. (See examples 6 and 7 below).

If the decimal point is not present, enter the decimal point after the numeric presented (with decimal point no further then fourth position). For validation purposes, the decimal point must be entered so the system can zero fill the percentage correctly. (See examples 1 and 3 below).

If the percentage has a fraction, ignore the fraction, and enter the number only. (See example 8 and 9 below).

Enter all money amounts as DOLLARS ONLY.

DO NOT enter money amounts from any form or document that is "X'd out."

Enter negative amounts, where allowed, by leading the amount with a hyphen (-).

If a negative money amount appears in a positive only field, press <F3>, to clear the field and press <Enter>. Negative amounts can be identified by a minus sign or being enclosed in parentheses or brackets.

If the taxpayer enters a positive or negative $.49 or less, <F3>, to clear the field, then press <Enter>. If the taxpayer enters a positive or negative $.50 to $.99, enter $1 or -$1 respectively.

If the taxpayer files a State Schedule K-1, and it has a column with the federal information, transcribe the information from the federal lines.

The following lines are presented for verification:

If two-dollar amounts are present on the same line, manually add together and enter total amount.

Alpha Codes are used in Part III to identify certain types of income, deductions, or credits. Valid Alpha Code characters consist of A-ZZ and blank. Enter the amount that corresponds with the valid Alpha Code. Alpha Codes can be found on the following lines of Schedules K-1:

Always delete a block if the tax year cannot be determined.

If a prior year Schedule K-1 is processed by the scanner, SCRIPS operators:

If the payer EIN is the same as the previous document, the system copies the payer information into the document and then the next Schedule K-1 is presented.

If the payer EIN is different, the payer Entity fields appear, and the operator is to enter the payer entity information.

The following tables represent specific SCRIPS entry procedures.

The following conditions may be present if normal SCRIPS validity checks have been bypassed:

Terminus Error - This error is caused by a section with variable length input fields containing an erroneous size field.

Correction Procedures:

Definition - Any field that does not meet the requirement(s) for that field is shown as a Priority III error. Consistency and or relationships with other fields are not a factor.

Some reasons for this type of error are:

Display - Every field displayed is in error.

Correction Procedures:

Definition - Any valid field used in any computation in which the result is inconsistent with (or contrary to) any other valid field has Error Code 001–999 assigned and is shown as a Priority IV Error.

Display - These errors are displayed with the Error Code assigned to them for the specific error in ascending numerical order. The screen display shows the Error Code assigned and the fields needed to make the necessary correction.

Correction Procedures:

Section 01 contains the payee entity data and is required for every record.

Listed below are the fields contained in Section 01 that applies to Schedules K-1 processing:

There is no validity check of this field.

This field is always blank.

Valid characters are alpha, hyphen (-), blank, numeric, and ampersand (&).

Invalid Conditions:

Correction Procedure:

Valid characters are alpha, hyphen (-), blank, numeric, percent (%), and ampersand (&).

Invalid Conditions:

Corrections Procedure:

Description - Field 01ADD is in the Entity Section of the return.

Invalid Condition - Field 01ADD generates as a field error when any of the following conditions are present:

Correction Procedures:

Description - Field 01CTY is in the Entity Section of the return.

Invalid Conditions - Field 01CTY displays as a field error when any of the following conditions are present:

Correction Procedures:

Description - Field 01ST is in the Entity section of the return.

Invalid Condition - This field is invalid if it is not found in the State Code Table.

Correction Procedures:

Correction Procedures for APO/DPO/FPO

Description - Field 01ZIP is in the Entity Section of the return.

Invalid Condition - Field 01ZIP generates as a field error when any of the following conditions are present:

Correction Procedures:

Section 02 contains miscellaneous data fields.

Listed below are the fields contained in Section 02 that applies to Schedules K-1 processing:

Section 06 contains, date fields, money amounts, indicators, and descriptions.

If invalid dates are listed in the 06BTP and 06ETP fields, these are typos from the taxpayer or the SCRIPS operators.

ERS must use CC ENMOD and use the parent’s tax year, it is listed under "FYM."

To correct errors in Fields 06BTP and 06ETP, enter a space after the P, enter seven zeros and then enter the four-digit year and the two-digit month.

Below are the fields listed in Section 06 that apply to Schedules K-1 processing:

Form 1041 Doc Code 66

Form 1065 Doc Code 65

Form 1120-S Doc Code 67

Section 16 contains the payer entity data and is required for every record.

Listed below are the fields contained in Section 16 that applies to Schedules K-1 processing:

Valid characters are alpha, hyphen (-), blank, numeric and ampersand (&).

Invalid Conditions:

Correction Procedure:

Valid characters are alpha, hyphen (-), blank, numeric and ampersand (&).

Invalid Conditions:

Correction Procedure:

Description - Field 16ADD is in the Entity Section of the return.

Invalid Condition - Field 16ADD generates as a field error when any of the following conditions are present:

Correction Procedures:

Foreign addresses see IRM 3.0.101.14.11.1.1.

Description - Field 16CTY is in the Entity Section of the return.

Invalid Conditions - Field 16CTY generates as a field error when any of the following conditions are present:

Correction Procedures:

Description - Field 16ST is in the Entity section of the return.

Invalid Condition - This field is invalid if it is not found in the State Code Table.

Correction Procedures:

Correction Procedures for APO/DPO/FPO Addresses -

Description - Field 16ZIP is in the Entity Section of the return.

Invalid Condition - Field 16ZIP generates as a field error when any of the following conditions are present: