Recent updates concerning 8038-CP processing, including e-file

 

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The IRS now accepts electronic filing of Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, using an authorized IRS e-file provider. Electronic filing is secure and leads to fewer errors, quicker processing, and faster payments. After December 31, 2023, electronic filing of Form 8038-CP claims is mandatory if the filer is required to file 10 or more returns of any type in a calendar year. Electronic filing is also recommended for filers of less than 10 returns of any type.

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Benefits of electronic filing

Electronic filing offers many advantages over paper filing, including rapid and secure transmission of forms to the IRS. The IRS sends an acknowledgement of receipt within 24 hours. The confirmation provides the return status as accepted or rejected. It does not include a payment date because an accepted return goes through additional manual or systemic checks.

Electronic filing results in faster processing by eliminating the inefficiency of processing a paper return. Faster processing of error free returns results in faster payments.

Electronic filing reduces human errors by either the filer, in completing the return, or the IRS in processing the return. Electronic filing also prevents math errors on critical lines. By reducing errors, electronic filing reduces the risk of unforeseen payment delays.

How to file an electronic Form 8038-CP?

Generally, information returns and tax returns filed electronically must be transmitted to the IRS through an authorized e-file provider. The first step for issuers that are new to electronic filing of their returns is to find authorized 8038-CP e-file providers. An updated list of approved e-file providers can be found on the Exempt organizations and other tax-exempt entities Modernized e-File providers page. You'll see several options, listed by tax year. The 8038-CP software found with the link for the most recent tax year listed generally should be used. The software for the current list of three 8038-CP e-providers can be used through April 30, 2025.

There are no options for direct e-filing with the IRS. Any changes to the authorized e-file providers will be reflected in the updated list of approved e-file providers for Form 8038-CP. Each e-provider establishes their own prices which are not regulated by the IRS.

EFIN and PTIN. Each e-file provider determines whether an Electronic Filing Identification Number (EFIN) or a Preparer Tax Identification Number (PTIN) is required to use its software. A paid preparer, such as a trustee bank, uses its own EFIN when filing a return on behalf of its issuer clients.

Issuer signature requirement. Form 8038-CP is a return of the issuer, and as such, must be signed by an officer of the issuer with the authority to bind the issuer. For paper returns, a wet or pen and ink signature is required. For electronic returns, there are two ways to sign the return. One method is a personal identification number (PIN) (Form 8879-TE) and the other is an attached pdf signature document (Form 8453-TE).

Technical issues with e-file. If you encounter difficulties preparing or transmitting your e-filed return, a first step is to refer to the error message generated when the return is not accepted for filing. You may also find it helpful to check Recent developments on About Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds.

If you can't find the solution in the Form 8038-CP instructions, your next step should be to contact the MeF provider for the software. The IRS regularly communicates known issues to the software providers. If an issue you encounter has come up for someone else, your software provider may already be aware of it and have a solution.

If the software provider cannot resolve the issue, call the e-Help Desk at 866-255-0654. Please be aware that these inquiries must be limited to technical issues about electronic filing. You will need to have attempted to e-file and know which specific errors are causing your e-file efforts to fail. The e-Help Desk cannot provide tax advice.

Avoid e-filing in late December and early January. The IRS generally does not accept e-filed returns while IRS programming is updated (generally the last week in December and the first week in January). During this shutdown period you may be able to submit your return to your e-provider but the e-provider cannot transmit the return to the IRS. To avoid possible transmission delays take advantage of the ability to file returns 90 days before the interest payment date on fixed rate bonds.

Mandatory electronic filing in 2024

Under Treasury Regulations titled "Electronic-Filing Requirements for Specified Returns and Other Documents" (26 CFR Par. 23 Section 301.6011-11), published February 23, 2023, electronic filing of Forms 8038-CP filed after December 31, 2023, is mandatory for most filers. Under the regulations, an issuer of a qualified bond eligible to file Form 8038-CP must file the return electronically if the issuer is required to file at least 10 returns during the calendar year. The 10-return threshold includes, among others, Forms W-2 and 1099, Series 8038 Forms, income tax returns, employment tax returns, and excise tax returns. If an issuer has more than one EIN, the threshold requirement is applied to the issuer and not to each EIN separately. Thus, an issuer with multiple EINs meets the 10-return threshold if it files 10 returns in the aggregate even if for any or all EINs separately it files less than 10 returns.

Each W-2 is counted as a separate return as well as each quarterly Form 941. For example, an issuer with three employees (three Form W-2s, four Form 941s, Employer's Quarterly Federal Tax Return and one Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return and a direct pay bond issue with semi-annual interest payments (two Form 8038-CPs) is required to file Form 8038-CP electronically.

Currently the only way to satisfy the mandatory electronic filing requirement in the regulations is to file an MeF return using a paid e-file provider.

The current focus of the IRS is to educate customers using the form instructions, videos, webinars, and information on IRS.gov. However, if substantial voluntary compliance is not achieved additional compliance measures may be implemented.

Waivers and exemptions. Regulations section 301.6011-11 authorize the IRS to provide waivers and administrative exemptions from the electronic-filing requirements for Form 8038-CP. For Forms 8038-CP filed during calendar year 2024, the IRS allows for waivers from the electronic-filing requirements for Form 8038-CP in cases of undue hardship claimed by the issuer. Currently, the IRS has not provided for administrative exemptions from the electronic-filing requirements for Form 8038-CP.

Issuers claiming a waiver from the electronic filing requirements for Form 8038-CP for the calendar year 2024 are not required to submit a written waiver request to the IRS, such as Form 8508, Application for a Waiver from Electronic Filing of Information Returns. The issuer should instead keep documentation supporting their undue hardship in the issuer's records. The documentation should include the name of the issuer, the name of the bond issue, the issue date of the bonds as well as the reason for claiming the waiver. Rural issuers without access to internet and issuers that lack digital literacy are expected to make a good faith effort to comply with the electronic-filing requirement. However, if obtaining the necessary assistance to file electronically would cause an undue hardship, the issuer can claim and document a waiver in the issuer's records. For example, an undue hardship includes (i) undue financial hardship caused by the amount, if any, by which the cost of filing the return electronically exceeds the cost of filing a paper return based on all the facts and circumstances, (ii) death, serious illness, or unavoidable absence of the issuer's employee or official responsible for electronic filing of the Form 8038-CP, and (iii) other issues outside the issuer's control.

When to file. The due date for filing Form 8038-CP is the same for paper forms and electronic forms. Because IRS personnel perform a compliance review on every Form 8038-CP, regardless of the filing format, the credit payment on late filed returns may not be paid by the interest payment date to which they relate. IRS systems also complete various checks on both paper returns and electronic returns. The IRS generally corresponds with issuers when required information is missing or inconsistent with other information the IRS has on file concerning the bond issue. Accordingly, the IRS recommends that issuers filing either paper or electronic forms file Form 8038-CP well before the due date (but not more than 90-days before the interest payment date for fixed rate bonds).

Status of e-file return. The IRS sends an acknowledgement of receipt within 24 hours. The confirmation provides the return status as accepted or rejected. It does not include a payment date because an accepted return goes through additional manual or systemic checks. Questions concerning accepted e-file returns are handled the same way as questions about paper returns. See Form 8038-CP FAQs. Please contact TE/GE Customer Service at 877-829-5500 about late payments when the return was filed at least 45 days before the interest payment date and it is past the interest payment date. TE/GE Customer Service can also answer questions about reduced payments because of sequestration and/or setoffs.

Do not file duplicate Form 8038-CP returns. The filing of a duplicate return for the same interest payment date may prevent any payments from being processed on either return. If you already filed a paper return, do not file an electronic return for the same interest payment date. If you filed an electronic return, do not file a paper return for the same interest payment date. The filing of a duplicate return for the same interest payment without specific authorization from the IRS is not permitted.

Correcting errors on previously filed Form 8038-CP returns. Do not file duplicate returns to correct errors on previously filed returns. If correcting an error that was not a final return, Lines 21a and 21b are available to correct prior mistakes to credit payments related to prior filings of Form 8038-CP for the respective issue. An amended return can be filed to correct a previously filed final return as explained in the instructions for Form 8038-CP PDF.

Reminders

Tax Exempt Bonds made important changes to Form 8038-CP and to the processing of requests for refundable credit payments. The revised form and procedures apply to all Forms 8038-CP received after January 1, 2022. 

The IRS periodically revises the form instructions and provides examples to prevent observed errors in completing the form. Please review the form instructions carefully, especially following releases of revised instructions. Revised instructions generally will be released at the end of December or the beginning of January.

Practical tips on filing Form 8038-CP

All required lines must have entries. It’s important to ensure the return is fully completed. This means that all required lines must have an entry, even if that entry is a zero or a checkbox. An e-filed return without required information will be rejected by the IRS.

Use the correct EIN for Reporting Authority on Line 8. The Issuer’s EIN should be the same as listed on the applicable Form 8038-B or 8038-TC filed when the bonds were issued.

Use the correct Report Number on Line 10. Issuers are required to assign permanent report numbers for bonds currently eligible to receive credit payments (Direct Pay bonds) and consistently use the same report number when filing to claim the credit for the bonds. Issuers assign a separate report number in the range 401–450 for each type of bond that is required to be treated as a separate bond issue for purposes of Form 8038-CP payment requests. When related issuers file 8038-CPs using the same EIN, the issuers need to coordinate to make sure they are not using the same report number for their respective bonds.

Once a report number is used for any Direct Pay bonds, it must be used as the report number for all future filings of Form 8038-CP returns for those bonds. A report number used for any Direct Pay bonds may not be used for any other Direct Pay bonds, even after bonds are redeemed or are no longer outstanding.

File Schedule A for specified tax credit bonds. Schedule A is required for new clean renewable energy bonds (NCREBs), qualified energy conservation bonds (QECBs), qualified zone academy bonds (QZABs), and qualified school construction bonds (QSCBs) and the total from line 3 of Schedule A is entered on line 19c of Form 8038-CP. Therefore, NCREBs and QECBs with multiple maturities are no longer reported on separate Forms 8038-CP.

Attach revised debt service schedules. Attach revised debt service schedules to paper returns. Attach revised debt service schedules to electronic returns as a pdf document.

Interactive features of Form 8038-CP and Schedule A

Form 8038-CP is still interactive. You can avoid delays in getting your refund due to missing or incorrect information by using the interactive Form 8038-CP and Schedule A available at IRS.gov. To use the interactive feature, complete it in the order presented and it will alert you to missing fields and other errors. Then use the "Verify and Print" button at the top of the form to check for other errors and print the document for mailing to the IRS. Download the interactive version of Form 8038-CP PDF and Schedule A PDF. When Schedule A is required to be filed, it should be completed prior to completing Form 8038-CP because the interactive features are not linked.

How we process Form 8038-CP

Before we can process your Form 8038-CP, all required lines must be completed. If your claim is missing required information, we'll request the necessary information from you by mail. We will not process your return until we receive the requested information. This may delay payment of your refundable credit, so it's important to provide the requested information timely. If you don't respond to our request for information within the prescribed timeframe, we will not process the Form 8038-CP. In summary:

  • Form 8038-CP: All required Form 8038-CP lines must be completed.
  • Schedule A: Schedule must be completed for NCREBs, QECBs, QZABs, and QSCBs.
  • Requests for missing information: If you don't include all required information and documents when filing your Form 8038-CP, including Schedule A for NCREBs, QECBs, QZABs, and QSCBs, we'll send you a correspondence letter requesting the missing information.
    • If you file the original return with missing or incomplete information, payment of your requested refundable credit may be delayed.
  • Requests to verify certain Information: If information provided on your Form 8038-CP is inconsistent with information provided on previous returns; we'll send you a correspondence letter to verify certain information in order to process the return.

What if you don't provide the requested information?

If you don't provide the missing information asked for in Letter 6436C (Missing or incomplete information request) within 30 days of the IRS request, we'll notify you by mail that we're unable to consider your claim. To have your claim considered after we notified you of our no consideration, you must file another Form 8038-CP containing all required information for the respective interest payment date.

If you don't provide the information requested in Letter 6539C (Verification for Form 8038-CP) within 30 days of the IRS request, we may send a check to an appropriate address. However, until the requested information is provided the processing of subsequently filed returns will be delayed and additional correspondence may be sent.

IRS correspondence letters you may receive

You may receive one or more of these IRS correspondence letters:

Letter 6436C, Request for Missing Information letter

Letter 5836C, No Consideration letter

  • Issued when you did not respond within the 30-day timeframe to the IRS' request for missing/additional information that was needed to process your return.
  • The No consideration letter indicates that your filed Form 8038-CP cannot be processed and you will not receive the credit payment requested.

Letter 5980C, Claim Disallowance letter

  • Issued to deny your request for refundable credit when you did not file your Form 8038-CP within the Statute of Limitations.

Letter 510C, Refund in Error

  • Issued to request repayment of an erroneous refunded credit payment.

Letter 6539C, Verification for Form 8038-CP

IRS notices you may receive

You may receive one or more of these computer-generated IRS notices:

Notice CP152A, Acknowledgment of Return and Notice of Sequestration

  • Generates upon the receipt and processing of your Form 8038-CP.
  • This Notice provides the Report Number associated with a particular interest payment date.

Notice CP153, Notice of EFT Refund Not Allowed

  • Generates when the requested refundable credit payment cannot be direct deposited due to a problem with the direct deposit information provided on your Form 8038-CP. You will receive a hard copy check.

Notice CP138, Notification That the Overpayment on the Return was Offset Against Another Tax Period with a Balance Due

  • Generates when your requested refundable credit payment is offset against another tax period with a balance due.

Notice CP116, Math Error

  • Generates when a math error on your Form 8038-CP results in an overpayment of more than $1.00.

Notice CP161, No Math Error, Balance Due

  • Generates when there is a balance due on your Form 8038-CP with no math error.

Notice CP210, Tax Adjustment

  • Generates when there is a subsequent adjustment that creates a balance due, overpayment, or a zero balance on your Form 8038-CP.

Notice CP220, Tax Adjustment

  • Generates when there is a subsequent adjustment entered on your Form 8038-CP.

Notice CP231, Undelivered Refund Check

  • Generates when your refund check was returned undeliverable and requests that you provide a correct mailing address.

Questions about a Form 8038-CP payment?

If payment has not been received, you may contact TEGE Customer Service at 877-829-5500.

  • If the return has been filed at least 45 days before the interest payment date, and
  • It is past the interest payment date.

Only the issuer, or the trustee if authorized by the issuer on Form 8038-CP, may ask a question. You'll need the employer identification number(s) of the Part I entity and the Part II issuer (if different), the interest payment date, the report number (as indicated on Notice CP 152A), and the anticipated refundable credit payment amount. You may also need to provide the CUSIP number of the issue (if applicable) and the issue price of the issue.

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Page Last Reviewed or Updated: 11-Sep-2024