The Error Resolution System (ERS) is an online computer application used by tax examiners to correct errors identified on tax returns during Generalized Mainline Framework (GMF) processing.

Authority for the procedures in this IRM is in the following sections of the Internal Revenue Code and their corresponding Treasury regulations:

Policy Statements and Delegation Orders for submission processing are in the following IRMs:

The Submission Processing Director is responsible for monitoring operational performance of Submission Processing.

The Austin Submission Processing Input Correction Operations Manager is responsible for monitoring operational performance of Austin Error Resolution.

The Error Resolution team manager and lead tax examiner are responsible for performance monitoring and ensuring tax examiners have the tools to perform their duties.

Tax examiners are responsible for following the instructions in this IRM, including all IRM procedural updates (IPU) posted to the SERP (Servicewide Electronic Research Program) website.

Program Reports. All ERS records are controlled by a Document Locator Number (DLN), and error records are accessed and assigned for correction by block DLN. The daily ERS Error Inventory Report ERS 13-40 lists each block of returns and the number of returns in ERS inventory by program. The ERS system displays with command ERVOL the real-time volume in inventory by status and by program. Daily, weekly and periodic reports are available to management through Control-D WebAccess to manage inventory and capture data for program planning and review. See IRM 3.12.37, Error Resolution, IMF General Instructions, Related Reports, for a listing and description of ERS reports.

Quality Review. Tax examiner completed inventory is selected for quality review during real-time processing. This review is conducted according to the procedures in IRM 3.30.30, Embedded Quality for Submission Processing (EQSP) System.

CARE Review. The Computer Assisted Review of ERS (CARE) is an on-line quality review of Taxpayer Notice Codes (TPNC) when assigned by tax examiners in ERS. Assigned TPNCs are reviewed and records are corrected to prevent the issuance of erroneous notices to taxpayers. Results are reported in daily and periodic reports to managers and tax examiners.

Annual Clearance of IRM. This IRM is updated and published annually after review and concurrence by affected offices according to the clearance process established in IRM 1.11.9, Internal Management Documents, Clearing and Approving Internal Management Documents (IMDs).

All tax examiners must submit and have approved by management a BEARS request to gain access to the Error Resolution System.

Tax returns in ERS are worked on a First In First Out (FIFO) basis as they are received from input systems through the General Mainline Framework (GMF).

Control clerks are responsible for the control of error documents. Inventory control procedures are described in IRM 3.12.37, Error Resolution, IMF General Instructions.

The following table lists other Internal Revenue Manuals (IRM) and job aids that provide guidance for ERS processing of international tax returns.

Tax forms and internal use forms referenced in this IRM are listed in Exhibit 3.22.3-14, Tax Forms and Internal Use Forms.

Acronyms commonly used in this IRM are listed in Exhibit 3.22.3-15, Acronyms.

The text in this manual is organized in the following order:

If forms other than Form 1040 or Form 1040-X are submitted using the Streamlined Filing Compliance Procedures, then route to LB&I MS 4305 AUSC if there’s no indication of prior LB&I review.

Upon receipt of the returns back from LB&I, follow the procedures outlined by LB&I.

If the Streamlined Certification Form 14653 or Form 14654 is marked "Amended" then the returns must be reviewed by LB&I before processing. If an amended certification form is attached to an amended return, and there isn't an indication of prior LB&I review, then route all the returns submitted to MS 4305 AUSC.

Philadelphia Accounts Management processes amended returns submitted using the Streamlined Filing Compliance Procedures.

If correspondence is necessary for any return submitted under the Streamlined Filing Compliance Procedures, all returns submitted by the taxpayer must be kept together. This means that if one return needs correspondence then all returns in the submission must be kept with the suspended return(s) and held together in the Suspense area.

Don’t correspond for missing information related to the streamline procedures (paragraphs A through E on Form 13900) if the primary taxpayer doesn’t have a valid TIN (SSN or ITIN). Follow the instructions in IRM 3.22.3.7 (4) and process as a return not filed using Streamlined Filing Compliance Procedures.

If correspondence is needed for issues related to Streamlined Filing Compliance Procedures as listed in "Types of Correspondence" at IRM 3.22.3.7.3.1, use Letter 4087C and correspond for these issues and all required information missing on the return.

The American Jobs Creation Act of 2004 (AJCA) clarified and supplemented the U.S. tax rules dealing with U.S. territories for determining if a taxpayer is a bona fide resident of a U.S. territory and whether income is from a territory source or effectively connected with the conduct of a U.S. territory trade or business.

Residence Rules - In general, IRC 937(a) provides rules for determining whether a taxpayer is a bona fide resident of a U.S. territory.

Source Rules - In general, IRC 937(b) provides that the principles for determining whether income is U.S. source and whether income is effectively connected with the conduct of a United States trade or business are applicable for purposes of determining whether income is U.S. territory source and whether income is effectively connected with the conduct of a trade or business in a U.S. territory. The regulations also generally provide that under the "U.S. Income Rule" of IRC 937(b)(2):

The regulations provide the following exceptions to these rules:

American Samoa has its own separate and independent income tax system.

Bona fide residents of American Samoa are generally exempt from United States tax on their American Samoa source income.

United States Armed Forces - Bona fide residents of American Samoa include military personnel whose official home of record (i.e., SLR) is American Samoa. See instructions at IRM 3.22.3.9 above.

The CNMI has its own income tax system based partly on the same tax laws and tax rates that apply to the United States, and partly on local taxes imposed by the CNMI government.

In general, all individuals with income from the CNMI will file only one return, either with CNMI or the United States. The taxpayer's residency status under IRC 937(a) with respect to the CNMI determines which return they will file.

Taxpayers that reside in any of the U.S. territories cannot claim Earned Income Credit except in limited circumstances. Refer to IRM 3.22.3, EC 337 and EC 338.

Members of the U.S. Armed Forces who:

Guam has its own income tax system based partly on the same tax laws and tax rates that apply to the United States

In general, all individuals with income from Guam will file only one return, either with Guam or the IRS. The taxpayer's residency status regarding Guam determines which return they will file.

Members of the U.S. Armed Forces who:

The Commonwealth of Puerto Rico has its own separate independent income tax system.

Generally, the taxpayer will file returns with both Puerto Rico and the IRS. The income reported on each return depends on the taxpayer's residency status in Puerto Rico. See IRM 3.22.3.9 for instructions in determining if the taxpayer is a bona fide resident of Puerto Rico.

The USVI system of income taxation is based upon the United States Internal Revenue Code as amended. An important factor in USVI taxation is whether, during the entire taxable year, the taxpayer is a bona fide resident of USVI.

In general, a bona fide resident of the USVI pays tax only to the USVI.

A United States citizen or resident alien who is not a bona fide resident of the USVI, but has USVI source income, is required to pay the allocable portion of the tax to each jurisdiction.

The Virgin Islands Bureau of Internal Revenue (BIR) sends Form 1040 tax return to the IRS that require special handling and editing, a process identified in Submission Processing as the VI Cover Over Program. These returns are batched together and hand carried to each function, including ERS.

Code & Edit is instructed to X all entries except:

Follow these instructions when processing these returns in ERS:

Don’t correspond or assign TPNCs on a VI Cover Over return. If an error code generates and a TPNC is required to resolve the error, assign TPNC 100 with the following literal instead of the TPNC specified in the error code instructions: "VI Cover Over return - Void Notice" .

A taxpayer is a Resident Alien of the United States for tax purposes and must file Form 1040 if they meet either the "green card test" or the "substantial presence test" for the calendar year. If they do not meet either of these tests, they file Form 1040-NR, if applicable.

Green Card Test is met when a taxpayer is a lawful permanent resident of the United States at any time during the calendar year and has been issued an alien registration card (Form I-551), also known as a "green card" . All references made throughout this IRM to "green card" include Form I-551 for all years after 1996. Form I-151 is only acceptable as proof of permanent residency for TY96 and prior. See 2512-001, International Tax Returns Job Aid.

To meet the Substantial Presence Test the taxpayer must be physically present in the United States on at least

Nonresident Aliens report only U.S. source income and income that is effectively connected with a U.S. trade or business on Form 1040-NR. U.S. source income is reported on Form 1042-S, Form W-2, Form 1099 series, Form 8805, Form 8288-A, Form SSA/RRB 1042-S, or statement of income and received from:

United States tax law exempts nonresident aliens from United States taxation on interest from deposits in United States bank accounts if such interest is not effectively connected with a U.S. trade or business.

Effectively Connected Income, after allowable deductions, is reported on page 1 of the Form 1040-NR and is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents.

Non-Effectively Connected Income is reported on Schedule NEC of Form 1040-NR and is taxed at a flat 30 percent rate or at a lower treaty rate if a tax treaty exists between the United States and the taxpayer's foreign country of residence, and no deductions are allowed against such income.

When a taxpayer performed services as an employee both inside and outside the United States, the taxpayer must allocate their compensation between the United States and non-U.S. sources.

Determine the country of permanent residence of a nonresident alien by using the taxpayer’s information on the return, in the following order:

When Scholarship or Fellowship Grants income is paid to a resident of a country with a tax treaty that exempts this type of income from taxation, the exempt income may be reported on line 1k (TY21 and prior 1c, Form 1040-NR)Form 1040-NR. See the instructions for verifying Scholarship or Fellowship Grants income treaty claims in EC 218 at IRM 3.22.3.170.2.2.1 (Form 1040-NR).

When Scholarship or Fellowship Grant income is paid to a resident of a country without a tax treaty with the United States:

When a Form 1040-NR is received from a married Canadian resident (who is not a U.S. citizen) who has U.S. source wages that are subject to tax in the United States, they may be able to compute their U.S. tax liability in accordance with the special provision contained in Article XXV(3) of the U.S.- Canada Tax Treaty.

Review Form 1040-NR from Canadian resident taxpayers for the following indications that they are computing their U.S. tax on wages using Article XXV(3):

Article XXV(3) limits the Canadian resident taxpayer’s U.S. liability with respect to his or her U.S. source employment income to an amount computed using the following formula: (Form 1040-NR Taxable Income/Form 1040 Taxable Income) × Form 1040 Tentative Tax. The tentative tax reported on Form 1040 or statement is the total U.S. tax payable by the taxpayer and his or her spouse as if both were U.S. citizens and all of their income arose in the United States. An income deficit (or loss) of the spouse shall not be taken into account.

EC 265 generates on Form 1040-NR when the taxpayer uses this special tax calculation. See EC 265 at IRM 3.22.3.198.2.

Article XXV(3) does not provide a basis for Canadian residents who are not U.S. citizens to claim on their actual Form 1040-NR a standard deduction or any credits for which they would not be eligible under the Internal Revenue Code.

Taxpayers that are subject to expatriation tax must attach Form 8854, Initial and Annual Expatriation Statement, to their regular filing of Form 1040 or Form 1040-NR, whichever is applicable, for the year of expatriation and in certain circumstances for subsequent years. Taxpayers may elect to defer all or a portion of the expatriation tax and may attach two hypothetical Form 1040 returns to Form 8854 to support their calculations. Taxpayers making this election must file Form 8854 annually up to and including the year in which the full amounts of deferred tax and interest are paid.

If Form 8854 is attached to a tax return, GTSEC 01 and enter Audit Code "K" in Field 01ACD. Continue to process the tax return with normal processing procedures.

Taxpayers that are subject to the community property laws of a foreign country, a United States state, or a United States territory, generally must follow those laws to determine the income of each taxpayer for United States tax purposes. However, they must disregard certain community property laws if:

Earned Income of each taxpayer, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the taxpayer whose services produced the income. That taxpayer must report all on a separate tax return.

Trade or business income, other than a partners’ distributive share of partnership income, is treated as the income of the person who exercises substantially all of the management and control over the trade or business. That taxpayer must report all on a separate return.

Partnership income (or loss). A partner's distributive share of partnership income is treated as the income (or loss) of the partner. The partner must report all of it on a separate tax return.

Income derived from the separate property of the taxpayer (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that taxpayer. That taxpayer must report all on a separate tax return. Use the appropriate community property law to determine what is separate property.

All other community income is treated as provided by the applicable community property laws.

For additional information see EC 260 at IRM 3.22.3.198.5

The United States has income tax treaties (conventions) with many foreign countries. Under these treaties, residents of foreign countries are taxed at a reduced rate, or are exempt from United States income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and with specific items of income. In certain limited circumstances, resident aliens may be entitled to treaty benefits.

Tax treaties may, under certain circumstances, permit foreign individuals who are residents of the treaty country to visit the United States, practice their profession and earn income (sometimes in limited amounts) for a limited period of time without having to pay United States tax.

Tax treaty tables are found in this IRM at Exhibit 3.22.3-1, Tax Treaty Table 2, Compensation for Personal Services Performed in United States Exempt from U.S. Income Tax Under Income Tax Treaties, and Exhibit 3.22.3-3, Tax Treaty Table 1, Tax Rates on Income Other than Personal Service Income Under Chapter 3, Internal Revenue Code, and Income Tax Treaties.

Refer to IRM 3.22.3.17.3, Field 03TEX - Total Income Exempt by Treaty, for instructions for validating treaty exemption claims on Form 1040-NR. Refer to IRM 3.22.3.17.23, Field 03TNC Tax on Not Effectively Connected Income (NEC), for instructions for validating treaty tax rates.

An original signature is required, below the jurat (perjury statement), on most returns. Without the taxpayer's signature, the return is not an official document and may not be processed. ERS examiners are required to inspect returns for missing original signatures. If a return is unsigned, SSPND 640 to send the return to Rejects. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, Signature Requirements, for specific procedures regarding missing signatures.

Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for guidance on identifying possible refund schemes and frivolous and fraudulent returns.

All amounts on U.S. individual tax returns are to be reported in U.S. currency only. If amounts on the tax return are reported in foreign currency, and Code & Edit has not converted to U.S. dollars, then convert the amounts using the official rate in effect at the end of the tax year of the return as reported on the exchange rate chart published by the U.S. Treasury for the tax period of the filer’s tax return (see https://fiscaldata.treasury.gov/datasets/treasury-reporting-rates-exchange/treasury-reporting-rates-of-exchange).

If a Taxpayer Notice Code (TPNC) is required to resolve an error on a return after foreign currency is converted to US dollars, also assign a TPNC 358.

In all instances, it is necessary to convert a Form 1040-NR-EZ to a Form 1040-NR to process the return.

If a TPNC is required to resolve an error on Form 1040-NR-EZ after conversion to Form 1040-NR, assign TPNC 311 as the first notice code to inform the taxpayer that the return has been converted.

Each taxpayer must complete a separate Form 1040-NR and include the income and withholding for self only, even if the taxpayer is married. If there are two names on the name line of the return see Field 01NL1 First Name Line at IRM 3.22.3.15.4 for instructions.

If the return includes wages or other income or withholding that doesn’t belong to the taxpayer filing the return, then adjust the return to include only the taxpayer’s income and withholding. Assign TPNC 334

Section 01 contains the following fields

The following describes correction procedures for Section 01 that are unique to processing International returns. Refer to IRM 3.12.2, Individual Master File Error Resolution General Instructions, for general Section 01 correction procedures.

Correct coding and transcription errors and misplaced entries on displayed fields.

Return Filed Using Streamlined Filing Compliance Procedures with Missing Primary TIN (P-TIN) - Don’t correspond for a missing TIN on a Streamlined return. If the TIN is missing and not found after searching the return and after research, then suspend with Action Code 320 to Entity for assignment of an IRSN. When the return comes back from Entity with an IRSN follow the instructions in EC 005 at IRM 3.22.3.82.2 before entering RPC O.

Form 1040-NR can have only one name in the caption on page 1. If two names are present, determine if two incomes are present or if withholding documentation (Form W-2, Form 1042-S, etc.) is included for both names and follow these instructions.

The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

Foreign Address - Field 01NL2 may be used when the entity is a foreign address. Field 01NL2 is limited to 35 characters.

If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

For Puerto Rico only, the following are different types of address formats:

When Field 01NL2 is required (deceased taxpayer, Power of Attorney (POA), minor, etc.) and a foreign address is present, follow the instructions at EC 260 to issue a manual refund. See IRM 3.22.3.193.6.

A foreign address is any address outside of the 50 states of the United States and the District of Columbia.

The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

A U.S. territory address must be entered using the same format as a domestic address as described in IRM 3.12.2, Individual Master File Error Resolution General Instructions. See IRM 3.22.3.15.5 for additional instructions for addresses in Puerto Rico.

If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

For an address in a foreign country Field 01ADD should contain the city, state, territory or province, and postal code, if present. Field 01NL2 may be used to allow for a more complete address (see Field 01NL2, IRM 3.22.3.15.5, for exceptions). When shortening the foreign address to fit the limitations of Field 01NL2 and Field 01ADD:

The following states, provinces and territories for the countries listed below must be abbreviated. See Exhibit 3.22.3-6 to enter the abbreviation:

The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

A foreign country name entered in Field 01C/S must be in the required format. Twenty-four (24) characters may be entered in this field, which includes the slashes (/) and period. The required space in position 25 is not visible on the ERS screen.

If a domestic and foreign address are both present in the entity area of the return then enter the domestic address.

For TY18 only, if the address on page 1 of Form 1040 is for a foreign country, and no domestic address is present, enter the foreign address in Section 01. Don’t correspond for Schedule 6.

For foreign addresses, this field should contain ONLY the country in the correct format:

The following are examples of country names that too are long and the abbreviation below must always be used.

For United States territory addresses: The following are valid state abbreviations for U.S. territories:

The foreign country name, province, and foreign postal code are found on page 1 of the tax return.

For FLC 20 with a foreign address:

All U.S. territory addresses must contain a valid zip code. See Exhibit 3.22.3-5

Valid tax period endings are as follows:

Residents of Australia and New Zealand often use a June (06) fiscal tax period ending date that coincides with their country’s accounting period. Follow taxpayer intent and enter YYYY06 for the tax period when June 30th is indicated as the tax period ending date on the tax return for a resident of Australia or New Zealand.

Correction Procedures -Verify the tax period on the return or attachments and correct any transcription errors. If the tax period is invalid, correct as follows:

The Country Code Field is a two-position field which is designed to identify treaty countries whose residents are entitled to refunds of U.S. withholding on U.S. sourced income. The Country Code will assist in identifying erroneous claims for refunds of Social Security (Form SSA-1042-S) withholding. See Exhibit 3.22.3-4 for a listing of Country Codes.

Code & Edit edits the Country Code to the right of the Entity Section of Form 1040-NR. Determine the country of permanent residence using the information on the tax return in this order:

A special processing code (SPC) is an alphabetic or numeric character entered by a Code & Edit examiner to alert the computer to a special condition or computation. The number of SPCs in a return may not exceed ten. These codes are used for campus processing and do not post to the Master File. This field was created as an overflow for return processing codes.

The list of Special Processing Codes is in IRM 3.12.2, Individual Master File Error Resolution General Instructions, Exhibit 3.12.2-4, Special Processing Code.

An entry in Field 01FSC is invalid if the Filing Status Code is other than:

Form 1040-NR:

Filing Status Code for Dual-Status - Filing Status (FS) can be 1, 3, or 5; and FS 6 in TY17 and prior year.

The Computer Condition Code (CCC) is transcribed in Field 01CCC from the following area on the return:

An entry in Field 01CCC is invalid if the Computer Condition Code is other than the following:

Correction Procedures- Determine and enter the correct code, if needed.

The list below describes Computer Condition Codes commonly used on international returns. For a complete list of Computer Condition Codes see IRM 3.12.2, Individual Master File Error Resolution General Instructions, Exhibit 3.12.2-2, Computer Condition Codes.

If an international Form 1040, Form 1040-NR, Form 1040-SS, or Form 1040-SS (sp) is transshipped to AUSPC from another IRS Campus, Territory Office, or IRS foreign post, take the following action:

Refer to IRM 3.12.2, Individual Master File Resolution General Instructions, Field 01RCD, Received Date, for additional procedures on determining received dates.

If a received date is needed but not stamped or written on the return, and there’s no indication that the return was transshipped as described above, then determine the received dates by following the priorities in IRM 3.12.2.4.3.20 paragraph (9).

ALWAYS review each return for the words "Sent Back for Signature" or similar statement and a date present in the lower left-hand corner of the return. These are returns that were originally received missing a signature and were mailed back to the taxpayer from Receipt and Control. If a date and the notation, "Sent Back for Signature" is present, follow the instructions below for determining the received date:

The exemption amount that can be claimed on an individual’s Form 1040-NR in TY 201812 and later is $0. Exemption coding (Field 01EXC and Field 94EXV) is retained for determining family size in certain calculations.

For TY18 and later Form 1040-NR, the exemption line 13b (TY19, line 39) is only to allow for exemptions when the form is filed by an Estate or Trust. These returns are processed at the Kansas City Submission Processing Center.

Form 1040-NR - Dependents (TY18 and later) and Exemptions (TY17 and prior) are limited by country of residence. The country of residence is determined by using taxpayer information on Schedule OI of Form 1040-NR or on other attachments.

Form 1040 use exemption positioning as if the taxpayer lived in the United States. For example, if the taxpayer lists children who lived with them, enter that number of exemptions in position 3 regardless of the address on the return.

Form 1040-SS (sp)/Form 1040-SS the computer will generate Field 01EXC based on filing status.

Form Processing Codes (FPC) are edited to the right of line 7 on page 1 of Form 1040-NR, 1040-SS (sp), and Form 1040-SS.

An entry in Filed 01FPC is invalid if the Form Processing Code is other than:

Correction Procedures- Take the following actions to correct Field 01FPC:

Form Processing Codes - The number of Form Processing Codes may not exceed ten. The codes and their meanings are listed below:

Return Processing Codes (RPC) are edited as follows:

An entry in Field 01RPC is invalid if the Return Processing Code is other than:

Correction Procedures- Take the following actions to correct Field 01RPC:

Return Processing Codes - The number of Return Processing Codes may not exceed ten. The codes and their meanings are listed below:

ALWAYS SSPND with Action Code 215 for first correspondence with taxpayers in FLC 20 or 21.

The ERS Action Code indicates that specific information is missing, or the return is being suspended, or removed from processing. Error Resolution System (ERS) Action Codes will have sufficient detail to indicate if correspondence, in-house research, or other action(s) are required. For a complete listing of ERS Action Codes refer to the exhibit in IRM 3.12.2, Individual Master File Error Resolution General Instructions.

Code & Edit Tax Examiners assign Action Codes to numbered returns that are unprocessable, require research, correspondence, etc. The code is entered on the lower center margin of the return.

Correspondence Action Sheets (Form 3696-A, Form 6001, Form 13900, or Form 13975) used for initiating correspondence are attached by Code & Edit. For routing within the service center (In-House Research), codes and literals for each Action Code will generally be sufficient with no further explanation.

The Action Code assigned by Code & Edit is transcribed and kept as part of the Form 1040/Form 1040-NR record. It will always display as a Priority 1 error.

The presence of a valid Action Code except for Action Code 001, places the record in the suspense inventory, either Workable or Unworkable.

If the Action Code assigned by Code & Edit is invalid or incomplete, the "000" is used as a clear code to delete invalid or erroneous Action Codes when there is no reason to suspend the record.

Only one Action Code can be assigned at one time to a record.

Use Command Code SSPND, RJECT or NWDLN to enter an Action Code on the record, correct an invalid code, resuspend, or delete a record from ERS.

This is edited by Code & Edit in the bottom right margin of Page 1.

Invalid Conditions - are as follows:

Correction Procedures - Compare the field on the screen with the entry on the return. If edited or transcribed incorrectly, correct the screen display and the code entered in the lower right margin of page 1 of the return. If the code is illegible, use the following list to determine the correct Audit Code:

If the correct audit code cannot be determined delete the audit code from the screen.

Section 02 contains the following Fields:

Don’t enter unallowable codes (UA) or unallowable amounts on any international tax returns including Form 1040, Form 1040-NR, Form 1040-SS, and Form 1040-SS (sp). Unallowable instructions in IRM 3.12.3, Error Resolution, Individual Income Tax Returns, don’t apply to any international returns. LB&I Compliance has developed other methods to select unallowable cases for review.

Delete entries if present in the following fields in Section 02: 02CD1, 02AM1, 02CD2, 02AM2, 02CD3, 02AM3, 02AGI, 02ITM, 02NI, and 02TXA.

Description -This field is edited on line 8 of Edit Sheet Form 3471.

Invalid Condition - Any entry other than "1" .

Correction Procedures -

Section 03 contains the following Fields:

W-2 Wages is transcribed in Field 03WG from the following lines:

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

For TY21 and prior Household Employees may not have Form W-2 to support an entry on line 1a, Form 1040-NR. They are instructed to write "HSH" and the amount of earnings to the left of the wages line. Consider this a "Form W-2 type" statement.

Total Income Exempt by Treaty is transcribed in Field 03TEX from the following lines:

The amount from this field is used for information purposes only and not used in the computation of total income. Refer to EC 218 in IRM 3.22.3.170.2.2.1 (3) for Form 1040-NR.

The taxpayer's entry on line 15 (TY20 and TY21, line c) must correspond to the information provided about treaty-exempt income reported on Schedule OI, item L, Form 1040-NR, or elsewhere on the return.

The taxpayer must identify:

All three (3) items listed above must be identified before validation of the treaty can be completed. Correspond for any missing information by selecting paragraph J on Form 13900. If no reply or an incomplete reply, disallow the treaty exemption.

Treaty income exemption claims are validated using the tax treaty table at Exhibit 3.22.3-1, Table 2. Compensation for Personal Services, and the table of exempt countries for government service employees at Exhibit 3.22.3-2. Include the guidance in the footnotes on the tax treaty table when validating treaty exemption claims. The footnotes are based on the specific provisions in each of the tax treaties.

If the taxpayer provides a treaty article number, but doesn’t cite the subparagraphs, accept the treaty article without the subparagraphs if the country and amount are valid for that article number on the treaty tables.

Total Wages is transcribed in Field 03TWG from line 1z Form 1040-NR.

Refer to EC 201 in IRM 3.12.3Error Resolution, Individual Income Tax returns.

Tax Exempt Interest is transcribed in Field 03TEI from the following lines:

≡ ≡ ≡ ≡ ≡ ≡ taxpayer's entry.

Taxable Interest is transcribed in Field 03INT from the following lines:

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

United States bank interest, savings and loan or similar association interest and certain deposits with United States insurance companies is not taxable. Delete entry where reported.

Qualified Dividends is transcribed in Field 03QD from the following lines:

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Ordinary Dividends is transcribed in Field 03DIV from the following lines:

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Gross IRA Distribution is transcribed in Field 03GIR from the following lines:

Taxable IRA Distribution is transcribed in Field 03TIR from the following lines:

Refer to EC 218 in IRM 3.12.3, Error Resolution, Individual Income Tax Returns. In TY 2018, IRA amounts are combined with pensions and annuities and reported on line 17a and 17b.

Gross Pensions and Annuities is transcribed in Field 03GPA from the following lines:

Taxable Pensions and Annuities is transcribed in Field 03TPA from the following lines:

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Capital Gains is transcribed in Field 03CGL from the following lines:

Refer to EC 204 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Additional Income is transcribed in Field 03ADD from the following line:

This field did not exist on TY19 Form 1040-NR, but for TY20 and later this field will be transcribed on Form 1040-NR.

Refer to EC 218 in both IRM 3.22.3 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.

Total Income is transcribed in Field 03TOT from the following lines:

. Refer to EC 218 in both IRM 3.22.3.170 and IRM 3.12.3, Error Resolution, Individual Income Tax Returns.