Bulletin No. 1998–32
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Internal Revenue
bulletin
Bulletin No. 1998–32
August 10, 1998
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Rev. Rul. 98–37, page 5.
Rulings; obsolete. A list is given of rulings under the jurisdiction of the Associate Chief Counsel (Domestic) that have
been identified as no longer determinative.
Rev. Rul. 98–38, page 4.
Mutual life insurance companies; differential earnings
rate. The differential earnings rate for 1997 and the recomputed differential earnings rate for 1996 are set forth for
use by mutual life insurance companies to compute their income tax liabilities for 1997.
1996 and the Taxpayer Relief Act of 1997. Rev. Proc. 98–3
modified and amplified.
Rev. Proc. 98–41, page 7.
Section 457 model amendments. This procedure provides model amendments that an eligible employer may use
to amend its section 457(b) eligible deferred compensation
plan to reflect the revisions made to section 457 of the
Code by the Small Business Job Protection Act of 1996 and
the Taxpayer Relief Act of 1997.
EXEMPT ORGANIZATIONS
Announcement 98–76, page 64.
EMPLOYEE PLANS
Rev. Proc. 98–40, page 6.
Section 457 ruling program. This procedure describes
the conditions under which the sponsor of an eligible deferred compensation plan under section 457 of the Code
may obtain a ruling from the Service that takes into account
changes made by the Small Business Job Protection Act of
Finding Lists begin on page 66.
Department of the Treasury
Internal Revenue Service
A list is given of organizations now classified as private foundations.
ADMINISTRATIVE
Rev. Proc. 98–44, page 11.
This procedure provides specifications for filing Form
1042–S, Foreign Person’s U.S. Source Income Subject to
Withholding, Magnetically or Electronically.
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Mission of the Service
ucts and services; and perform in a manner warranting
the highest degree of public confidence in our integrity, efficiency, and fairness.
The purpose of the Internal Revenue Service is to collect
the proper amount of tax revenue at the least cost; serve
the public by continually improving the quality of our prod-
Statement of Principles
of Internal Revenue
Tax Administration
The Service also has the responsibility of applying and
administering the law in a reasonable, practical manner.
Issues should only be raised by examining officers when
they have merit, never arbitrarily or for trading purposes.
At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that
care be exercised not to raise an issue or to ask a court to
adopt a position inconsistent with an established Service
position.
The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue
is determined by Congress.
With this in mind, it is the duty of the Service to carry out that
policy by correctly applying the laws enacted by Congress;
to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them;
and to perform this work in a fair and impartial manner, with
neither a government nor a taxpayer point of view.
Administration should be both reasonable and vigorous. It
should be conducted with as little delay as possible and
with great courtesy and considerateness. It should never
try to overreach, and should be reasonable within the
bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it
should be relentless in its attack on unreal tax devices and
fraud.
At the heart of administration is interpretation of the Code. It
is the responsibility of each person in the Service, charged
with the duty of interpreting the law, to try to find the true
meaning of the statutory provision and not to adopt a
strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only
when we ascertain and apply the true meaning of the statute.
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Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly and may be obtained
from the Superintendent of Documents on a subscription
basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold
on a single-copy basis.
dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances
are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements
of internal practices and procedures that affect the rights
and duties of taxpayers are published.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions, and Subpart B, Legislation and Related
Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to
these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings
are issued by the Department of the Treasury’s Office of the
Assistant Secretary (Enforcement).
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings
to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature
are deleted to prevent unwarranted invasions of privacy and
to comply with statutory requirements.
Part IV.—Items of General Interest.
With the exception of the Notice of Proposed Rulemaking
and the disbarment and suspension list included in this part,
none of these announcements are consolidated in the Cumulative Bulletins.
Rulings and procedures reported in the Bulletin do not have
the force and effect of Treasury Department Regulations,
but they may be used as precedents. Unpublished rulings
will not be relied on, used, or cited as precedents by Service
personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce-
The first Bulletin for each month includes a cumulative index
for the matters published during the preceding months.
These monthly indexes are cumulated on a semiannual basis
and are published in the first Bulletin of the succeeding semiannual period, respectively.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.
3
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Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 809.—Reduction in
Certain Deductions of Mutual
Life Insurance Companies
26 CFR 1.809–9: Computation of the differential
earnings rate and the recomputed differential
earnings rate.
Mutual life insurance companies;
differential earnings rate. The differential earnings rate for 1997 and the recomputed differential earnings rate for 1996
are set forth for use by mutual life insurance companies to compute their income
tax liabilities for 1997.
Rev. Rul. 98–38
This revenue ruling contains the differential earnings rate for 1997 and the recomputed differential earnings rate for
1996. Under § 809 of the Internal Revenue Code, mutual life insurance companies use these rates in computing their
Federal income tax liability for taxable
years beginning in 1997. This revenue
ruling also contains the figures on which
the determinations of these rates are
based. Notice 98–19, 1998–13 I.R.B. 24,
contained tentative determinations of
these rates.
Section 809(a) provides that, in the
case of any mutual life insurance company, the amount of the deduction allowable under § 808 for policyholder dividends is reduced (but not below zero) by
the “differential earnings amount.” Any
excess of the differential earnings amount
over the amount of the deduction allowable under § 808 is taken into account as a
reduction in the closing balance of reserves under subsections (a) and (b) of
§ 807. The “differential earnings
amount” for any taxable year is the
amount equal to the product of (a) the life
insurance company’s average equity base
for the taxable year multiplied by (b) the
“differential earnings rate” for that taxable year. The “differential earnings rate”
for the taxable year is the excess of (a) the
“imputed earnings rate” for the taxable
year over (b) the “average mutual earnings rate” for the second calendar year
preceding the calendar year in which the
taxable year begins. The “imputed earnings rate” for any taxable year is the
amount that bears the same ratio to 16.5
percent as the “current stock earnings
rate” for the taxable year bears to the
“base period stock earnings rate.”
Section 809(f) provides that, in the case
of any mutual life insurance company, if
the “recomputed differential earnings
amount” for any taxable year exceeds the
differential earnings amount for that taxable year, the excess is included in life insurance gross income for the succeeding
taxable year. If the differential earnings
amount for any taxable year exceeds the
recomputed differential earnings amount
for that taxable year, the excess is allowed
as a life insurance deduction for the succeeding taxable year. The “recomputed
differential earnings amount” for any taxable year is an amount calculated in the
same manner as the differential earnings
amount for that taxable year, except that
the average mutual earnings rate for the
calendar year in which the taxable year
begins is substituted for the average mutual earnings rate for the second calendar
year preceding the calendar year in which
the taxable year begins.
The stock earnings rates and mutual
earnings rates taken into account under
§ 809 generally are determined by dividing statement gain from operations by the
average equity base. For this purpose, the
term “statement gain from operations”
means “the net gain or loss from operations required to be set forth in the annual
statement, determined without regard to
Federal income taxes, and . . . properly
adjusted for realized capital gains and
losses. . . .” See § 809(g)(1). The term
“equity base” is defined as an amount determined in the manner prescribed by regulations equal to surplus and capital increased by the amount of nonadmitted
financial assets, the excess of statutory reserves over the amount of tax reserves,
the sum of certain other reserves, and 50
percent of any policyholder dividends (or
other similar liability) payable in the following taxable year. See § 809(b)(2), (3),
(4), (5) and (6). Section 1.809–10 of the
Income Tax Regulations provides that the
equity base includes both the asset valuation reserve and the interest maintenance
reserve for taxable years ending after December 31, 1991.
Section 1.809–9(a) of the regulations
provides that neither the differential earnings rate under § 809(c) nor the recomputed differential earnings rate that is
used in computing the recomputed differential earnings amount under § 809(f)(3)
may be less than zero.
For purposes of § 809, the differential
earnings rate for 1997 and the rate used to
calculate the recomputed differential
earnings amount for 1996 (the recomputed differential earnings rate for 1996),
and the figures on which these two rates
are based are set forth in Table 1.
Rev. Rul. 98–38 Table 1
Determination of Rates To Be Used For Taxable Years
Beginning in 1997
Differential earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Recomputed differential earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Imputed earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.669
Imputed earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.813
Base period stock earnings rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.221
Current stock earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.254
Stock earnings rate for 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.437
Stock earnings rate for 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.087
Stock earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.238
Average mutual earnings rate for 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.477
Average mutual earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.112
August 10, 1998
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DRAFTING INFORMATION
The principal author of this revenue
ruling is Katherine A. Hossofsky of the
Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue ruling contact Ms. Hossofsky on (202) 622-3477
(not a toll-free number).
rulings under the jurisdiction of the Associate Chief Counsel (Domestic) that have
been identified under the Service’s review
program as no longer being determinative. The rulings are categorized by subject matter.
Accordingly, the rulings listed below
are hereby declared obsolete.
ENTITY CLASSIFICATION
Section 7805.—Rules and
Regulations
26 CFR 301.7805–1: Rules and regulations.
Rulings; obsolete. A list is given of
rulings under the jurisdiction of the Associate Chief Counsel (Domestic) that have
been identified as no longer determinative.
Rev. Rul. 98–37
The Internal Revenue Service is continuing its program of reviewing rulings (including revenue rulings and revenue procedures) published in the Internal
Revenue Bulletin to identify and publish
lists of those rulings that, although not
specifically revoked or superseded, are no
longer considered determinative because:
(1) the applicable statutory provisions or
regulations have been changed or repealed; (2) the ruling position is specifically covered by a statute, regulation, or
subsequent published position; or (3) the
facts set forth no longer exist or are not
sufficiently described to permit clear application of the current statute and regulations.
This revenue ruling publishes a list of
1998–32 I.R.B.
Rev. Rul. No.
C.B. Citation
71–277
71–434
71–574
72–75
72–120
72–121
72–122
75–19
77–214
79–106
88–8
88–76
88–79
93-4
93–5
93–6
93–30
93–38
93–49
93–50
93–53
93–81
93–91
93–92
93–93
94–5
94–6
94–30
94–51
1971–1 C.B. 422
1971–2 C.B. 430
1971–2 C.B. 432
1972–1 C.B. 401
1972–1 C.B. 402
1972–1 C.B. 403
1972–1 C.B. 405
1975–1 C.B. 382
1977–1 C.B. 408
1979–1 C.B. 448
1988–1 C.B. 403
1988–2 C.B. 360
1988–2 C.B. 361
1993–1 C.B. 225
1993–1 C.B. 227
1993–1 C.B. 229
1993–1 C.B. 231
1993–1 C.B. 233
1993–2 C.B. 308
1993–2 C.B. 310
1993–2 C.B. 312
1993–2 C.B. 314
1993–2 C.B. 316
1993–2 C.B. 318
1993–2 C.B. 321
1994–1 C.B. 312
1994–1 C.B. 314
1994–1 C.B. 316
1994–2 C.B. 407
5
Rev. Rul. No.
C.B. Citation
94–79
95–2
95–9
1994–2 C.B. 409
1995–1 C.B. 220
1995–1 C.B. 222
OTHER GUIDANCE
Rev. Rul. No.
57–271
74–77
76–562
83–113
85-143
Rev. Proc. No.
83–58
C.B. Citation
1957–1 C.B. 453
1974–1 C.B. 33
1976–2 C.B. 430
1983–2 C.B. 251
1985–2 C.B. 55
C.B. Citation
1983–2 C.B. 575
The Service will continue to review
other rulings to identify those that, for the
reasons stated above, are inapplicable to
future transactions. Therefore, failure to
include any particular ruling in the above
list should not be construed as an indication that the ruling necessarily is determinative with respect to future transactions.
DRAFTING INFORMATION
The principal author of this revenue
ruling is David A. Schneider of the Office
of Assistant Chief Counsel (Income Tax
and Accounting). For further information
regarding the rulings identified under
OTHER GUIDANCE, contact Mr.
Schneider on (202) 622-4890. For further
information regarding the rulings identified under ENTITY CLASSIFICATION,
contact Mark D. Harris of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries) on (202) 6223050. These are not toll-free calls.
August 10, 1998
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Part III. Administrative, Procedural, and Miscellaneous
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 98–40
SECTION 1. PURPOSE
This Revenue Procedure describes the
conditions under which the sponsor of an
eligible deferred compensation plan under
§ 457(b) of the Internal Revenue Code
may obtain a ruling from the Service that
takes into account changes made by the
Small Business Job Protection Act of
1996, Pub. L. No. 104–188 (“SBJPA”)
and the Taxpayer Relief Act of 1997, Pub.
L. No. 105–34 (“TRA ’97”).
SECTION 2. BACKGROUND AND
GENERAL INFORMATION
.01 Section 457 applies to nonqualified
deferred compensation plans established
by state and local government and taxexempt employers. These plans may be
either eligible plans that meet the requirements of § 457(b) or ineligible § 457(f)
plans. Under § 457(a), compensation deferred pursuant to eligible plans that meet
the requirements of § 457(b) and the income attributable to such deferred compensation are not includible in gross income until the taxable year in which the
deferred amounts are actually paid or
made available to the plan participant or
beneficiary.
.02 Significant revisions were made to
§ 457 by the SBJPA and by TRA ’97, including a new trust requirement for compensation deferred under governmental
§ 457(b) plans and provision for limited
in-service distribution of certain small
§ 457(b) plan amounts. In response to
these SBJPA amendments, Revenue Procedure 96–56, 1996–2 C.B. 389, announced that, due to study of these
changes, the Service would suspend issuance of rulings regarding the tax effects
of provisions under the SBJPA affecting
§ 457(b) plans until further notice. Notice
96–63, 1996–2 C.B. 228, invited comments on whether the Service should publish model language to provide § 457(b)
plan sponsors with a streamlined method
for amending their plans to comply with
the new SBJPA provisions relating to
§ 457(b) plans.
August 10, 1998
.03 Guidance regarding the SBJPA
statutory amendments was provided in
Notice 98–8, 1998–4 I.R.B. 6. In addition, the Service is publishing Revenue
Procedure 98–41 in this issue of the Internal Revenue Bulletin to provide model
plan amendments for § 457(b) plans.
SECTION 3. SECTION 457(b)
RULING PROCEDURAL
REQUIREMENTS
.01 Section 5.19 of Revenue Procedure 98–3, 1998–1 I.R.B. 100, 110, currently provides that the Service will not
issue rulings regarding the tax effects of
provisions under the SBJPA affecting §
457(b) plans. Effective on August 10,
1998, except as provided in Section 4
below, the Service will consider all requests for rulings for § 457(b) plans
made in accordance with Revenue Procedure 98–1, 1998–1 I.R.B. 7 (including
payment of the required user’s fee), the
additional requirements of this Section 3,
and any other rule adopted by the Service from time to time. See Section 5
below regarding the impact of this revenue procedure on Revenue Procedure
98–3.
.02 If a ruling is requested for a
§ 457(b) plan that has previously received
a private letter ruling, the ruling request
must include a copy of the previous ruling
letter. Private letter ruling requests for
§ 457(b) plans that have been amended
more than twice since the plan was established must contain a restated plan document incorporating all amendments and
proposed amendments. In the case of a restated plan, the ruling request must clearly
identify the changes made to the plan
since any prior private letter ruling was issued (for example, by underscoring the location of all changes in the restated plan
document). In the case of a plan intended
to be a § 457(b) plan maintained by a state
or local government entity, a copy of the
trust agreement, custodial account agreement, or annuity contract must be included
with the private letter ruling request. (If
there are more than 3 trust agreements,
custodial account agreements, or annuity
contracts, representative samples of these
documents may be provided.)
6
SECTION 4. LIMITATIONS ON
ISSUANCE OF § 457(b) RULINGS
.01 The Service will not issue a new
private letter ruling concerning a § 457(b)
plan that has previously received a private
letter ruling if that plan is amended solely
to conform it to the SBJPA changes by
adding one or more of the model amendments contained in Revenue Procedure
98–41 (and to replace obsolete terms or
delete provisions inconsistent with the
model amendments so adopted). However, the Service will consider a private
letter ruling request for a pre-existing
§ 457(b) plan even though the employer
had previously received a favorable private letter ruling, if the employer has
made amendments to its § 457(b) plan
after it had received that ruling (other than
adoption of model amendments and conforming changes). For example, the Service will consider a private letter ruling
request from a plan sponsor that had received a favorable ruling in 1984 regarding its § 457(b) plan, and that has since
amended that plan to conform with
changes in the law, such as amendments
made to conform with the Tax Reform
Act of 1986.
.02 The Service will issue a private letter ruling concerning a § 457(b) plan
maintained by a state or local government
employer only if the plan includes provisions reflecting § 457(g), including the
guidance provided in Sections VI, VII, or
VIII of Notice 98–8. Model Amendment
4 of Revenue Procedure 98–41 may be
used for this purpose.
.03 The Service will not issue a private
letter ruling for a § 457 plan if the plan
provides that a loan may be made from
assets held by the plan to any participants
or beneficiaries under the plan.
SECTION 5. EFFECT ON REVENUE
PROCEDURE 98–3
.01 The first sentence of Section 5.19
of Revenue Procedure 98–3 (barring rulings regarding the tax effects of the
SBJPA affecting § 457(b) plans) is modified to read as follows: The tax effect of
provisions under the Small Business Job
Protection Act affecting plans described
in § 457(b) if such provisions do not com-
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Page 7
ply with Section 4 of Revenue Procedure
98–40.
.02 The second sentence of Section
5.19 of Revenue Procedure 98–3 (authorizing advance rulings on § 457(b) plans
based on the law in effect prior to enactment of the SBJPA) is deleted.
.03 Revenue Procedure 98–3 is amplified by adding to Section 5 the following: Section 457. Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations. The tax treatment of any § 457
plan that provides that a loan may be
made from assets held by such plan to
any participants or beneficiaries under
the plan.
SECTION 6. EFFECTIVE DATE
This revenue procedure applies to all
ruling requests, including any pending in
the National Office before August 10,
1998.
DRAFTING INFORMATION
The principal author of this revenue
procedure is John Tolleris of the Office of
Associate Chief Counsel (Employee Benefits/ Exempt Organizations). However,
other personnel from the Internal Revenue Service and Treasury participated in
its development. For further information
regarding this revenue procedure, contact
John Tolleris at (202) 622-6030 (not a
toll-free number).
26 CFR 601.201: Rulings and determination letters.
Rev. Proc. 98–41
SECTION 1. PURPOSE
This Revenue Procedure provides
model amendments that may be used by
an eligible employer (as defined in
457(e)(1) of the Internal Revenue Code)
to amend its § 457(b) plan to reflect the
revisions made to § 457 of the Internal
Revenue Code by the Small Business Job
Protection Act of 1996, Pub. L. No. 104–
188 (“SBJPA”) and by the Taxpayer Relief Act of 1997, Pub. L. No. 105–34
(“TRA ’97”).
SECTION 2. BACKGROUND AND
GENERAL INFORMATION
.01 Section 457 of the Internal Revenue Code applies to nonqualified de-
1998–32 I.R.B.
ferred compensation plans established by
state and local government and tax-exempt employers. These plans may be either eligible plans that meet the requirements of § 457(b) or ineligible § 457(f)
plans. Under § 457(a), compensation deferred pursuant to eligible plans that meet
the requirements of § 457(b) and the income attributable to such deferred compensation are not includible in gross income until the taxable year in which the
deferred amounts are actually paid or
made available to the plan participant or
beneficiary.
.02 Section 1447(a) of the SBJPA and
section 1071 of TRA ’97 amended
§ 457(e)(9) of the Code, generally effective for years beginning after December
31, 1996, to permit in-service distributions of amounts of $5,000 or less payable
under a § 457(b) plan under certain conditions, and to permit an additional election
by a participant to further defer commencement of distributions under a
§ 457(b) plan after the first permissible
payout date. Section 1447(b) of the
SBJPA added new paragraph (15) to
§ 457(e) of the Code, also effective for
years beginning after December 31, 1996,
under which the $7,500 maximum deferral limitation under §§ 457(b) (2) and
457(c)(1) is indexed (in $500 increments)
for cost of living adjustments. (The maximum deferral limitation for 1998 is
$8,000.)
.03 Section 1448 of the SBJPA added
new subsection (g) to § 457 of the Code to
provide that all assets and income under a
§ 457(b) plan that is maintained by a state
or local government employer must be
held in trust for the exclusive benefit of
plan participants and their beneficiaries.
Before the enactment of the SBJPA,
§ 457(b)(6) mandated that all § 457(b)
plans be unfunded (so that plan assets
could not be set aside for the exclusive
benefit of participants and beneficiaries).
Section 457(g) generally applies to assets
and income held by a governmental
§ 457(b) plan on and after August 20,
1996. However, in the case of a § 457(b)
plan in existence on August 20, 1996,
maintained by a state or local government
employer, a trust is not required to be established pursuant to § 457(g) before January 1, 1999.
.04 In response to these significant revisions made to § 457 by the SBJPA and
7
by TRA ’97, the Service published Revenue Procedure 96–56, 1996–2 C.B. 389,
which announced that, due to study of
these changes, the Service would suspend
issuance of rulings regarding the tax effects of provisions under the SBJPA affecting § 457(b) plans until further notice.
Notice 96–63, 1996–2 C.B. 228, invited
comments on whether the Service should
publish model language to provide
§ 457(b) plan sponsors with a streamlined
method for amending their plans to comply with the new SBJPA provisions relating to § 457(b) plans.
.05 In addition, the Service has recently issued Notice 98–8, 1998–4 I.R.B.
6, which provides substantive guidance
concerning the revisions to § 457 made by
the SBJPA and TRA ’97. The Service is
issuing this revenue procedure providing
model amendments based on the guidance
provided in Notice 98–8.
SECTION 3. USE OF THE MODEL
AMENDMENTS
.01 Any eligible employer may amend
a § 457(b) plan to utilize one or more of
the optional changes made to § 457(e) of
the Internal Revenue Code by section
1447 of the SBJPA and section 1017 of
TRA ’97 and described in Section 2.02 of
this revenue procedure by adopting one or
more of Model Amendments 1, 2 or 3
contained in the appendix to this revenue
procedure.
.02 An eligible employer that is a state
or local government employer must
amend its § 457(b) plan to comply with
the mandatory trust requirement of
§ 457(g) described in Section 2.03. An eligible government employer may adopt
Model Amendment 4 in the appendix to
this revenue procedure in order to modify
the plan to reflect the funding arrangement established under the plan in conformity with § 457(g). In addition, in order
to rely on Model Amendment 4, the eligible government employer must adopt a
trust, one or more custodial accounts, or
one or more annuity contracts that hold all
assets and income described in Model
Amendment 4. The trust, custodial account or accounts, or annuity contract or
contracts must be valid instruments under
state law, must otherwise comply with the
requirements provided in Notice 98–8,
and may contain no language inconsistent
with Model Amendment 4. See Section 4
August 10, 1998
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below for more information regarding a
government entity’s right to rely upon a
prior private letter ruling concerning its
§ 457(b) plan if it adopts Model Amendment 4 on a word-for-word basis.
SECTION 4. RELIANCE BY
EMPLOYERS WITH PRIOR § 457(b)
RULING
.01 Reliance—An employer entitled to
rely on a private letter ruling issued to it
prior to August 10, 1998, regarding the eligibility of a plan under § 457(b) that is a
defined contribution plan as defined in §
414(i) will not lose its right to rely on its
letter ruling merely because it adopts one
or more of the amendments set forth in
this revenue procedure on a word-forword basis. Such an employer may adopt
the applicable model amendments provided under this revenue procedure on a
word-for-word basis and continue to rely
on the previously issued private letter ruling regarding its § 457(b) plan without filing another request with the Service for a
new private letter ruling.
tent with the model amendment so
adopted.
.02 Superseding obsolete prior provisions—An employer that satisfies the
conditions of Section 4.01 above and that
amends its § 457(b) plan to include one or
more of the model amendments set forth
in this revenue procedure on a word-forword basis will also not lose its right to
rely on its prior letter ruling merely because it replaces obsolete terms (such as
replacing “bookkeeping accounts” or “hypothetical accounts” with “accounts”), or
deletes prior provisions that are inconsis-
DRAFTING INFORMATION
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective August 10, 1998.
The principal author of this revenue
procedure is John Tolleris of the Office of
Associate Chief Counsel (Employee Benefits/ Exempt Organizations). However,
other personnel from the Internal Revenue Service and Treasury participated in
its development. For further information
regarding this revenue procedure, contact
John Tolleris at (202) 622-6030 (not a
toll-free number).
APPENDIX FOR REVENUE PROCEDURE 98–41
MODEL AMENDMENTS
(Note to sponsors: In this appendix presenting the model amendment language, the portions printed in italics are explanatory
notes for the benefit of the § 457(b) plan sponsor and are not to be included in the amendments. The portions not printed in italics
are the model amendment language for use by the plan sponsor in amending its § 457(b) plan in accordance with this revenue procedure.)
OPTIONAL AMENDMENTS THAT MAY BE ADOPTED BY ANY ELIGIBLE 457 PLAN
AMENDMENT 1 IN-SERVICE DISTRIBUTION OF $5,000 OR LESS
Any one of the following model amendments may be adopted for any § 457(b) plan to provide for the in-service de minimis distribution option permitted under § 457(e)(9)(A) of the Internal Revenue Code and described in Section 2.02 above. These amendments are in addition to any plan provision requiring distribution of small account balances following the general distribution commencement date set by the plan. If it wishes, the plan sponsor may also substitute in the following model amendments a consistent
figure lower than $5,000 in place of “$5,000 (or the dollar limit under section 411(a)(11) of the Internal Revenue Code, if greater)”.
The plan may adopt only one of Option A, Option B, or Option C.
OPTION A: INVOLUNTARY DISTRIBUTIONS
The following amendment may be adopted by an eligible employer that wishes to provide for the mandatory in-service distribution
to participants with aggregate account balances under the § 457(b) plan that total $5,000 or less:
“Involuntary In-Service Distribution: The Plan shall distribute the total amount payable under the Plan to a participant who is an
active employee of an eligible employer if the following requirements are met:
(i) the total amount payable to the participant under the Plan does not exceed $5,000 (or the dollar limit under section
411(a)(11) of the Internal Revenue Code, if greater),
(ii) the participant has not previously received an in-service distribution of the total amount payable to the participant under
the Plan; and
(iii) no amount has been deferred under the Plan with respect to the participant during the two-year period ending on the date
of the in-service distribution.”
OPTION B: VOLUNTARY DISTRIBUTIONS
The following amendment may be adopted by an eligible employer that wishes to provide for the voluntary in-service distribution
to participants with aggregate account balances under the § 457(b) plan that total $5,000 or less:
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“Voluntary In-Service Distribution: A participant who is an active employee of an eligible employer shall receive a distribution of
the total amount payable to the participant under the Plan if the following requirements are met:
(i) the total amount payable to the participant under the Plan does not exceed $5,000 (or the dollar limit under section
411(a)(11) of the Internal Revenue Code, if greater),
(ii) the participant has not previously received an in-service distribution of the total amount payable to the participant under
the Plan,
(iii) no amount has been deferred under the Plan with respect to the participant during the two-year period ending on the date
of the in-service distribution; and
(iv) the participant elects to receive the distribution.”
OPTION C: COMBINATION VOLUNTARY AND INVOLUNTARY DISTRIBUTIONS
The following amendment may be adopted by an eligible employer that wishes to provide for both a mandatory in-service distribution of small account balances (such as $500) and a voluntary in-service distribution election to participants with higher aggregate
account balances under the § 457(b) plan that total $5,000 or less:
“Involuntary In-Service Distribution: The Plan shall distribute the total amount payable under the Plan to a participant who is an
active employee of an eligible employer if the following requirements are met:
(i) the total amount payable to the participant under the Plan does not exceed [enter a dollar amount that is less than $5,000],
(ii) the participant has not previously received an in-service distribution of the total amount payable to the participant under
the Plan; and
(iii) no amount has been deferred under the Plan with respect to the participant during the two-year period ending on the date
of the in-service distribution.
Voluntary In-Service Distribution: A participant who is an active employee of an eligible employer shall receive a distribution of
the total amount payable to the participant under the Plan if the following requirements are met:
(i) the total amount payable to the participant under the Plan does not exceed $5,000 (or the dollar limit under section
411(a)(11) of the Internal Revenue Code, if greater),
(ii) the participant has not previously received an in-service distribution of the total amount payable to the participant under
the Plan,
(iii) no amount has been deferred under the Plan with respect to the participant during the two-year period ending on the date
of the in-service distribution; and
(iv) the participant elects to receive the distribution.”
AMENDMENT 2 ADDITIONAL DEFERRAL ELECTION
The following model amendment may be used to provide for the one “additional” distribution election authorized by §
457(e)(9)(B) of the Internal Revenue Code and described in section 2.03 above.
“If a participant has elected, in accordance with the Plan, to defer the commencement of distributions beyond the first permissible
payout date, then the participant may make an additional election to further defer the commencement of distributions, provided that
the election is filed before distributions actually begin and the later commencement date meets the required distribution commencement date provisions of sections 401(a)(9) and 457(d)(2) of the Internal Revenue Code. A participant may not make more than one
such additional deferral election after the first permissible payout date.
For purposes of the preceding paragraph, the “first permissible payout date” is the earliest date on which the Plan permits payments to begin after separation from service, disregarding payments to a participant who has an unforeseeable emergency or attains
age 701⁄2, or under the in-service distribution provisions of the Plan.” (Any of the provisions mentioned in the preceding sentence may
be omitted if the plan does not include such a provision.)
AMENDMENT 3 COST-OF-LIVING-ADJUSTMENTS
Any § 457(b) plan may be amended to provide for implementing cost of living adjustments to the “$7,500” maximum deferral
amount pursuant to § 457(e)(15) by substituting the following for “$7,500” wherever it appears as a limitation on the maximum deferral amount under the plan:
“$7,500, adjusted for the calendar year to reflect increases in cost-of-living in accordance with sections 457(e)(15) and 415(d) of the
Internal Revenue Code.”
MODEL AMENDMENT TO REFLECT MANDATORY § 457(g) REQUIREMENTS FOR GOVERNMENTAL § 457(b)
PLANS
AMENDMENT 4 § 457(g) TRUST REQUIREMENTS FOR GOVERNMENTAL § 457(b) PLANS
Any one of the following three model amendments may be used to reflect the mandatory trust requirement applicable to eligible
plans of state and local government entities under § 457(g) of the Code. None of these amendments are applicable to § 457(b) plans
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sponsored by tax-exempt organizations that are not state or local government entities, and they may not be adopted by such organizations. The last sentence of each of the following model amendments (requiring amounts to be transferred within a 15-day period)
is optional.
OPTION A: TRUST
“Notwithstanding any contrary provision of the Plan, in accordance with section 457(g) of the Internal Revenue Code, all amounts
of compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to
such amounts, property, or rights shall be held in trust for the exclusive benefit of participants and beneficiaries under the Plan. Any
trust under the Plan shall be established pursuant to a written agreement that constitutes a valid trust under the law of [insert name of
applicable state].
All amounts of compensation deferred under the Plan shall be transferred to a trust established under the Plan within a period that
is not longer than is reasonable for the proper administration of the accounts of participants. To comply with this requirement, all
amounts of compensation deferred under the Plan shall be transferred to a trust established under the Plan not later than 15 business
days after the end of the month in which the compensation would otherwise have been paid to the employee.”
OPTION B: ANNUITY CONTRACT
“Notwithstanding any contrary provision of the Plan, including any annuity contract issued under the plan, in accordance with
section 457(g) of the Internal Revenue Code, all amounts of compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall be held in one or more annuity contracts, as defined in section 401(g) of such Code, issued by an insurance company qualified to do business in the state where the contract was issued, for the exclusive benefit of participants and beneficiaries under the Plan. For this purpose, the term “annuity
contract” does not include a life, health or accident, property, casualty, or liability insurance contract.
All amounts of compensation deferred under the Plan shall be transferred to an annuity contract described in section 401(f) of the
Internal Revenue Code within a period that is not longer than is reasonable for the proper administration of the accounts of participants. To comply with this requirement, all amounts of compensation deferred under the Plan shall be transferred to a contract described in section 401(f) of such Code not later than 15 business days after the end of the month in which the compensation would
otherwise have been paid to the employee.”
OPTION C: CUSTODIAL ACCOUNT
“Notwithstanding any contrary provision of the Plan, in accordance with section 457(g) of the Internal Revenue Code, all amounts
of compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to
such amounts, property, or rights shall be held in one or more custodial accounts for the exclusive benefit of participants and beneficiaries under the Plan. For purposes of this paragraph, the custodian of any custodial account created pursuant to the Plan must be a
bank, as described in section 408(n) of the Internal Revenue Code, or a person who meets the nonbank trustee requirements of paragraphs (2)–(6) of section 1.408–2(e) of the Income Tax Regulations relating to the use of non-bank trustees.
All amounts of compensation deferred under the Plan shall be transferred to a custodial account described in section 401(f) of the
Internal Revenue Code within a period that is not longer than is reasonable for the proper administration of the accounts of participants. To comply with this requirement, all amounts of compensation deferred under the Plan shall be transferred to a custodial account described in section 401(f) of such Code not later than 15 business days after the end of the month in which the compensation
would otherwise have been paid to the employee.”
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NOTE:
Following is a list of related instructions and forms for filing Information Returns Magnetically/Electronically. A copy of
these instructions and forms will be included in the printed copy of Publication 1187:
䉴 1998 Instructions for Form 1042–S
䉴 Form 4419—Application for Filing Information Returns Magnetically/Electronically
䉴 Form 4804—Transmittal of Information Returns Reported Magnetically/Electronically
䉴 Form 4802—Transmittal of Information Returns Reported Magnetically/Electronically (Continuation of Form 4804)
䉴 Form 8508—Request for Waiver From Filing Information Returns on Magnetic Media (For Forms W–2, W–2G,
1042–S, 1098, 1099 Series, 5498, 5498–MSA and 8027)
䉴 Form 8809—Request for Extension of Time to File Information Returns (For Forms W–2, W–2G, 1042–S, 1098, 1099,
5498, 8027)
䉴 Notice 210—Preparation Instructions for Media Label
The Internal Revenue Service, Martinsburg Computing Center, encourages filers to make copies of blank forms for future use.
Rev. Proc. 98–44
Use this revenue procedure to prepare Tax Year 1998 Forms 1042–S for submission to Internal Revenue Service (IRS) using any of
the following:
– Tape Cartridge
– Magnetic Tape
– 8mm, 4mm, and Quarter Inch Cartridges
– 5 1⁄4-inch Diskette
– 3 1⁄2-inch Diskette
– Electronic Filing
– (Bisynchronous)
– (Asynchronous)
Caution to filers
Format changes to accommodate Year 2000 are included in this publication for TY98, calendar year 1999.
To be in compliance with Year 2000 changes, the current bisynchronous electronic filing communications package will
change in the future.
Please read this publication carefully. Persons or businesses required to file information returns magnetically or electronically may be subject to penalties for failure to file or include correct information if they do not follow the instructions in this
revenue procedure.
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Contents
Part A. General
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
Section 8.
Section 9.
Section 10.
Section 11.
Section 12.
Section 13.
Section 14.
Section 15.
Section 16.
Section 17.
Purpose
Nature of Changes - Current year (Tax Year 1998)
Where to File and How to Contact the IRS Martinsburg Computing Center (IRS/MCC)
Filing Requirements
Form 8508, Request for Waiver from Filing Information Returns on Magnetic Media
Vendor List
Form 4419, Application for Filing Information Returns Magnetically/Electronically
Test Files
Filing of Forms 1042–S Magnetically/Electronically and Retention Requirements
Due Dates
Extensions of Time to File
Processing of Information Returns Magnetically/Electronically
Corrected Returns
U.S. Taxpayer Identification Numbers (TIN) and Individual Taxpayer Identification Numbers (ITIN)
Effect on Paper Returns and Statements to Recipients
Definition of Terms
Major Problems Encountered
Part B. Magnetic Media Specifications
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
Section 8.
Section 9.
Section 10.
General
Tape Cartridge Specifications
Magnetic Tape Specifications
8mm, 4mm, and Quarter Inch Cartridge Specifications
5 1⁄4- and 3 1⁄2-Inch Diskette Specifications
Data Sequence Specifications
Transmitter “T” Record
Recipient “Q” Record
Withholding Agent “W” Record
End of Transmission “Y” Record
Part C. Bisynchronous (Mainframe) Electronic Filing Specifications
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
General
Electronic Filing Approval Procedure
Test Files
Electronic Submissions
Transmittal Requirements
IBM 3780 Bisynchronous Communication Specifications
Bisynchronous Electronic Filing Record Specifications
Part D. Asynchronous (IRP-BBS) Electronic Filing Specifications
Section 1.
Section 2.
Section 3.
Section 4.
Section 5.
Section 6.
Section 7.
General
Electronic Filing Approval Procedure
Test Files
Electronic Submissions
Transmittal Requirements
Information Reporting Program Bulletin Board System (IRP-BBS) Specifications
IRP-BBS First Logon Procedures
Part E. Magnetic/Electronic Specifications for Extension Of Time
Section 1.
Section 2.
Section 3.
General Information
Magnetic Tape, Tape Cartridge, 8mm, 4mm, and QIC (Quarter Inch Cartridge), 5 1⁄4- and 3 1⁄2-inch Diskette, and
IRP-BBS Specifications
Record Layout
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Part F. Miscellaneous Information
Section 1.
Section 2.
Addresses for Martinsburg Computing Center
Telephone Numbers for Contacting IRS/MCC
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Part A. General
Revenue procedures are generally revised annually to reflect legislative and form changes. Comments concerning this revenue
procedure, or suggestions for making it more helpful, can be addressed to:
Internal Revenue Service
Martinsburg Computing Center
Attn: IRB, Information Support Section
P.O. Box 1359
Martinsburg, WV 25402
Sec. 1. Purpose
.01 The purpose of this revenue procedure is to provide the specifications under which withholding agents may file Form 1042–S,
Foreign Person’s U.S. Source Income Subject to Withholding, magnetically or electronically, which includes 1⁄2-inch magnetic tape,
IBM 3480, 3490, or AS400 compatible tape cartridges (including 8mm, 4mm, and Quarter Inch); or 5 1⁄4- or 3 1⁄2-inch diskettes with
IRS.
.02 This revenue procedure supersedes the following: Rev. Proc. 96–11, published as Pub. 1187 (01–96), Specifications for Filing Form 1042–S, Foreign Person’s U.S. Source Income Subject to Withholding, Magnetically/Electronically.
.03 Specifications for filing the Form 1042-S are contained in this revenue procedure. This revenue procedure must be used for
the preparation of current Tax Year 1998 Forms 1042-S filed between January 1, 1999, and December 31, 1999, and those filed for
years prior to 1998.
.04 The following revenue procedures and publications provide more detailed filing procedures for certain other information returns.
(a) 1998 “Instructions for Form 1042–S.”
(b) 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G” provides specific instructions on completing and submitting information returns to IRS.
(c) Rev. Proc. 84–33, 1984–1 C.B. 502, regarding the optional method for agents to report and deposit backup withholding.
(d) Publication 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099 Series, 5498, and
W–2G.
(e) Publication 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips Magnetically or Electronically.
(f) Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Magnetically or Electronically.
(g) Publication 1245, Specifications for Filing Form W–4, Employee’s Withholding Allowance Certificate, Magnetically
or Electronically.
(h) Publication 1167, Substitute Printed, Computer Prepared, and Computer Generated Tax Forms and Schedules (Use this
publication for preparing substitute Forms 1042–S).
(i) Rev. Proc. 98–25, specifications set forth for the magnetic or electronic filing of 1998 Form 8851, Summary of Medical
Savings Accounts.
.05 It is unlawful to intentionally transmit a computer virus to the Internal Revenue Service. Violators may be subject to a fine
and/or imprisonment.
.06 Refer to Part A, Sec. 16, for definitions of terms used in this publication.
Sec. 2. Nature of Changes – Current Year (Tax Year 1998)
.01 Legislative changes for Tax Year 1998 necessitated major changes in the record format for Form 1042–S filed magnetically/electronically. Format changes to accommodate Year 2000 are contained in this publication. Treasury has mandated
that all electronic year dates exchanged with non-IRS organizations, both government and private, both input and output,
shall adhere to the following:
– All Gregorian date formats will be in the format ‘YYYYMMDD’.
– All other year date formats (e.g., Julian, Tax Period, Cycle Dates) will expand representations from 2-digit year to 4-digit
year: ‘YYYY’.
Other format changes were made to the records as well. The record changes make it imperative for filers to read this publication in its entirety. Failure to comply with the new record formats will result in the media being returned to the filer.
.02 In previous years, new or revised information in the publication has been highlighted by the use of italics. Due to the
various changes in record formats, italics will not be used in this publication. Filers are encouraged to read the entire publication.
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.03 Within the next few years, IRS/MCC will discontinue processing 5 1⁄4-inch diskettes as an acceptable form of media.
Filers are encouraged to explore optional types of media or methods for submitting information returns to IRS/MCC. The
Information Reporting Program-Bulletin Board System (IRP-BBS) is a highly recommended alternative to diskette filing.
.04 Editorial Changes – General
Numerous editorial and format changes have been made to the publication. Following are some of the changes that have been
made to the revenue procedure:
a) A ZIP code change has occurred for the Martinsburg Computing Center. For all Martinsburg Computing Center addresses
containing a post office box, the ZIP code has been changed from 25401 to 25402. The ZIP code for the street address (Route
9 and Needy Road) of the Martinsburg Computing Center remains 25401.
b) In Part A, Sec. 6, filers are advised that the Vendor List will be printed every other year. The most current version will always
be available for reading or downloading from the Information Reporting Program- Bulletin Board System (IRP-BBS).
c) Part A, Sec. 7.01, a chart has been added to clarify the guidelines for applications for a Transmitter Control Code (TCC).
d) In Part A, Sec. 7.11, information has been added to advise filers that multiple Transmitter Control Codes (TCCs) will only be
issued to a filer with multiple TINs, one TCC per TIN.
e) In Part A, Sec. 8.02, added the word “Test” as an indicator to be used for testing purposes.
f) In Part A, Sec. 9.09, filers are advised to create a self-adhesive label with the required information to attach to each tape, cartridge, or diskette.
g) Part A, Sec. 9.10, filers are advised to attach a label that states “IRB, Box ___of___” to the outside of the shipping container.
h) In Part A, Sec. 10.03, filers are advised that the timely mailing rule now applies to designated private delivery services.
i) Part A, Sec. 12.03, information has been added regarding the Media Tracking Slip (Form 9267) which accompanies media returned to filers due to processing problems.
j) Part A, Sec. 14, has been added relating to U.S. Taxpayer Identification Numbers (TIN) and the Individual Taxpayer Identification Number (ITIN).
k) Part A, Sec. 17, Problem 11, Math Computation Discrepancy was added as one of the major problems encountered. Suggested formulas were added to help eliminate this problem.
l) Added 8mm, 4mm and QIC (Quarter Inch Cartridge) as acceptable forms of magnetic media.
m) Added Part F, Miscellaneous Information. Information in this part has been provided as a quick reference point for addresses
and telephone numbers for IRS/MCC.
n) Date field positions were increased to accommodate Year 2000.
o) Numerous record format changes occurred throughout Part B.
☛ Note: Filers are encouraged to read the publication in its entirety to ensure accuracy in filing their information magnetically/electronically.
Sec. 3. Where to File And How to Contact The IRS Martinsburg Computing Center (IRS/MCC)
☛ Note: The Code has changed from 25401-1359 to 25402-1359 for the IRS P.O. Box addresses for Martinsburg, WV.
.01 All Forms 1042-S filed magnetically or electronically are processed at IRS/MCC. Files containing Forms 1042-S, requests
for IRS magnetic media and electronic filing information, undue hardship waivers, and requests for extensions of time to file returns,
or to furnish the statements to recipients, are to be sent to the following addresses:
✈
✉
If by Postal Service:
or
IRS-Martinsburg Computing Center
Information Reporting Program
P. O. Box 1359
Martinsburg, WV 25402-1359
If by truck or air freight:
IRS-Martinsburg Computing Center
Information Reporting Program
Route 9 and Needy Road
Martinsburg, WV 25401
.02 Send a magnetically filed extension of time request to one of the following addresses:
✉
If by Postal Service:
IRS-Martinsburg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
P. O. Box 879
Kearneysville, WV 25430
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✈
If by truck or air freight:
IRS-Martinsburg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
Route 9 and Needy Road
Martinsburg, WV 25401
.03 Telephone inquiries for the Information Reporting Program Call Site may be made between 8:30 a.m. and 4:30 p.m. Eastern
time, Monday through Friday. The telephone numbers for magnetic media inquiries or electronic submission are:
☎
304-263-8700 - Call Site - Part A, Sec 3.06
Asynchronous filing
304-264-7070 - IRP–BBS (Information Reporting Program- Bulletin Board System) - Part D
Bisynchronous filing
(Mainframe filing)
304-264-7080 - 4.8 Modems - Part C
304-264-7040 - 9.6 Modems - Part C
304-264-7045 - 14.4 Modems - Part C
304-267-3367 - TDD (Telecommunication Device for the Deaf)
304-264-5602 - Fax Machine
(These are not toll-free telephone numbers.)
TO OBTAIN FORMS:
1-800-TAX-FORM (1-800-829-3676)
IRP-BBS ACCESS TO FORMS
304-264-7070
INTERNET ACCESS TO FORMS
http://www.irs.ustreas.gov
.04 Requests for paper returns, publications and forms related to magnetic media processing MUST be made by calling the
“Forms Only Number” listed in your local telephone directory or by calling the IRS toll free number: 1-800-TAX-FORM (1-800829-3676)
.05 The 1998 “Instructions for Form 1042–S” have been included in Publication 1187 for transmitter convenience. The Form
1042 is used to transmit Copy A of paper Forms 1042–S. If filing paper returns, follow the mailing instructions on the Form 1042
and submit the paper returns to the Internal Revenue Service Center, Philadelphia PA 19255.
.06 The Internal Revenue Service Centralized Call Site is located at IRS/MCC and operates in conjunction with the Information
Reporting Program. The Call Site provides service to the payer community (financial institutions, employers, and other transmitters
of information returns).
.07 The Call Site accepts calls from all areas of the country. Hours of operation for the Call Site are Monday through Friday, 8:30
a.m. to 4:30 p.m. Eastern Time. The Call Site is in operation throughout the year to handle the questions of payers, transmitters, and
employers. Due to the high demand for assistance at the end of January and February, it is advisable to call as soon as possible to
avoid these peak filing seasons.
.08 The IRS Centralized Call Site answers both magnetic media and tax law questions relating to the filing of Forms 1042–S, all
information returns, and backup withholding due to missing and incorrect taxpayer identification numbers.
.09 For assistance with regard to the reporting of Forms 1042-S, nonresident alien withholding, magnetic media filing, and processing requirements, contact:
Martinsburg Computing Center
Information Reporting Program Call Site
☎
TEL: 304-263-8700
TDD: 304-267-3367
FAX: 304-264-5602
.10 If you need help with regard to nonresident alien withholding requirements, contact:
August 10, 1998
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Office of the Assistant Commissioner (International)
ATTN: Taxpayer Service Division
950 L’Enfant Plaza South, SW
Washington, DC 20024
☎
TEL: 202-874-1460
FAX: 202-874-5440
Sec. 4. Filing Requirements
.01 The regulations under section 6011(e)(2)(A) of the Internal Revenue Code, provide that any person, including a corporation,
partnership, individual, estate, and trust, who is required to file 250 or more information returns must file such returns magnetically/electronically. Withholding agents who meet the threshold of 250* or more Forms 1042–S are required to submit their information electronically or magnetically.
*Even though as many as 249 Forms 1042–S may be submitted on paper to the Internal Revenue Service, IRS encourages filers to transmit the forms magnetically or electronically.
.02 The filing requirement applies individually to each reporting entity as defined by its separate Taxpayer Identification Number
(TIN), (Social Security Number (SSN), or Employer Identification Number (EIN)). For example, if filing for a corporation with
several branches or locations and each uses the same name and EIN, the filer must aggregate the total volume of returns to be filed
for that EIN and apply the filing requirement accordingly.
.03 This requirement applies separately to original and corrected documents. For example, 300 original documents are filed magnetically or electronically. If 200 of those documents were filed with erroneous information, corrections may be submitted on paper
forms; however, 250 or more corrections must be submitted magnetically/electronically.
☛ Note: If filers meet the filing requirements and engage a service bureau to prepare media on their behalf, the filers
should ensure not to report duplicate data which may cause penalty notices to be generated.
.04 Filers who are required to submit their Forms 1042–S on magnetic media may choose to submit their documents electronically instead. Filers who transmit their information electronically are considered to have satisfied the magnetic media filing requirements.
.05 IRS/MCC has two methods by which payers may submit their files electronically. Bisynchronous (mainframe) electronic filing, which can be found in Part C of this publication, or Asynchronous (Information Reporting Program-Bulletin Board System),
which is in Part D. An overview of some features provided on the IRP-BBS are as follows:
• Electronic filing of information returns to the IRS using dial-up modems
• Return notification of the acceptability of the data transmitted within 10 days for Forms 1042–S
• Electronic communication with IRS and SSA bulletin board systems
• Access to shareware
• Access to forms and publications relating to the Information Reporting Program
• News about the latest changes and updates that affect the Information Reporting Program at IRS
• Answers to messages and questions left on the bulletin board
• Available for public use and can be reached by dialing 304-264-7070
• IRP-BBS is accessible 24 hours a day, 7 days a week. Routine maintenance is performed daily, at approximately 7:00 a.m.
Eastern Time
• Questions, comments, or suggestions can be directed to the Systems Operator (SYSOP) through IRP-BBS.
.06 The above requirements do not apply if the withholding agent submits an application for and is granted an undue hardship
waiver. (See Part A. Sec. 5.)
.07 For additional information on filing requirements, please refer to the 1998 “Instructions for Form 1042-S.”
Sec. 5. Form 8508, Request For Waiver From Filing Information Returns on Magnetic Media
.01 If a payer is required to file on magnetic media but fails to do so (or fails to file electronically, in lieu of magnetic media filing) and does not have an approved waiver on record, the filer will be subject to a penalty of $50 per return in excess of 250. The
penalty applies separately to original and corrected returns. (For penalty information, refer to the Penalty section of the 1998 “Instructions for Forms 1042–S”).
.02 Payers required to file Form 1042–S magnetically or electronically may receive a waiver if the requirement would create an
undue hardship. The payer may request a waiver by submitting Form 8508, Request for Waiver From Filing Information Returns on
Magnetic Media, to IRS/MCC.
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.03 Generally, only the payer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter
signed by the payer stating this fact must be attached to the Form 8508.
.04 A separate Form 8508 must be submitted by each payer. Do not submit a list of payers.
.05 Filers are encouraged to submit Form 8508 at least 45 days before the due date of the return.
.06 If a waiver for original documents is approved, any corrections for the same type of returns will be covered under this waiver.
If a payer submits the original Forms 1042-S on magnetic media, less than 250 corrections may be submitted on paper. However, if
you can submit your original returns on magnetic media but not your corrections, you must request a waiver for those exceeding the
250.
.07 Waivers are evaluated on a case-by-case basis and are approved or denied based on regulation criteria set forth under section
6011(e) of the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/MCC to respond to a waiver request.
.08 All information requested on the Form 8508 must be provided to IRS for the request to be processed. Failure to provide all of
the information requested on the Form 8508 and/or the cost estimates, if applicable, will result in an automatic denial of the waiver
request.
.09 An approved waiver will only provide exemption from magnetic or electronic filing for one tax year. A waiver may not be
requested for more than one tax year at a time. If needed, the withholding agent must apply each year for a waiver.
.10 A copy of Form 8508 may be obtained by calling 1-800-829-3676. Form 8508 may be photocopied or computer-generated as
long as it contains all the information requested on the original form. A copy of the Form 8508 is located in the back of this publication.
.11 If a waiver request is approved, the transmitter should keep the approval letter on file.
.12 An approved waiver from filing information returns magnetically or electronically does not provide exemption from filing;
the withholding agent must still file information returns on acceptable paper forms with the Philadelphia Service Center. Do not include a copy of the approved waiver with the paper forms.
Sec. 6. Vendor List
.01 IRS/MCC prepares a list of vendors who support magnetic media or electronic filing. The Vendor List (Publication 1582)
contains the names of service bureaus that will produce files on the prescribed types of magnetic media or via electronic filing. It
also contains the names of vendors who provide software packages for payers who wish to produce magnetic media or electronic
files on their own computer systems. This list is compiled as a courtesy and in no way implies IRS/MCC approval or endorsement.
.02 If filers meet the filing requirements and engage a service bureau to prepare media on their behalf, the filers should
ensure not to report duplicate data, which may cause penalty notices to be generated.
.03 The Vendor List may be updated in print every other year. The most recently printed copy will be available by contacting
IRS/MCC at 304-263-8700 or by way of letter (See Part A. Sec. 3). The copy of the Vendor List on the Information Reporting Program-Bulletin Board System is updated whenever changes or new information is received. (Refer to Part D).
.04 A vendor, who offers a software package, has the ability to produce magnetic media for customers, or has the capability to
electronically file information returns, and would like to be included on the list, must submit a written request to IRS/MCC. The request should include:
(a) Company name
(b) Address (include city, state, and ZIP code)
(c) Telephone number (include area code)
(d) Contact person
(e) Type(s) of service provided (e.g., service bureau and/or software)
(f) Type(s) of media offered (e.g., magnetic tape or tape cartridge, 5 1⁄4- or 3 1⁄2-inch diskettes or electronic filing)
(g) Type of return
Sec. 7. Form 4419, Application For Filing Information Returns Magnetically/Electronically
.01 Withholding agents or their agents are required to submit Form 4419, Application for Filing Information Returns Magnetically/Electronically, to request authorization to file Forms 1042–S with IRS/MCC. A single Form 4419 should be filed. A separate
Transmitter Control Code (TCC) will be assigned for each form identified in Block 6. A TCC for filing Forms 1042–S begins with
the numbers “22”. Please make sure you submit your magnetic media files using the correct TCC. See the chart below:
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A separate Transmitter Control Code (TCC) is required for filing each of the following types of returns: Forms 1098, 1099,
5498; 8027; 8596; Questionable W–4; and W–2G.
FORM AND TCC
NUMBERING SERIES
TITLE
EXPLANATION
1098, 1099-Series
5498, 8596, and W–2G
(Various TCC numbers
excluding those beginning
with numbers 21, 22, and 70–79)
Various types of Information
returns
Returns using Pub 1220 for filing requirements and record layout
8027
(TCC begins
with numbers “21”)
Employer’s Annual Information
Return of Tip Income and
Allocated Tips
Returns using Pub 1239 for filing requirements and record layout
Questionable W–4
(See Note)
(TCC begins with numbers “70”
through “79”)
Employee’s Withholding
Allowance Certificate
Returns using Pub 1245 for filing requirements and record layout
☛ Note: Employers are not required to send other Forms W–4 unless notified to do so by the IRS.
.02 Form 4419 can be submitted any time during the year; however, it must be submitted to IRS/MCC at least 30 days before the
due date of the return(s) for current year processing. This will allow IRS/MCC the minimum amount of time necessary to process
and respond to applications. In the event that computer equipment or software is not compatible with IRS/MCC, a waiver may be
requested to file returns on paper documents.
.03 For documents to be filed electronically using IBM 3780 bisynchronous protocols, Form 4419 must be submitted at
least 45 days prior to the due date of the returns (See Part C, Sec. 2).
.04 If a filer has been assigned a TCC to file magnetically and later chooses to file electronically, it is not necessary to apply for
another TCC as long as the TCC begins with the digits “22”.
.05 Filers must have a TCC to transmit data electronically. When initial contact is made with the IRP-BBS, filers will be instructed to assign their own password and do not need prior approval, other than a valid TCC.
.06 A Form 4419 is included in the Publication 1187 for the filer’s use. This form may be photocopied. Additional forms may be
obtained by calling 1-800-TAX-FORM (1-800-829-3676). The form is also available on IRP-BBS at 304-264-7070 or on Internet
at http://www.irs.ustreas.gov.
.07 The filer will receive an approval letter that will contain a five-character alpha/numeric TCC (beginning with the digits
“22”). Do not submit Forms 1042-S using a TCC assigned for the purpose of filing other information returns. Forms 1042-S
may not be filed electronically or magnetically until an application has been approved and a TCC assigned. The TCC must be coded
in the Transmitter “T” Record.
A magnetic media reporting package containing the current revenue procedure, forms, and instructions will be sent annually to the
attention of the contact person indicated on Form 4419.
.08 Once a TCC has been assigned for filing magnetically or electronically, it is not necessary to reapply each year unless:
(a) The withholding agent/transmitter has discontinued filing magnetically or electronically for two years; the filer’s TCC
may have been reassigned by IRS/MCC. Filers, who are aware that the TCC assigned will no longer be used, are requested to notify IRS/MCC so these numbers may be reassigned.
(b) The filer’s magnetic media files were transmitted in the past by a service bureau using the service bureau’s TCC, but
now the filer has computer equipment compatible with that of IRS/MCC and wishes to prepare his or her own files.
The filer must request a TCC by filing Form 4419.
If any of the information (name, TIN or address) on the Form 4419 changes, please notify IRS/MCC in writing so the IRS/MCC
database can be updated. However, a change in the method by which information returns are being submitted is not information
which needs to be updated (i.e., tape to disk, disk to BBS). The transmitter should include the TCC in all correspondence.
.09 If a withholding agent’s files are prepared by a service bureau, it may not be necessary to submit an application to obtain a
TCC. Some service bureaus will produce files, code their own TCC on the media, and send it to IRS/MCC for the withholding
agent. Other service bureaus will prepare magnetic media and return the media to the withholding agent for submission to
IRS/MCC. However, even if the service bureau prepares and transmits the media, the withholding agent is responsible for the accuracy of the filing and the returns being filed. The withholding agent will be liable for penalties for failure to comply with filing requirements. These service bureaus may require the withholding agent to obtain a TCC to be coded in the “T” Record. Withholding
agents should contact their service bureaus for further information.
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.10 IRS/MCC encourages transmitters who file for multiple payers to submit one application and to use the assigned TCC for all
withholding agents.
.11 One Form 4419 may be submitted regardless of how many types of media or methods are used to file the return. Multiple
TCC’s will only be issued to withholding agents with multiple TINS. Only one TCC will be issued per TIN unless the filer
has checked other forms listed in Block 6 of Form 4419 in addition to Forms 1042–S.
.12 Approval to file does not imply endorsement by IRS/MCC of any computer software or of the quality of tax preparation services provided.
Sec. 8. Test Files
.01 IRS/MCC does not require test files, but encourages first-time magnetic media or electronic filers to submit a test for review
prior to the filing season. For current filers, sending a test file will provide the opportunity to ensure their software reflects any programming changes. IRS/MCC will check the file to ensure it meets the specifications of this revenue procedure. The test file must
not consist of fictitious data. The test file must consist of a sample of each type of record:
(a) Transmitter “T” Record
(b) Multiple Recipient “Q” Records (at least 20)
(c) Withholding Agent “W” Record
(d) End of Transmission “Y” Record
See Part B for the record formats.
.02 Use the Test Indicator “TEST” in Field Positions 133-136 of the “T” Record to show this is a test file.
.03 Form 4419 must be filed with IRS/MCC and a TCC must be assigned before test files are submitted.
.04 Tests should be sent to IRS/MCC between December 1 and February 15. The test must be received at MCC by February
15 in order to be processed.
.05 For tests filed electronically, the transmitter must send the signed Form 4804, Transmittal of Information Returns Reported
Magnetically/Electronically, the same day the transmission is made. For tests filed on magnetic tape, tape cartridge, 8mm, 4mm,
and quarter inch cartridge, 5 1⁄4- and 3 1⁄2-inch diskettes, the transmitter must include the signed Form 4804 in the same package with
the corresponding magnetic media. Mark the “TEST” box in Block 1 on the form, and in Block 9 provide the total number of recipient “Q” records. Also, indicate “TEST” on the external media label.
.06 IRS/MCC will send an acknowledgment to indicate the test results. Unacceptable magnetic media files, along with documentation identifying the errors, will be returned to the filer for replacement. Resubmission of test files must be received by
IRS/MCC no later than February 15.
.07 IRS/MCC does not return media once it has been successfully processed.
Sec. 9. Filing of Forms 1042-S Magnetically/Electronically and Retention Requirements
.01 Form 4804, Transmittal of Information Returns Reported Magnetically/Electronically, Form 4802, Transmittal of Information
Returns Reported Magnetically/Electronically (Continuation), or computer-generated substitute, must accompany all magnetic
media shipments. For electronic transmissions, the Form 4804 and Form 4802, if applicable, must be sent the same day as the electronic transmission. Form 4802 is a continuation of Form 4804 and should only be used if the filer is reporting for multiple withholding agents. Form 4802 is not a stand-alone form; it can only accompany Form 4804.
.02 IRS/MCC encourages the use of computer-generated substitutes for Form 4804/4802. The substitutes must contain all information requested on the original forms including the affidavit and signature line. Photocopies are acceptable but an original signature is required. When using computer generated forms, be sure to mark very clearly which tax year is being reported. This
will eliminate a call from IRS/MCC to question the tax year.
.03 Multiple types of media may be submitted in a shipment. However, submit a separate Form 4804 for each type of media.
.04 Current and prior year data may be submitted in the same shipment; however, each tax year must be on separate media,
and a separate Form 4804 must be prepared to clearly indicate each tax year.
.05 Filers who have prepared their information returns in advance of the due date are encouraged to submit this information to
IRS/MCC no earlier than January 1 of the year the return is due.
.06 Do not report duplicate information. If a filer submits returns magnetically/electronically, identical paper documents
must not be filed. This may result in erroneous penalty notices.
.07 Form 4804 may be signed by the withholding agent or the transmitter, service bureau, paying agent, or disbursing agent (all
hereafter referred to as agent), on behalf of the payer. An agent may sign the Form 4804 if the agent has the authority to sign the affidavit under an agency agreement (either oral, written, or implied) that is valid under state law and adds the caption “FOR: (name of
withholding agent/payer)”. Failure to sign the affidavit on Form 4804 may delay processing or could result in the files being returned unprocessed.
.08 Although an authorized agent may sign the affidavit, the withholding agent is responsible for the accuracy of the Form 4804
and the returns filed. The withholding agent will be liable for penalties for failure to comply with the filing requirements.
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.09 A self-adhesive external media label, created by the filer, must be affixed to each tape and diskette. (IRS no longer provides self-adhesive labels for this purpose.) For instructions on how to prepare an external media label, refer to Notice 210 in the
forms section of this publication. If diskettes are used, and the operating system is not MS-DOS compatible, the operating system and
hardware information must be provided. Failure to provide this information may result in the diskettes being returned to the filer.
.10 On the outside of the shipping container, affix or attach a label which reads IRB Box ___of___ reflecting the number of containers in the shipment. (Filers can create a label with this information or cut out one of the labels on the special label page provided
in this publication). If there is only one container, mark the outside as Box 1 of 1. For multiple containers, include the sequence (for
example, Box 1 of 3, 2 of 3, 3 of 3).
.11 When submitting files include the following:
(a) A signed Form 4804;
(b) Form 4802, if applicable;
(c) External Media Label (created by the filer) affixed to the magnetic media;
(d) IRB Box ___ of ___ outside label.
☛ Note: See Parts C and D for electronic submission requirements.
.12 IRS/MCC will not pay for or accept “Cash-on-Delivery” or “Charge to IRS” shipments of tax information that an individual
or organization is legally required to submit.
.13 Withholding agents should retain a copy of the information returns filed with IRS or have the ability to reconstruct the data for
at least 3 years from the reporting due date.
Sec. 10. Due Dates
.01 The due dates for filing paper returns with IRS also apply to magnetic media or electronic filing. Filing of Form 1042–S is on
a calendar year basis. Files must be submitted to IRS/MCC postmarked no later than March 15 of the calendar year.
.02 If the due date of March 15 falls on a Saturday, Sunday, or a legal holiday, the return to IRS and the statement to recipient is
considered timely if filed with IRS and furnished to the recipient on the next business day.
.03 Returns postmarked by the United States Postal Service (USPS) on or before March 15, 1999, and delivered by United States
mail to the IRS/MCC after the due date, are treated as timely under the “timely mailing as timely filing” rule. A similar rule applies
to items delivered by private delivery services (PDSs) designated by the IRS. A PDS must be designated by the IRS before it will
qualify for the timely mailing rule. Designation is determined with respect to each type of delivery service offered by a PDS (e.g.,
next day delivery, two day delivery, etc.). Notices 97–26, 1997–1 C.B. 413 and 97–50, 1997–37 I.R.B.21, provide the list of designated PDSs and the types of delivery services designated. Designation is effective until the IRS issues a revised list of designated
PDSs. Notice 97–26 also provides rules for determining the date that is treated as the postmark date. For items delivered by a nondesignated PDS, the actual date of receipt by IRS/MCC will be used as the filing date. For items delivered by a designated PDS, but
through a type of service not designated in Notices 97–26 or 97–50, the actual date of receipt by IRS/MCC will be used as the filing
date. The timely mailing rule also applies to furnishing statements to recipients.
.04 Statements to recipients must be furnished to the income recipient on or before March 15, 1999, for TY98.
.05 Late filed media could result in a penalty for failure to file correct information returns by the due dates. (For information on
penalties, refer to the Penalty Section of the 1998 “Instructions for Form 1042–S”.
.06 Use this revenue procedure to prepare Forms 1042–S filed magnetically or electronically beginning January 1, 1999 and received by IRS/MCC no later than December 31, 1999.
Sec. 11. Extensions of Time to File
.01 An extension of time to file may be requested for Form 1042–S.
.02 Form 8809, Request for Extension of Time to File Information Returns, should be submitted to IRS/MCC. This form may be
used to request an extension of time to file information returns submitted on paper, magnetically or electronically.
.03 Requesting an extension of time for multiple withholding agents (50 or less) may be done by submitting Form 8809 and attaching a list of the withholding agent’s names and their TINs (EIN or SSN). The listing must be attached to ensure the extension
is recorded for all withholding agents. Form 8809 may be computer-generated or photocopied. Be sure all the pertinent information is included.
.04 Requests for an extension of time to file for more than 50 withholding agents are required to be submitted magnetically or
electronically (See Note). Requests for an extension of time for 10 to 50 withholding agents are encouraged to be filed magnetically
or electronically. (See Part E, Sec. 3, for the record format.) The request may be filed on tape, tape cartridge, 5 1⁄4- and 3 1⁄2-inch
diskette, or electronically through the IRP-BBS or mainframe.
☛ Note: If a filer does not have an IRS/MCC assigned TCC, a Form 4419, Application for Filing Information Returns
Magnetically/Electronically, must be submitted to obtain a TCC. This number must be used to submit an extension request magnetically/electronically.
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.05 All magnetically filed requests for an extension of time should be sent using the following addresses:
✉
If by Postal Service:
IRS-Martinsburg Computing Center
Information Reporting Program
ATTN: Extension of Time Coordinator
P. O. Box 879
Kearneysville, WV 25430
✈
If by truck or air freight:
IRS-Martinsburg Computing Center
Information Reporting Program
ATTN: Extension of Time Coordinator
Route 9 and Needy Road
Martinsburg, WV 25401
.06 Requests for extensions of time for multiple withholding agents will be responded to with one approval letter, accompanied
by a list of withholding agents covered under that approval.
.07 Withholding agents may request an extension of time to file for 30 days as soon as they are aware that an extension is necessary; but no later than the due date of the return (March 15, 1999 (TY98) for Forms 1042–S). It will take a minimum of 30 days
for IRS/MCC to respond to an extension request. Under certain circumstances, a request for an extension of time could be denied.
When a denial letter is received, any additional or necessary information may be resubmitted within 20 days.
.08 If an additional extension of time is needed, a second Form 8809 must be submitted before the end of the initial extension period. Line 7 on the form indicates an additional extension is being requested. A second 30-day extension will be approved only in
cases of extreme hardship or catastrophic event. When requesting an extension of time, submit the information return files as
soon as prepared. Do not wait for MCC’s response to your extension request.
.09 Form 8809 must be postmarked no later than the due date of the return for which an extension is requested. If requesting an
extension of time to file several types of forms, use one Form 8809, but the Form 8809 must be postmarked no later than the
earliest due date. For example, if requesting an extension of time to file both Forms 1099–INT and 1042–S, submit Form 8809
postmarked on or before March 1, 1999. Complete more than one Form 8809 to avoid this problem.
.10 If an extension request is approved, the approval letter should be kept on file. The approval letter or copy of the approval letter for an extension of time should not be sent to IRS/MCC with the magnetic media file or to Philadelphia Service Center with the
paper returns.
.11 Request an extension for only one tax year.
.12 The extension request must be signed by the withholding agent or a person who is duly authorized to sign a return, statement
or other document for the agent.
.13 Failure to properly complete and sign the Form 8809 may cause delays in processing the request or result in a denial. Please,
read and follow the instructions on the back of the Form 8809 carefully.
.14 Form 8809 may be obtained by calling 1-800-TAX-FORM (1-800-829-3676). The form is also available on IRP-BBS at
304-264-7070 or on Internet at http://www.irs.ustreas.gov. A copy of the Form 8809 is also provided in the back of the Publication 1187.
.15 Request an extension of time to furnish the statements to recipients of Form 1042–S by submitting a letter to IRS/MCC containing the following information:
(a) Withholding Agent’s Name
(b) TIN
(c) Address
(d) Type of Return
(e) Specify that the extension request is to provide statements to recipients.
(f) Reason for Delay
(g) Signature of Withholding Agent or Person Duly Authorized
Requests for an extension of time to furnish the statements to recipients of Form 1042–S are not automatically approved; however, if approved, generally an extension will allow a maximum of 30 additional days from the due date to furnish the statements to
the recipients. The request must be postmarked by the date on which the statements are due to the recipients.
.16 An approved extension grants additional time to file the Forms 1042–S with IRS/MCC only. This does not include Form
1042 which is an actual tax return. Any tax due must still be paid timely.
.17 To request an extension of time to file Form 1042, submit Form 2758 with the IRS at the following address:
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✉
Internal Revenue Service Center
Philadelphia, PA 19255
Sec. 12. Processing of Information Returns Magnetically/Electronically
.01 All data received at IRS/MCC for processing will be given the same protection as individual income tax returns (Form 1040).
IRS/MCC will process the data and determine if the records are formatted and coded according to this revenue procedure.
.02 If media is returned, it is because IRS/MCC encountered errors, (not limited to format) and was unable to process the media,
therefore, requiring a replacement. Open all packages immediately.
.03 When the magnetic media is returned to the transmitter for replacement, it will be accompanied with a Media Tracking Slip
(Form 9267), and sample records identifying the type of errors. It is the responsibility of the transmitter to check the entire file for
similar errors.
.04 Files must be corrected and returned with the Media Tracking Slip (Form 9267) to IRS/MCC within 45 days from the date of
the letter IRS/MCC included with the returned files. If the payee record count (number of “Q” Records ) has changed from the original filing, include a Form 4804 stating the new record count; mark the word replacement in Box Number 1; and return the form with
your replacement media. A penalty for failure to file correct information returns by the due date will be assessed if the files are not
corrected and returned within 45 days, or if the incorrect files are returned by IRS/MCC for replacement more than two times.
A penalty for intentional disregard of the filing requirements will be assessed if a replacement file is not received. (For penalty information refer to the Penalty Section of the 1998 “Instructions for Form 1042–S”).
.05 Some conditions may not require corrective actions. For example, certain recipients should have had tax withheld at a
particular rate, but the withholding agent withheld at a different tax rate. A letter from the filer must accompany the original and/or replacement files verifying the amount reported on the Form 1042–S was actually withheld by the agent, and the
tax rate being used is the correct one from Publications 515 or 901. This letter will permit the incorrect data to be accepted
for processing, but does not relieve the withholding agent of the responsibility to withhold at the prescribed tax rates, or to
remit the correct amount of tax with Form 1042 (See Part B, Sec. 8, “Q” Record layout, positions 372-373, tax rate NOTES).
.06 The following definitions have been provided to help distinguish between a replacement and a correction:
• A correction is an information return submitted by the transmitter to correct a return that was successfully processed by
IRS/MCC, but contained erroneous information (See Sec. 13, Corrected Returns).
• A replacement is an information return file that IRS/MCC has returned to the transmitter due to format or coding errors
encountered during processing. After necessary changes have been made, the file must be returned for processing along
with the Media Tracking Slip (Form 9267) which was included in the shipment from IRS/MCC.
☛ Note: Filers should never send anything to IRS/MCC marked “REPLACEMENT” UNLESS IRS/MCC returned
media to them.
.07 IRS/MCC will not return media after successful processing. Therefore, if the transmitter wants proof that IRS/MCC received
a shipment, the transmitter should select a service with tracing capabilities or one that will provide proof of delivery.
.08 IRS/MCC will work with filers as much as possible to assist with processing problems. If the filer is contacted by
IRS/MCC, a prompt response is important. IRS/MCC may have information the filer needs to correct his or her file.
.09 IRS/MCC contacts withholding agents who have submitted recipient data with missing TINs in an attempt to prevent errors
that could result in penalties. Agents who submit data with missing TINs and have taken the necessary steps to obtain this information
are required to attach a letter of explanation to the Form 4804. This will prevent unnecessary contact from IRS/MCC. (See Part B,
Sec. 8, “Q” Record Layout, Positions 113–121). However, corrections are required to be filed as soon as the TIN has been received.
.10 Do not use special shipping containers for transmitting data to IRS/MCC. Shipping containers will not be returned.
Sec. 13. Corrected Returns
.01 The magnetic media and electronic filing requirements of 250 or more Forms 1042–S applies separately to both original and
corrected returns.
.02 If Forms 1042–S are filed magnetically or electronically, and later the filer determines that corrections are necessary, the corrections may be filed on paper if the 250 documents threshold has not been met.
.03 If the withholding agent has 250 or more corrections, they must be submitted to IRS/MCC magnetically or electronically unless a waiver has been granted. If a waiver was granted for original Forms 1042–S, this waiver applies to the corrections as well.
.04 Corrections should be filed as soon as possible. Corrections filed after August 1 may be subject to the maximum penalty of
$50 per return. Corrections filed prior to August 1 may be subject to a lesser penalty. (For information on penalties, refer to the
Penalty Section of the 1998 “Instructions for Forms 1042–S”.) However, if withholding agents discover errors after August 1, they
may still be required to file corrections so they will not be subject to a penalty for intentional disregard of the filing requirements.
Failure to correct information returns may result in penalties for failure to provide correct information. All fields must be com-
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pleted with the correct information, not just the data fields needing correction. Submit corrections only for the returns filed in
error, not the entire file. Furnish corrected statements to recipients as soon as possible.
.05 Prior year data, original and corrected, must be filed according to the requirements of this revenue procedure. Be sure to use
the actual year designation of the correction in field positions 2–5 of the “T” record. If filing electronically, a separate transmission
must be made for each tax year, and magnetically filed prior year data must be on separate media.
.06 In general, filers should submit corrections for returns filed within the last three calendar years.
.07 The “Q” record provides a 15-position field (positions 122–136) for the recipient’s account number assigned by the withholding agent. Do NOT enter a TIN as an account number. This number will help identify the appropriate incorrect return if more than
one return is filed for a particular recipient.
.08 Corrected returns MUST NOT be included on the same media or sent in the same electronic transmission with original returns.
☛ Note: If filers discover that certain information returns were omitted on their original file, they must NOT submit these
documents as corrections. They must submit them as original returns and on separate media from corrections.
.09 Form 4804 and Form 4802 must be submitted with corrected files submitted magnetically/electronically. Mark “Correction”
in Block 1. Indicate type of filing as “C” on the media label.
.10 To provide clarification of the correction process for Forms 1042–S, the following definitions have been provided:
(a) A void record is an information return (Form 1042–S) submitted by the transmitter to delete a previously filed incorrect
original return. A void record must be a duplicate of the original successfully processed return with the exception of a
“V” in field position 371 of the “Q” record. This record can be filed with or without a corresponding “C” record.
For example, a Form 1042–S was submitted, and it should have been prepared as a Form 1099. A “Q” record with the
original Form 1042–S information would be filed with a “V” in position 371. In this instance, a corresponding “C”
coded “Q” record would NOT be necessary.
(b) A correction is an information return (Form 1042–S) submitted by the transmitter to correct a return that was successfully processed by IRS/MCC, but contained erroneous information. A “C” in field position 371 of the “Q” record identifies a correction record. This record must always have a corresponding “V” record.
.11 Following is a chart showing the steps to be taken for correcting Forms 1042–S:
Guidelines for Filing Corrected Returns
Magnetically/Electronically
Transaction 1: Identify incorrect returns (void process)
The record sequence for filing corrections is the same as for original returns. Create the file in the following order exactly the
same as the original transmission:
(a) Transmitter “T” Record
(b) Recipient “Q” Record with the exact information as submitted originally; however,
(c) Place a “V” (See Note) in field position 371 of the “Q” Record
(d) Prepare a Withholding Agent “W” Record summarizing the preceding “V” Coded “Q” Records. (See sample format below.)
☛ Note: A “V” coded “Q” Record may or may not have a corresponding “C” Coded “Q” Record. (See Sec. 13.10)
Transaction 2: Report the correct information (correction process)
On the same media or electronic submission prepare:
(a) Recipient “Q” Record with the correct information
(b) Place a “C” (See Note) in Field Position 371 of the “Q” Record
(c) Prepare a Withholding Agent “W” Record summarizing the preceding “C” coded “Q” records
(d) Prepare an End of Transmission “Y” record
(e) “V” and “C” Coded Corrected returns submitted to IRS/MCC must be in the same submission.
☛ Note: Each “C” Coded “Q” Record MUST have a corresponding “V” Record.
.12 Sample data sequence for void/correction records:
T
Q with V
Q with V
Q with V
Q with V
Q with V
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Q with V
W
Q with C
Q with C
Q with C
Q with C
W
Y
.13 For information on when an amended Form 1042 is required, refer to Pub. 515, “Withholding of Tax on Nonresident Aliens
and Foreign Corporations”.
.14 All paper returns, whether original or corrected, must be filed with the Philadelphia Service Center. See the 1998 Paper Instructions for Forms 1042–S for information on filing paper corrections.
Sec. 14. U.S. Taxpayer Identification Numbers (TIN) and Individual Taxpayer Identification Number
(ITIN)
.01 Any recipient whose income is effectively connected with a U.S. trade or business must obtain and furnish the withholding
agent with a U.S. taxpayer identification number. The U.S. taxpayer identification number is a Social Security Number (SSN) or an
Individual Taxpayer Identification Number (ITIN) in the case of an individual and an Employer Identification Number (EIN) in all
other cases. These identification numbers are required on the Forms 1042–S filed with the IRS.
.02 As of January 1, 1997, the IRS will no longer accept tax returns without a Taxpayer Identification Number (TIN) for the person filing a return, the spouse on a joint return, or for dependents claimed on a return.
.03 An ITIN is a nine digit number that the IRS assigns in the following format: 900-00-0000. This number will always begin
with “9” and “0” may be any other number. The IRS uses the number to identify taxpayers, dependents or spouses (resident or nonresident alien individuals) who are required to or wish to file a U.S. tax return, but are unable to obtain a Social Security Number
(SSN). The ITIN is for tax purposes only. It does not entitle the recipient to Social Security benefits, and creates no inference regarding immigration status or the right to work in the United States.
.04 Use IRS Form W–7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN by mail or in person at most IRS offices. You may obtain the Form W–7 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676).
☛ Note: Taxpayers who have a previously assigned Internal Revenue Service Taxpayer Identification Number (IRSN) may
also use Form W–7 to request a valid ITIN.
Sec. 15. Effect on Paper Returns and Statements to Recipients
.01 Magnetic or electronic reporting eliminates the need to submit paper Forms 1042–S to IRS. CAUTION! Do not send Copy
A of the paper forms to IRS/MCC in addition to magnetic media and electronic filing or to the Philadelphia Service Center.
This will result in duplicate filing; therefore, erroneous notices could be generated.
.02 Withholding Agents are responsible for providing statements to the recipients as outlined in the 1998 Paper Instructions for
Form 1042–S. Refer to these instructions for filing information returns on paper with the IRS and furnishing statements to recipients.
.03 Statements to recipients should be clear and legible. If the official IRS form is not used, the filer must adhere to the specifications and guidelines in Publication 1167, Substitute Printed, Computer Prepared, and Computer Generated Tax Forms and
Schedules (Rev. 10–97).
.04 The address for filing paper Forms 1042–S and 1042 is:
✉
Internal Revenue Service Center
Philadelphia, PA 19255
Do NOT send paper Forms 1042–S or 1042 to IRS/MCC.
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Sec. 16. Definition of Terms
Element
Description
Asynchronous Protocols
This type of data transmission is most often used by micro- computers, PCs
and some mini-computers. Asynchronous transmissions transfer data at
arbitrary time intervals using start-stop method. Each character transmitted has its own start bit and stop bit.
b/
Denotes a blank position. Enter blank(s) when this symbol is used (do not
enter the letter “b”). This appears in numerous areas throughout the record
descriptions.
Bisynchronous Protocols
For purposes of this publication, these are electronic transmissions made using
IBM 3780 protocols. These transmissions must be in EBCDIC character code
and use the Bell 208B (4800bps), AT&T 2296A (9600bps) or Hayes OPTIMA
288 V.FC Smart modem (14400bps) modems. Standard IBM 3780 space compression is acceptable.
Blocked records
Two or more records grouped together between interrecord gaps.
Correction
A correction is an information return (Form 1042–S) submitted by the transmitter to correct a return that was previously submitted to and processed by
IRS/MCC, but contained erroneous information.
☛ Note: A correction should not be confused with a replacement. Only media returned to the filer by IRS/MCC due to
processing problems should be marked replacement.
Employer Identification Number (EIN)
A nine-digit number assigned by IRS for Federal tax reporting purposes.
Electronic Filing
Submission of information returns using switched telecommunications network circuits. These transmissions use modems, dial-up phone lines, and
asynchronous or bisynchronous protocols. (See Parts A, C and D of this publication for specific information on electronic filing).
File
For purposes of this revenue procedure, a file consists of a Transmitter “T”
record at the beginning of the file, Recipient “Q” records, followed by a corresponding Withholding Agent “W” Record, then additional “Q” and “W”
Record sequences for other Withholding Agents, as needed, and an End of
Transmission “Y” Record.
Filer
Person (may be withholding agent and/or transmitter) submitting information
returns to IRS.
Filing Year
The actual year in which the information returns are being submitted to
IRS/MCC (if magnetically/electronically), or to Philadelphia Service Center
(if paper)
Individual Taxpayer
Identification Number (ITIN)
A nine digit number issued by the IRS to a resident or nonresident alien
individual required to have a U.S. taxpayer identification number but who
does not have and cannot obtain an SSN.
Information Return
The vehicle for submitting required information about another person to IRS.
For this revenue procedure, it is information about a foreign person’s U.S.
source income subject to Withholding, and the information return is Form
1042–S.
Magnetic Media
For this revenue procedure, the term “magnetic media” refers to 1⁄2-inch magnetic tape; IBM 3480/3490/3490E or AS400 compatible tape cartridge; 8mm,
4mm, and QIC (Quarter Inch cartridges) cartridge or 5 1⁄4- and 3 1⁄2-inch diskettes.
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Element
Description
Media Tracking Slip
Form 9267 accompanies media that IRS/MCC has returned to the filer for
replacement due to incorrect format or errors encountered when trying to
process media. THIS FORM MUST BE RETURNED WITH THE
REPLACEMENT FILE.
Multi-reel/diskette file
A group of tape reels or diskettes submitted under one TCC where all media
either ends with a Recipient “Q” Record or Withholding Agent “W” Record,
except for the last media of the file, which ends with an End of Transmission
“Y” Record. (Refer to Part B. Sec. 6 for data sequence specifications)
Payer
Person or organization who is the originator of income and enters into a contractual agreement with the withholding agent for the purpose of disbursing
income for the payer. For example, Corporation X is about to declare a dividend. Corporation X contracts Bank Y to calculate and distribute such dividends to recipients, and be responsible for withholding. Corporation X is considered the Payer and Bank Y is considered the Withholding Agent.
Recipient
Person or organization receiving payments from a withholding agent.
Replacement
A replacement is an information return file that IRS/MCC has returned to the
transmitter due to errors encountered during processing.
☛ Note: Filers should never submit media to IRS/MCC marked “Replacement” unless IRS/MCC returned media to the filers. When
sending “Replacement” media be sure to include the Media Tracking Slip (Form 9267) which will accompany media
returned by IRS/MCC. Media that has been incorrectly marked as replacement may result in duplicate filing.
Service Bureau
Person or organization with whom the filer has a contract to prepare and/or
submit information return files to IRS/MCC. A parent company submitting
data for a subsidiary is not considered a service bureau.
Social Security Number (SSN)
A nine-digit number assigned by the Social Security Administration (SSA) to
an individual for tax and wage reporting purposes.
Special Character
Any character that is not a numeric, an alpha, or a blank.
SSA
Social Security Administration
Taxpayer Identification
Number (TIN)
Refers to either a Social Security Number (SSN), an Employer Identification
Number (EIN), or an Individual Taxpayer Identification Number (ITIN)
Tax Year
The year in which payments were made by a withholding agent to a recipient.
Transmitter
Person or organization who prepares and submits file(s) magnetically/electronically. May be the withholding agent or their agent.
Transmitter Control Code (TCC)
A five-character alpha/numeric number assigned by IRS/MCC to the transmitter prior to the filing of magnetic or electronic information. This number
is inserted in the “T” Record of the file and must be present before the file can
be processed. An application Form 4419 must be filed with IRS/MCC to
receive this number. Transmitter control codes assigned to 1042–S filers will
always begin with “22”. Do not use the TCC number assigned for Form 1099
filing.
Vendor
Vendors include service bureaus that produce information return files on the
prescribed types of magnetic media or via electronic filing for withholding
agents. Vendors also include companies who provide software for those who
wish to produce their own media or electronic files.
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Element
Description
Void
A void record is used in the correction process of Form 1042–S. For purposes
of this revenue procedure, a void record is an information return (Form 1042–S)
submitted by the transmitter to delete a previously filed incorrect original return.
A void record must be a duplicate of the original successfully processed return
with the exception of a “V” in field position 371 of the “Q” record.
Withholding Agent
A person or entity, U.S. or foreign, required to withhold U.S. tax on payments
of income subject to withholding from U.S. sources. A withholding agent may
be an individual, partnership, corporation, trust, estate, government agency
(Federal, State or local), association, or a tax-exempt foundation (whether
domestic or foreign), tenant, manager, broker, agent, fiduciary, or spouse.
Withholding agents include U. S. citizens and residents, and foreign nominees
and fiduciary residents of treaty countries who must withhold additional U.S.
tax under tax treaty provisions. The withholding agent is responsible for the
completeness, accuracy, and timely submission of files.
Sec. 17. Major Problems Encountered
IRS/MCC encourages filers to verify the format and content of each type of record to ensure the accuracy of the data. This may
eliminate the need for IRS/MCC to return files for replacement. This may be important for those filers who have either had their
files prepared by a service bureau or who have purchased preprogrammed software packages (see Note). If a filer purchased a software package for a previous tax year, it will not be valid for reporting TY98 information returns due to tax law and record format
changes.
☛ Note: If filers meet the filing requirements and engage a service bureau to prepare media on their behalf, the filer
remains responsible for the accuracy of the data submitted to IRS.
The Major Problems Encountered lists some of the most frequently encountered problems with magnetic/electronic files submitted to IRS/MCC. These problems may result in media being returned for replacement.
1. Records formatted incorrectly.
Use the record format as prescribed in this revenue procedure. Failure to format records correctly will result in files being returned
for replacement.
2. Incorrect or missing Transmitter Control Code.
Filers MUST use the unique Transmitter Control Code (TCC) assigned for Form 1042–S reporting. This TCC must begin with the
numbers “22.” Application procedures are provided in Part A., Sec. 7, of this revenue procedure.
3. Incorrect format of the Recipient Name Line.
The recipient’s surname should be reported first, followed by given names. However, if the recipient’s surname is not entered beginning in position 139 of the “Q” Record, the filer must enter an asterisk that immediately precedes the recipient’s surname. If the
surname is reported first, the asterisk must be omitted, since an asterisk is not valid in the first position of Recipient Name Line One.
4. Incorrect record sequence.
To be acceptable, records must be in a specific sequence. If this sequence is not followed, the file will be returned for replacement.
(Refer to Part B., Sec. 6)
5. Incorrect block size.
Some of the files received at IRS/MCC are blocked incorrectly causing media to be returned. Refer to Part B., Sec. 2., for the correct block size for submitting Forms 1042–S magnetically/ electronically. A block may not exceed 15,000 characters, although,
shorter blocks may be used.
6. Incorrect use of Country Code in positions 137–138 of the Recipient “Q” Record.
If the letters OC (which should be used ONLY when absolutely necessary) are used, rather than a specific country code, the rate of
tax withheld MUST be 30 percent.
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7. Incorrect use of Country Name in positions 335–354 of the Recipient “Q” Record.
This is a Required field for foreign addresses. Please read the Description and Remarks portion carefully. This may or may not be
the same country as indicated in the Country Code, field positions 137–138. DO NOT use Other Country; USA; US; Outside of
USA; United States.
8. Incorrect use of Tax Rate, Field position 372–373 of the Recipient “Q” Record.
This is a Required field with very specific acceptable codes. Please ensure the accuracy of the correct tax rate depending on the
proper country code and/or exemption code. See Part A, Sec. 12.05 and Part B, Sec. 8 for additional information.
9. Incorrect use of Exemption Code in field position 370 of the Recipient “Q” Record.
This is a Required field which causes many processing errors. Please read carefully the description and remarks portion, along with
the notes at the bottom to eliminate the possibility of errors.
10. Incorrect usage of Recipient Address Fields of the “Q” Record.
Be sure to use the specific breakdown of the address in the following positions:
U.S. Address Fields
(229 – 283) Street Address
(284 – 308) City
(324 – 332) Zip Code
(333 – 334) U. S. State Code
Foreign Address Fields
(229 – 283) Street Address
(284 – 308) City
(309 – 323) Province Name
(324 – 332) Postal Code
(335 – 354) Country Name
11. Math Computation Discrepancy
To avoid this error, apply the following formula to determine U.S. Federal Tax Withheld (field positions 374-384 of the “Q” Record).
All field positions described in the formula below are also in the “Q” Record:
Income Codes 15 and/or 16
All Other Income Codes
Gross Income Paid (359–369)
– Withholding Allowance (430–439)
= Net Income Amount (440–449)
⫻Tax Rate (372-373)
= U.S. Federal Tax Withheld (374–384)
Gross Income Paid (359–369)
⫻Tax Rate (372–373)
= U.S. Federal Tax Withheld (374-384)
Part B. Magnetic Media Specifications
Sec. 1. General
.01 The specifications contained in this part of the revenue procedure define the required format and content of the records to be
included in the magnetic media/electronic file. Do not deviate from this format.
.02 Transmitters must be consistent in the use of recording modes and density on files. If the media does not meet these specifications, it will be returned to the transmitter for replacement. Filers are encouraged to submit a test prior to submitting the actual
file. Contact IRS/MCC for further information at 304-263-8700.
.03 Regardless of the type of media used or if returns are filed electronically, the record length must be 500 positions.
Sec. 2. Tape Cartridge Specifications
☛ Note: Due to modernization efforts, cartridges created in ASCII format are the preferred type of media.
.01 Although IRS/MCC can process most compatible tape cartridge files, ASCII (American Standard Coded Information
Interchange) format is preferred. The following specifications will help alleviate processing problems:
(a) Standard acceptable format for 1042–S processing:
(1) ASCII Format (American Standard Coded Information Interchange)
(2) 18 Track (37, 871 CPI) or
(3) 36 Track (75,742 CPI) tape cartridge
(4) Labeled (preferred)
(b) If unable to create and submit tape cartridges in the requested ASCII format, they may be submitted in this EBCDIC format:
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(1) Must be IBM 3480, 3490, or AS400 compatible
(2) Standard label format
(3) Record size – 500 characters
(4) Blocking – multiple of 500; only the last block may be short
(5) Block size – 500 – 15,000 characters
.02 Transmitters should be consistent in the use of recording modes and density on files.
(1) Tape cartridges will be 1⁄2-inch tape contained in plastic cartridges which are approximately 4-inches by 5-inches by
1-inch in dimension.
(2) Magnetic tape will be chromium dioxide particle based 1⁄2-inch tape.
(3) Cartridges must be 18-track or 36-track parallel. (See Note.)
(4) Cartridges will contain 37,871 CPI or 75,742 CPI (characters per inch).
(5) Mode will be full function.
.03 The tape cartridge records defined in this revenue procedure may be blocked subject to the following:
(a) A block must not exceed 15,000 tape positions.
(b) If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9’s;
however, the last block of the file may be filled with 9’s or truncated. Do not pad a block with blanks.
(c) All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control
fields or block descriptor fields which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last
block which may be shorter (see item b above). The block length must be evenly divisible by 500.
(d) Records may not span blocks.
.04 Although labeled tape cartridges are preferred, tape cartridges may be labeled or unlabeled.
.05 For the purposes of this revenue procedure, the following must be used:
Tape Mark:
(a) Used to signify the physical end of the recording on tape.
(b) May follow the header label and precede and/or follow the trailer label.
.06 Tape header and trailer labels, record marks, and tape marks (other than the tape mark signifying the end of tape) are all
optional. If used, they must conform to the following ANSI standards:
(a) Header labels must begin with VOL1, HDR1, HDR2, or 1HDR. They must be the first record(s) on the reel immediately before the Transmitter “T” Record. Header labels may not exceed 80 characters in length.
(b) Trailer labels must begin 1EOR, 1EOF, EOF1, or EOV1, EOV2, EOF2. They must be the last record(s) on the reel, after
the “Y” record and tape mark (if a tape mark is used). Labels must be 80 characters in length. Any data beyond the
trailer label cannot be read by IRS programs.
☛ Note: Filers should indicate on the external media label and transmittal Form 4804 whether the cartridge is 36- or 18track, and if data is created in ASCII or EBCDIC format.
Sec. 3. Magnetic Tape Specifications
.01 IRS/MCC can process most compatible magnetic tape files. If transmitters are unable to submit data on cartridge, ASCII formatted magnetic tape is the next preferred type of media. The following specifications will help alleviate processing problems:
(a) 9-track ASCII (American Standard Coded Information Interchange) with:
(1) Labeled (preferred)
(2) Odd Parity
(3) A density of 6250 CPI
.02 ASCII is the preferred format. If unable to create tapes in the requested ASCII format, EBCDIC format is acceptable.
(a) 9-track EBCDIC (Extended Binary Coded Decimal Interchange Code) with:
(1) Labeled (preferred)
(2) Odd parity
(3) A density of 6250 CPI
(4) If using UNISYS Series 2200, an interchange tape must be submitted.
Transmitters should be consistent in the use of recording codes and density on files.
.03 All compatible tape files must have the following characteristics: Type of tape - 1⁄2-inch (12.7 mm) wide, computer-grade
magnetic tape on reels of up to 2,400 feet (731.52 m) within the following specifications:
(a) Tape thickness: 1.0 or 1.5 mils, and
(b) Reel diameter: 10 1⁄2-inch (26.67 cm), 8 1⁄2-inch (21.59 cm), 7-inch (17.78 cm), or 6-inch.
.04 The tape records defined in this revenue procedure may be blocked subject to the following:
(a) A block may not exceed 15,000 tape positions.
(b) If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9’s;
however, the last block of the file may be filled with 9’s or truncated. Do not pad a block with blanks.
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(c) All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control
fields or block descriptor fields which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last
block which may be shorter (see item b above). The block length must be evenly divisible by 500.
(d) Records may not span blocks.
.05 Although labeled tapes are preferred, labeled or unlabeled tapes may be submitted.
.06 Tape header and trailer labels, record marks, and tape marks (other than the tape mark signifying the end of tape) are all
optional. If used, they must conform to the following ANSI standards:
(a) Header labels must begin with VOL1, HDR1, HDR2, or 1HDR. They must be the first record(s) on the reel immediately before the Transmitter “T” Record. Header labels may not exceed 80 characters in length.
(b) Trailer labels must begin 1EOR, 1EOF, EOF1, or EOV1, EOV2, EOF2. They must be the last record(s) on the reel, after
the “Y” record and tape mark (if a tape mark is used). Labels must be 80 characters in length. Any data beyond the
trailer label cannot be read by IRS programs.
Sec. 4. 8mm, 4mm, and Quarter Inch Cartridge Specifications
.01 In most instances, IRS/MCC can process 8mm tape cartridges that meet the following specifications:
(a) Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:
(1) Created from an AS400 operating systems only.
(2) 8mm (.315-inch) tape cartridges will be 2 1⁄2-inch by 3 3⁄4-inch.
(3) The 8mm tape cartridges must meet the following specifications:
Tracks
Density
Capacity
1
1
20 (43245 BPI)
21 (45434 BPI)
2.5 Gb (10Gb)
5 Gb (20 Gb)
(4) Mode will be full function.
(5) Compressed data is not acceptable.
(6) Either EBCDIC (Extended Binary Coded Decimal Interchange Code) or ASCII (American Standard Coded
Information Interchange) may be used. However, IRS/MCC encourages the use of EBCDIC. This information must
appear on the external media label affixed to the cartridge.
(7) A file may consist of more than one cartridge, however, no more than 250,000 documents may be transmitted per file
or per cartridge. The filename, for example: 1042TAX, will contain a three digit extension. The extension will indicate
the sequence of the cartridge within the file (e.g., 1 of 3, 2 of 3, and 3 of 3 and would appear in the header label
1042TAX.001, 1042TAX.002, and 1042TAX.003 on each cartridge of the file). The end of transmission “Y” Record
should be placed on the last cartridge only for files containing multiple cartridges.
.02 The 8mm (.315-inch) tape cartridge records defined in this revenue procedure may be blocked subject to the following:
(a) A block must not exceed 15,000 tape positions.
(b) If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9’s;
however, the last block of the file may be filled with 9’s or truncated. Do not pad a block with blanks.
(c) All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control
fields or block descriptor fields which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last
block which may be shorter (see item (b) above). The block length must be evenly divisible by 500.
(d) Various COPY commands have been successful, however, the SAVE OBJECT COMMAND is not acceptable.
(e) Extraneous data following the “Y” record will result in media being returned for replacement.
(f) Records may not span blocks.
(g) No more than 250,000 documents per cartridge and per file.
.03 For faster processing, IRS/MCC encourages transmitters to use header labeled cartridges. 1042TAX may be used as a suggested filename.
.04 For the purposes of this revenue procedure, the following must be used:
Tape Mark:
(a) Used to signify the physical end of the recording on tape.
(b) For even parity, use BCD configuration 001111 (8421).
(c) May follow the header label and precede and/or follow the trailer label.
.05 If extraneous data follows the End of Transmission “Y” Record, the file must be returned for replacement. Therefore,
IRS/MCC encourages transmitters to use blank tape cartridges, rather than cartridges previously used, in the preparation of data
when submitting information returns.
.06 IRS/MCC can only read one data file on a tape. A data file is a group of records which may or may not begin with a tapemark, but must end with a trailer label. Any data beyond the trailer label cannot be read by IRS programs.
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.07 4mm (.157-inch) cassettes are now acceptable with the following specifications:
(a) 4 mm cassettes will be 2 1⁄4-inch by 3-inch.
(b) The tracks are 1 (one).
(c) The density is 19 (61000 BPI).
(d) The typical capacity is DDS (DAT data storage) at 1.3 Gb or 2 Gb, or DDS–2 at 4Gb.
(e) The general specifications for 8mm cartridges will also apply to the 4mm cassettes.
.08 Various Quarter Inch Cartridges (QIC) (1⁄4-inch) are also acceptable.
(a) QIC cartridges will be 4” by 6”.
(b) QIC cartridges must meet the following specifications:
Size
Tracks
Density
Capacity
QIC–11
QIC–24
QIC–120
QIC–150
QIC–320
QIC–525
QIC–1000
QIC–1350
QIC–2Gb
4/5
8/9
15
18
26
26
30
30
42
4 (8000 BPI)
5 (8000 BPI)
15 (10000 BRI)
16 (10000 BRI)
17 (16000 BPI)
17 (16000 BPI)
21 (36000 BRI)
18 (51667 BPI)
34 (40640 BPI)
22Mb or 30Mb
45Mb or 60Mb
120Mb or 200Mb
150Mb or 250Mb
320Mb
525Mb
1Gb
1.3Gb
2Gb
(c) The general specifications that apply to 8mm cartridges will also apply to QIC cartridges.
Sec. 5. 5 1⁄4-inch And 3 1⁄2-inch Diskette Specifications
.01 To be compatible, a diskette file must meet the following specifications:
(a) 5 1⁄4- or 3 1⁄2-inches in diameter.
(b) IRS recommends data be recorded in standard ASCII code. However, if data is recorded using EBCDIC, a 5 1⁄4-inch
diskette must be used and a 1024 byte sector would be valid for System 36 or AS400. The following command to format the diskette into a 1024 byte sector is:
INIT 1042TAX,,FORMAT2
The save commands are as follows:
(1) The save command for System 36 is SAVE.
(2) The save command for AS400 is SAVF36F.
(c) Records must be a fixed length of 500 bytes per record.
(d) Delimiter character commas (,) must not be used.
(e) Positions 499 and 500 of each record have been reserved for use as carriage return/line feed (cr/lf) characters if applicable.
(f) Filename of 1042TAX must be used. Do not enter any other data in this field. If a file will consist of more than one
diskette, the filename 1042TAX will contain a 3 digit extension. This extension will indicate the sequence of the diskettes
within the file. For example, if the file consists of three diskettes, the first diskette will be named 1042TAX.001, the second diskette will be 1042TAX.002, and the third will be 1042TAX.003. The first diskette, 1042TAX.001 will begin with
a “T” Record and the third diskette, 1042TAX.003 will have a “Y” Record at the end of the file.
(g) A diskette file may consist of multiple diskettes as long as the filename conventions are followed.
(h) Diskettes must meet one of the following specifications:
Capacity
Tracks
1.44 mb
1.44 mb
1.2 mb
96tpi
135tpi
96tpi
Sides/Density
hd
hd
hd
Sector Size
512
512
512
.02 IRS/MCC encourages transmitters to use blank or currently formatted diskettes when preparing files. If extraneous data follows the end of transmission “Y” record, the file must be returned for replacement.
.03 IRS/MCC prefers that 5 1⁄4- and 3 1⁄2-inch diskettes be created using MS/DOS; however, diskettes created using other operating systems may be acceptable (See Notes). IRS/MCC has equipment that can convert diskettes created under most operating systems to the appropriate MS-DOS format. IRS/MCC strongly recommends that transmitters submit a test file for 5 1⁄4- and 3 1⁄2-inch
diskettes, especially if their data was not created using MS-DOS.
☛ Note: TY98 will be the last year IRS will process 5 1⁄4-inch diskettes.
☛ Note: IRS will discontinue processing non-MS-DOS compatible diskettes after TY98.
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☛ Note: 3 1⁄2-inch diskettes created on a System 36 or AS400 are not acceptable.
.04 Transmitters should check media for viruses before submitting it to IRS/MCC.
Sec. 6. Data Sequence Specifications
.01 The first position of each record indicates the record type:
Transmitter
T
Recipient
Q
Withholding Agent
W
End of Transmission
Y
.02 In order to be acceptable, records within the file must be in the following sequence:
(a) Single tape, cartridge, or diskette:
(1) A Transmitter “T” Record; then
(2) One or more Recipient “Q” Records followed by a corresponding Withholding Agent “W” Record then;
(3) Additional “Q” and “W” Record sequences for other withholding agents, as needed; then
(4) An End of Transmission “Y” Record.
(b) Multiple tapes and cartridges: (see Note)
(1) A Transmitter “T” Record at the beginning of each tape and cartridge; then
(2) Sequence of Recipient “Q” Records followed by corresponding Withholding Agent “W” Records; then
(3) A sequence of Recipient “Q” Records may be continued from one tape to the next if they apply to the same withholding agent, without the necessity of repeating the “W” Record. The sequence might be, for example, QQQQ (end
of one tape); TQQQQW (beginning of next tape); then
(4) An End of Transmission “Y” Record ending the last tape.
(c) Multiple diskettes: (see Note)
(1) A Transmitter “T” Record; then
(2) One or more Recipient “Q” Records followed by a corresponding Withholding Agent “W” Record; then
(3) Additional “Q” and “W” Record sequences for other withholding agents as needed; then
(4) A sequence of Recipient “Q” Records may be continued from one diskette to the next if they apply to the same withholding agent, without the necessity of repeating the “W” Record. The sequence might be, for example, QQQQ (end
of one diskette); QQQQW (beginning of next diskette); then
(5) An End of Transmission “Y” Record ending the last diskette
.03 The minimum file transmitted must consist of a Transmitter “T” Record, a Recipient “Q” Record, a Withholding Agent “W”
Record, and an End of Transmission “Y” Record.
☛ Note: Due to differences in the processing of 1042-S information filed on tapes, cartridges, and diskettes, it is required that
there be a “T” record at the beginning of each tape or cartridge, but not at the beginning of each diskette in a shipment.
Sec. 7.
Transmitter “T” Record
.01 This record identifies the entity preparing and transmitting the file. The transmitter and the withholding agent may be the
same, but they need not be.
.02 The first record of a file MUST be a Transmitter “T” record, (preceded only by header labels, if any), and must appear on
each tape and cartridge; otherwise the file will be returned for replacement. For tape and cartridge files only, the Sequence Number,
position 131-132 of the “T” record must be increased by 1 (one) for each tape and cartridge.
.03 The “T” Record is a fixed length of 500 positions.
.04 All alpha characters entered in the “T” Record must be upper-case.
☛ Note: For all fields marked Required, the transmitter must provide the information described under Description and Remarks.
For those fields not marked Required, a transmitter must allow for the field, but may be instructed to enter blanks or
zeros in the indicated media position(s) and for the indicated length. All records are a fixed length of 500 positions.
Record Name: Transmitter “T” Record
Positions
Field Title
Length
Description and Remarks
1
Record Type
1
Required. Enter “T.”
2–5
Tax Year
4
Required. Enter year for which income and withholding are being
reported (for example, enter “1998” for income and withholding
reported for 1998)(unless reporting for a different tax year).
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Record Name: Transmitter “T” Record (Continued)
Positions
Field Title
Length
Description and Remarks
6–14
Transmitter’s
Taxpayer
Identification
Number (TIN)
9
Required. Enter the Identification Number [Social Security Number (SSN) or Employer Identification Number (EIN)] of the
Transmitter. Do Not enter blanks, hyphens, or alpha characters.
A TIN consisting of all the same digits (e.g., 111111111) is not
acceptable.
15–54
Transmitter Name
40
Required. Enter name of transmitter of file. Abbreviate if necessary
to fit 40-character limit. Omit punctuation if possible. Left-justify
and blank fill.
55–94
Transmitter Address
40
Required. Enter mailing address of the transmitter. Street address
should include number, street, apartment or suite number (or P.O.
Box if mail is not delivered to street address). Abbreviate as needed
to fit 40-character limit. Omit punctuation if possible. Left-justify
and blank fill.
95–114
City
20
Required. Enter the city or town of transmitter. If applicable, enter
APO or FPO only. Left-justify and blank fill.
115–116
State Code
2
Required. Enter only the two-letter Post Office Code as shown in
the list below. Do NOT spell out the state name.
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Code
AL
AK
AZ
AR
CA
CO
CT
DE
DC
FL
GA
HI
ID
IL
IN
IA
KS
KY
LA
ME
State
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
Code
MD
MA
MI
MN
MS
MO
MT
NE
NV
NH
NJ
NM
NY
NC
ND
OH
OK
OR
PA
RI
State
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
American Samoa
Federated States
of Micronesia
Guam
Northern Mariana
Islands
Marshall IslandsMH Palau
Puerto Rico
Virgin Islands
Code
SC
SD
TN
TX
UT
VT
VA
WA
WV
WI
WY
AS
FM
GU
MP
PW
PR
VI
☛ Note: When reporting APO/FPO addresses use the following format:
Example:
Name
PVT Willard J. Doe
Street Address
Company F, PSC Box 100
City
APO (or FPO)
State
AE, AA, or AP*
ZIP Code
098010100
*AE is the designation for ZIPs beginning with 090-098, AA for ZIP 340, and AP for ZIPs 962-966.
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Record Name: Transmitter “T” Record (Continued)
Positions
Field Title
Length
Description and Remarks
117–125
ZIP Code
9
Required. Enter the ZIP code of the transmitter for all U.S. addresses, U.S. Territories or Possessions, APO/FPO addresses. For transmitters using a five-digit ZIP code, enter the ZIP code in the left-most
five positions and zero fill the remaining four positions. For transmitters outside the U.S., enter nine zeros only. Do NOT blank fill.
126–130
Transmitter
Control Code
(TCC)
5
Required. Enter the five character alpha/numeric Transmitter
Control Code. This MUST be the TCC assigned to you for Forms
1042–S reporting ONLY. (The first two numbers will be “22.”)
131–132
Sequence Number
2
The two-digit sequence assigned by the transmitter to this media,
starting with 01. If Header Labels are used, the sequence should be
the same as the Sequence Number. This field is required for tape
and cartridge only.
133–136
Test Indicator
4
Required. Enter the word “test” if this is a test file; otherwise, enter
blanks.
137–498
Reserved
499–500
Blank or
Carriage Return
Line Feed
362
Blank fill.
2
Enter blanks or carriage return line feed (CR/LF) characters.
Transmitter “T” Record Layout
Record
Type
Tax
Year
Transmitter’s
TIN
Transmitter
Name
Transmitter
Address
City
1
2–5
6–14
15–54
55–94
95–114
State
Code
ZIP
Code
TCC
Sequence
Number
Test
Indicator
Reserved
Blank
or
CR/LF
115–116
117–125
126–130
131–132
133–136
137–498
499–500
Sec. 8. Recipient “Q” Record
.01 The “Q” Record contains complete name and address information for both Withholding Agent and Recipient of Income,
together with all the particulars of the income paid and tax withheld. Complete Withholding Agent data is required because each
Recipient “Q” Record is treated as if it were a separate Form 1042-S, and is processed independently of other records.
.02 Since the “Q” Record is restricted to one type of income and one tax rate, under certain circumstances it would be necessary
to write more than one “Q” Record. Following are some of the circumstances when more than one “Q” record for a recipient would
be required:
(a) Different sources of income. For example, Recipient X derived income from Capital Gains (Income Code 09) and
Industrial Royalties (Income Code 10). A separate “Q” record must be reported for each income code; providing Gross
Income Paid and U.S. Federal Tax Withheld pertaining to the corresponding code.
(b) Change in Country Code during the year. For example, the withholding agent received notification via Form 1001 that
the recipient changed from country X to country Y. A separate “Q” record must be reported for each country code; providing Gross Income Paid, Tax Rate and U.S. Federal Tax Withheld. The amounts reported must be based on each country code and the period of time under that country code.
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(c) Change in a country’s tax treaty rate during the year. For example, effective April 1, country X changes its tax treaty rate
from 10% to 20%. A separate “Q” record must be reported for each of the tax rates. Provide the Gross Income Paid,
Tax Rate, and U.S. Federal Tax Withheld for the period of time under that tax rate.
(d) Gross Income Paid of more than one billion dollars. Report a Gross Income Paid of 99999999999 (dollars and cents) in
the first Recipient “Q” record. The second Recipient “Q” record will contain the remaining money amount.
☛ Note: The applicable tax rates must be obtained from Publication 515, Withholding of Tax on Nonresident Aliens and
Foreign Corporations, or Publication 901, U.S. Tax Treaties. The U.S. Federal Tax Withheld is computed using
the tax rate applicable to the recipient’s country of tax residency (as found in Publications 515 and 901) and the
amount of gross income paid to the recipient. Use of any other tax rates may cause your records to be rejected.
☛ Note: If you withheld an incorrect amount of tax, you must report the amount which was actually withheld, and use the
correct tax rate from Publications 515 and 901, and attach a letter stipulating that the amount of tax withheld is
correct. This action will permit the “incorrect” data to be accepted for processing, but does not relieve you of the
responsibility to withhold at the prescribed rates and to remit the correct amount of tax with Form 1042.
☛ Note: Apply the following formula to determine U.S. Federal Tax Withheld (field positions 374-384 of the “Q” Record).
All field positions described below are also in the “Q” Record:
Income Codes 15 and/or 16
Gross Income Paid (359-369)
– Withholding Allowance (430-439)
= Net Income Amount (440-439)
⫻ Tax Rate (372-373)
= U.S. Federal Tax Withheld (374-384)
All Other Income Codes
Gross Income Paid (359-369)
⫻ Tax Rate (372-373)
= U.S. Federal Tax Withheld (374-384)
.03 Failure to provide multiple recipient “Q” records when necessary will generate math computation errors during processing
which will result in the file being returned for replacement.
.04 All recipient “Q” Records for a particular Withholding Agent must be written before the corresponding Withholding Agent
“W” Record, and before “Q” Records for another Withholding Agent may begin.
.05 For all fields marked “Required,” the transmitter must provide the information described under Description and Remarks. For
those fields not marked “Required,” the transmitter must allow for the field, but may be instructed to enter blanks or zeros in the
indicated media position(s) and for the indicated length.
.06 All alpha characters entered in the “Q” Record must be upper case.
Record Name: Recipient “Q” Record
Positions
Field Title
Length
Description and Remarks
1
Record Type
1
Required. Enter “Q”.
2–10
Withholding
Agent’s Taxpayer
Identification
Number (TIN)
9
Required. Enter the nine-digit Taxpayer Identification Number of
the Withholding Agent. Do NOT enter blanks, hyphens, or alpha
characters. A TIN consisting of all the same digit (e.g., 111111111) is
not acceptable. Do NOT enter the recipient’s TIN in this field.
11–45
Agent’s Name
35
Required. Enter the name of the Withholding Agent whose TIN
appears in positions 2-10 of the “Q” Record. Abbreviate as needed.
Left-justify and blank fill.
☛ Note: A blank (except when all positions are blank in this field) or special character in position 11 is not acceptable.
46–80
Agent’s Address
35
Required. Enter mailing address of the withholding agent. Street
address should include number, street, apartment or suite number (or
P.O. Box if mail is not delivered to street address). Abbreviate as
needed. Left-justify and blank fill unused positions.
81–100
Agent’s City
20
Required. Enter the city or town (or other locality name). Enter
APO or FPO only, if applicable. Left-justify and blank fill unused
positions.
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Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
101–102
Agent’s State
Code
2
Required. Enter the two-character state abbreviation from the list in
Part B. Sec. 7, Field Positions 115–116 of “T” Record. If not a U.S.
state, territory, or APO/FPO identifier, blank fill this field. Do not
use any of the two character Country Codes in the State Code
field.
103–111
Agent’s ZIP
Code
9
Required. Enter nine numeric characters for all U.S. addresses
(including territories and possessions). If a five-digit ZIP code is
used, enter the ZIP code in the left-most five positions and zero fill
the remaining four positions. Zero fill for addresses outside the U.S.
112
Type of TIN
1
This field is used to identify the Taxpayer Identification Number
(TIN) in positions 113-121 as an Employer Identification Number
(EIN), a Social Security Number (SSN), or an Individual Taxpayer
Identification Number (ITIN). Enter the appropriate code from the
following table:
Code
1
Type of TIN
EIN
2
SSN
Type of Account
A business, organization, sole proprietor, or other entity
An individual, including a sole proprietor
OR
2
ITIN
An individual required to have a taxpayer identification number, but
who is not eligible to obtain an SSN
Blank N/A
Enter a blank if type of TIN is undeterminable.
☛ Note: While not a “Required” field, this information is important for the correct processing of the recipient’s TIN.
113–121
Recipient’s
U.S. Taxpayer
Identification
Number (TIN)
9
Enter the Recipient’s nine-digit Taxpayer Identification Numbe
(TIN). Do NOT enter hyphens or alpha characters. Entry of all
zeroes, all ones, twos, etc. will have the effect of an incorrect TIN.
Use the following instructions for Entries in Positions 113–121:
1. A TIN must be entered when Exemption Code “1” is entered in
Position 370 of the Recipient “Q” Record.
2. A TIN must be entered when Income Code “16” or “17” is entered
in Positions 355–356 of the Recipient “Q” Record.
3. If the conditions in 1 and 2 are not present, or if a TIN is not available, enter blanks in Positions 113–121 of the Recipient’s “Q”
Record. Do NOT enter the Withholding Agent’s TIN in this field.
☛ Note: When the submission includes records where a TIN is required, but in which blanks are entered in Positions
113–121, provide a letter identifying the number of Recipient “Q” Records affected and presenting the reason(s)
the TIN(s) is not provided for each missing TIN.
☛ Note: A CORRECTED “Q” RECORD IS REQUIRED to be submitted upon later receipt of the Recipient TIN.
122–136
Account
Number
15
Enter the account number assigned by the withholding agent to the
recipient. This number is used to identify a specific account. This
field will be all blanks if account numbers are NOT assigned. This
field may contain numeric or alpha characters, blanks or hyphens.
Left-justify and blank fill.
☛ Note: A special character in position 122 is not acceptable.
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Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
137–138
Country Code
(Do not enter
“US” in this field)
2
Required. This field is used to identify the country for which the
recipient is a resident for tax purposes and the tax treaty benefits are
based. The rate of tax withheld is determined by this code.
☛ Note: Enter OC, Other Countries, only when the country of residence cannot be determined. If OC is used in this field,
the rate of tax (positions 372–373) must always be 30 percent.
☛ Note: This may or may not be the same as the country entered in the country name field (positions 335–354 of the
recipient “Q” record.)
☛ Note: If the country code for the recipient changes during the year, a new “Q” record will be required.
☛ Note: COUNTRY CODES: The list of country codes provided in the 1998 Paper Instructions for Form 1042–S should
be used to ensure the proper coding of the country code field. This list is updated each year with the most recent
country code changes. Refer to the updated yearly Paper Instructions for the list of country codes to be used in
the reporting of paper and magnetic/electronic Forms 1042–S for future tax years as well.
139–183
Recipient Name
Line One
45
Required. Provide the FULL name of the recipient (nonresident
alien individual, fiduciary, foreign partnership, foreign corporation
or other foreign entity). Enter the surname of the recipient FIRST followed by given names. For example, “DOE JOHN.” Enter an
asterisk(*) immediately before the surname, if the surname does
not begin in position 139 (See Note). For example, ”JOHNb*DOE”
is acceptable (b denotes a blank). If there is more than one recipient,
enter the name of the first recipient only. Since some foreign recipients will not have a Taxpayer Identification Number (TIN), it is very
important that the FULL name of the recipient be provided. Titles, if
any, must be provided in Recipient Name Line Two. (If the recipient
is unknown, an account number must be entered in positions
122–136).Valid characters are alphabetic, numeric, ampersand (&),
hyphen (–), slash (/), asterisk (*), period (.), comma (,), apostrophe
(‘), or blank. Left-justify and blank fill.
☛ Note: A blank (except when all positions are blank in this field) or a special character in position 139 is not acceptable.
184–228
Recipient Name
Line Two
45
Enter supplementary recipient name information; otherwise enter
blanks. Use this line for additional names (e.g., partners or joint owners), for trade names, stage names, aliases, or titles. Use this line also
for “care of,” “via,” or “through” information. Valid characters are
alphabetic, numeric, blank, ampersand (&), hyphen (–), slash (/),
pound sign (#), period (.), comma (,), apostrophe (‘) and the percent
(%). The percent (% [short for “in care of”]) is valid in the first position only. Left-justify and blank fill.
☛ Note: IRS encourages full identification of nonresident aliens (both individuals and organizations) because data is furnished to their governments in accordance with tax treaties and exchange of information agreements.
☛ Note: An asterisk is not a valid character in this field.
☛ Note: A blank (except when all positions are blank in this field) or a special character in position 184 is not acceptable.
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Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
☛ Note: The following address fields should be adhered to in the order listed (outside the U.S. or within the U.S.), when
identifying the address of the recipient:
Addresses OUTSIDE the United States (Use the following fields):
a. Street Address
(229-283)
b. City or Town
(284-308)
c. Province (if applicable)
(309-323)
d. Postal Code (if applicable)
(324-332)
e. Country Name
(335-354)
Addresses WITHIN the United States (Use the following fields):
a. Street Address
(229-283)
b. City or Town
(284-308)
c. Postal Code (Zip Code)
(324-332)
d. U.S. State Code
(333-334)
229–283
Street Address
55
Required. Enter the recipient’s full street address. Street address should
include number, street, apartment or suite number (or P.O. Box if mail is
not delivered to street address). Valid characters are alphabetic, numeric,
blank, ampersand (&), hyphen (–), slash (/), period (.), comma (,), apostrophe (‘), and pound sign (#). Left-justify and blank fill.
☛ Note: A blank (except when all positions are blank in this field) or special character in position 229 is not acceptable.
284–308
City
25
Required. Enter the name of City, Town, Village, Municipality or rural
place of residence of the recipient. Valid characters are alphabetic,
numeric, blank, ampersand (&), hyphen (–), slash (/), period (.), comma
(,), apostrophe (‘), and parenthesis (). For U.S. military installations enter
either APO or FPO as applicable. The name of the installation or ship
must be entered in the Street Address Line. Left-justify and blank fill.
☛ Note: A blank (except when all positions are blank in this field) or a special character in position 284 is not acceptable.
309–323
Province Name
15
Enter the name of the Province, Foreign State (but not the U.S. State),
County, Shire, District, Region, or other political subdivision. For
many countries the province (or other political subunit) is an important part of the postal address. Valid characters are alphabetic, blank,
ampersand (&), hyphen (–), period (.), comma (,), apostrophe (‘) or
slash (/). Left-justify and blank fill.
Canadian Provinces or Codes are required (See Notes)
Province
Province Code
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
Nova Scotia (including Sable Island)
Northwest Territories
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon Territory
1998–32 I.R.B.
AB
BC
MB
NB
NF
NS
NT
ON
PE
QC
SK
YT
39
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Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
☛ Note: A Canadian province may be expressed as a two-character code from the Canadian Province Code List, written
out in full, or appropriately abbreviated.
☛ Note: Either the Province or the Province Code must be entered. DO NOT ENTER BOTH.
☛ Note: A blank (except when all positions in this field are blank) or a special character in position 309 is not acceptable.
324–332
Postal Code
(Zip Code)
9
Enter a Foreign or U.S. Postal Code (ZIP Code). A Postal Code is
Required for United States and U.S. Territories, Canadian, and
Australian addresses. Withholding Agents should make an effort to
obtain postal codes for all other countries. Only alphabetic, numeric, and blank characters are valid. Do not omit any blanks that may
appear in the ZIP code. Use the following table to format Postal
Codes for the three required countries (“a” denotes alpha characters,
“n” denotes numerics, “b” denotes a blank). All postal codes should
be left-justified and blank filled.
Country
Postal Code Format
United States and
U.S. Territories
Canadian
Australian
nnnnnbbbb or nnnnnnnnn
anabnanbb
nnnnbbbbb
☛ Note: A blank (except when all positions in this field are blank) or a special character in position 324 is not acceptable.
333–334
U.S. State Code
2
Required for United States addresses, including U.S. territories.
Enter the appropriate postal identifier listed for APO and FPO
addresses (see list of valid state codes and postal identifiers for
APO/FPO addresses in Part B. Sec. 7, Positions 115-116 of
Transmitter “T” Record). Enter blanks if the recipient does not
have a U.S. address.
335–354
Country Name
(Recipient’s
Country of
Residence)
20
The name of the recipient’s country ofresidence for all addresses outside of the United States is Required in the field. Enter
blanks if the RECIPIENT RESIDES IN the U.S., including U.S.
territories and APO/FPO. This field is not used to determine the rate
of tax. Valid characters are alphabetic, blank, ampersand (&), and
hyphen (–). Left-justify and blank fill.
☛ Note: Do not follow the country name with parentheses containing such information as Virgin Islands (British).
☛ Note: Do not list “Outside of USA”, “USA”, “US”, United States, or “Other Country” in this field.
☛ Note: This may or may not be the same country indicated in the Country Code field (Positions 137-138 of the Recipient
“Q” Record).
☛ Note: Omit political titles such as “People’s Republic of,” “Kingdom of,” etc. Use the English Language name instead
of the native language name (for example, use “Finland” and not “Soumi”)
☛ Note: A blank (except when all positions in this field are blank) or a special character in position 335 is not acceptable.
355–356
August 10, 1998
Income Code
2
Required. Enter the income code EXACTLY as it appears below.
40
1998–32 I.R.B.
IRB 1998-32
8/6/98 5:26 PM
Page 41
Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
☛ Note: If the income code for the recipient changes during the year, a new “Q” record will be required.
Code
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
50
Type of Income
Interest paid by U.S. obligators-general
Interest on real property mortgages
Interest paid to a controlling foreign corporation
Interest paid by foreign corporations
Interest on tax-free covenant bonds
Dividends paid by U.S. corporations-general
Dividends paid by U.S. subsidiaries to foreign parent corporations (including consent dividends)
Dividends paid by foreign corporations
Capital gains
Industrial royalties
Motion picture or television copyright royalties
Other royalties (e.g., copyright, recording, publishing)
Real property income and natural resources royalties
Pensions, annuities, alimony, and/or insurance premiums
Scholarship or fellowship grants
Compensation for independent personal services
Compensation for dependent personal services
Compensation for teaching
Compensation during studying and training
Earnings as an artist or athlete
Social Security benefits
Railroad Retirement (Tier 1) benefits
Railroad Retirement (Tier 2) benefits
Real estate investment trust (REIT) distributions of capital gains
Trust distributions subject to IRC section 1445
Unsevered growing crops and timber distributions by a trust subject to IRC section 1445
Publicly traded partnership distributions subject to IRC section 1446
Gambling winnings
Other income
☛ Note: Use Income Code 01 for the reporting of interest payments to Canadian residents who are not U.S. citizens.
☛ Note: If compensation covered under Income Codes “16–19” are directly attributable to the recipient’s occupation as
an artist or athlete, use Income Code “20” instead.
☛ Note: If Income Code 20 is used, also use Recipient Code 09 (artist or athlete) instead of Recipient Code 01 (individual),
02 (corporation), or 03 (partnership).
357–358
1998–32 I.R.B.
Recipient Code
2
Required. Enter the appropriate code from the list below. No other
codes or values are valid.
Code
01
02
03
04
05
06
07
08
09
10
11
19
20
Type of Recipient
Individual (Notes 1 & 2)
Corporation (Note 2)
Partnership (Note 2)
Fiduciary (trust)
Nominee
Government or International Organization
“Tax Exempt” Organization [IRC section 501 (a)]
Private Foundation
Artist or Athlete (Note 2)
Fiduciary (estate)
Fiduciary (other)
Other
Type of Recipient unknown (Note 3)
41
August 10, 1998
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Page 42
Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
☛ Note 1: Recipient Code “01” (individual) MUST be entered when the Income Code is “21”, “22”, or “23”.
☛ Note 2: Use Recipient Code 09 (artist or athlete) instead of Recipient Code 01 (individual), 02 (corporation), or 03 (partnership) if Income Code 20 is used.
☛ Note 3: Use of Recipient Code 20 (type of recipient unknown) requires withholding at a 30 percent tax rate.
359–369
Gross Income
Paid
11
Required. Enter the gross income amount in dollars and cents. An
income amount other than zero must be shown. (Do not enter the
decimal point.) For whole dollar amounts, the cents must be shown
as zeros. For example, $1500 should be shown as 00000150000
where the left-most five zeros are “filler” and the right-most two
zeros represent cents. Right-justify and zero fill.
370
Exemption Code
1
Required. Enter the one-digit exemption code from the list below. If
the rate of tax is other than zero percent, enter a zero in this field. If
the rate of tax is zero percent, enter the code of 1-5 that applies.
Code
Zero
1
Authority for Exemption
No exemption claimed, rate of tax is above zero percent. (See Note 1)
Income effectively connected with a U.S. trade or business. (An EIN
or SSN must be entered in Positions 113–121). (See Notes 2 & 3)
Exempt under an Internal Revenue Code section (other than portfolio interest) (See Notes 2 & 3)
Income is non-U.S. sourced. (See Note 4)
Exempt under tax treaty. (See Note 3)
Portfolio interest exempt under an Internal Revenue Code section.
(See Note 5)
2
3
4
5
☛ Note 1: Exemption Code zero is invalid when used in conjunction with a tax rate of zero.
☛ Note 2: Use Income Code 01, Exemption Code 2, for interest payments to Canadian residents who are not U.S. Citizens.
☛ Note 3: If exemption Code “1”, “2”, or “4” is used in conjunction with Income codes “16” or “17” (Positions 355–356
in the Recipient “Q” Record), the recipient’s U.S. Taxpayer Identification Number (TIN) MUST be provided
in Positions 113–121 of the Recipient “Q” Record.
☛ Note 4: Non-U.S. source income paid to a nonresident alien is not subject to U.S. tax. Use Exemption Code 3 when
entering an amount for information reporting purposes.
☛ Note 5: Exemption Code “5” can only be used in conjunction with Income Codes “01”, “02”, “03”, “04”, or “05”.
371
Type of Return
Indicator
1
Required. Enter the one position code below to identify an
Original,Void or Corrected Return. (See Part A. Sec. 13.)
Code
Zero
V
Description
If this is an Original Return.
Enter a “V” to void the incorrect original return submitted.(See
Transaction 1, Part A, Sec. 13.11)
Enter a “C” if this is to identify the Correct Return.(See Transaction
2, Part A, Sec. 13.11)
C
372–373
August 10, 1998
Tax Rate
2
Required. Enter the appropriate tax rate found in Publication 515,
Withholding of Tax on Nonresident Aliens and Foreign Corporations.
An appropriate rate must be shown. The correct tax rate applies to
the Country Code identified in field positions 137-138 of the “Q”
Record. Do not use percent signs or decimal points. For fractional
rates, drop the fraction.
42
1998–32 I.R.B.
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Page 43
Record Name: Recipient “Q” Record (Continued)
Positions
Field Title
Length
Description and Remarks
☛ Note: When exemption code “1” through “5” is used in position 370, the Tax Rate MUST be zero.
☛ Note: If the recipient’s country of tax residence cannot be determined, and you enter OC in positions 137–138, the rate
of tax must always be 30 percent.
☛ Note: If the country’s treaty rate for the recipient changes during the year, a new “Q” record will be required.
☛ Note: If an incorrect amount of tax was withheld or an incorrect tax rate was used to withhold, report the correct tax rate
specified in Publications 515 and 901, but report the actual amount of money withheld, and include a letter of explanation. This will permit the “incorrect” data to be accepted for processing, but does not relieve the withholding agent
of the responsibility to withhold at the prescribed tax rates and remit the correct amount of tax with Form 1042.
374–384
U.S. Federal
Tax Withheld
11
Required. Enter in dollars and cents the amount of tax withheld, if
any. An amount must be shown if the Tax Rate is other than “00”, or
if income is not otherwise exempt from withholding. If Tax Rat
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