Bulletin No. 1998–21

Internal Revenue

bulletin

Bulletin No. 1998–21

May 26, 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

Announcement 98–43, page 93.

Rev. Rul. 98–26, page 4.

A list is given of organizations now classified as private foundations.

LIFO; price indexes; department stores. The March

1998 Bureau of Labor Statistics price indexes are accepted

for use by department stores employing the retail inventory

and last-in, first-out inventory methods for valuing inventories

for tax years ended on, or with reference to, March 31,

1998.

EXEMPT ORGANIZATIONS

Announcement 98–42, page 93.

Publication 3079, Gaming Publication for Tax-Exempt Organizations, is now available.

ADMINISTRATIVE

Rev. Proc. 98–35, page 6.

Magnetic media; electronic filing; 1998 form specifications. Specifications are set forth for the magnetic or

electronic filing of 1998 Forms 1098, 1099, 5498, and

W–2G. The forms may be filed with the Internal Revenue Service using 1⁄2 inch magnetic tape; IBM 3480/3490 or AS400

compatible tape cartridges; 8mm tape cartridges; 4mm cartridges; 1⁄4-inch cartridges; or 5 1⁄4-, 3 1⁄2-inch diskettes. Rev.

Proc. 97–34 superseded.

Finding Lists begin on page 99.

Announcement of the Consent Voluntary Suspension of Attorneys, Certified Public Accounts, Enrolled Agents, etc., begins on

page 96.

Department of the Treasury

Internal Revenue Service

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.

2

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

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 472.—Last-in, First-out

Inventories

26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; deparment

stores. The March 1998 Bureau of Labor

Statistics price indexes are accepted for

use by department stores employing the

retail inventory and last-in, first-out inventory methods for valuing inventories

for tax years ended on, or with reference

to, March 31, 1998.

Rev. Rul. 98–26

The following Department Store Inventory Price Indexes for March 1998 were

issued by the Bureau of Labor Statistics.

The indexes are accepted by the Internal

Revenue Service, under § 1.472–1(k) of

the Income Tax Regulations and Rev.

Proc. 86–46, 1986–2 C.B. 739, for appropriate application to inventories of department stores employing the retail inventory and last-in, first-out inventory

methods for tax years ended on, or with

reference to, March 31, 1998.

The Department Store Inventory Price

Indexes are prepared on a national basis

and include (a) 23 major groups of departments, (b) three special combinations of

the major groups - soft goods, durable

goods, and miscellaneous goods, and (c) a

store total, which covers all departments,

including some not listed separately, except for the following: candy, food,

liquor, tobacco, and contract departments.

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE

INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS

(January 1941 = 100, unless otherwise noted)

Mar.

1997

Mar.

1998

Percent Change

from Mar. 1997

to Mar. 19981

1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539.0

2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644.2

3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646.1

4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900.9

5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630.6

6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544.0

7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296.7

8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557.3

9. Women’s Outerwear and Girls’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430.0

10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617.9

11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587.7

12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479.9

13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1025.2

14. Notions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801.5

15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910.8

16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667.5

17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583.5

18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813.2

19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244.9

20. Radio and Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

78.5

21. Recreation and Education2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111.8

22. Home Improvements2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.9

23. Auto Accessories2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.7

Groups 1 – 15: Soft Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606.4

Groups 16 – 20: Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469.2

Groups 21 – 23: Misc. Goods2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.6

Store Total3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558.8

538.9

636.1

658.7

898.3

620.5

576.3

308.1

556.8

429.5

636.5

608.1

501.4

993.0

796.7

932.4

673.0

583.1

818.3

237.4

73.4

106.7

134.5

107.5

612.2

463.0

110.4

558.9

0.0

–1.3

2.0

–0.3

–1.6

5.9

3.8

–0.1

–0.1

3.0

3.5

4.5

–3.1

–0.6

2.4

0.8

–0.1

0.6

–3.1

–6.5

–4.6

2.0

–0.2

1.0

–1.3

–2.8

0.0

Groups

1Absence of a minus sign before percentage change in this column signifies price increase.

2Indexes on a January 1986=100 base.

3The store total index covers all departments, including some not listed separately, except for the following: candy, foods, liquor, to-

bacco, and contract departments.

May 26, 1998

4

1998–21 I.R.B.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Stan Michaels of the Office of

1998–21 I.R.B.

Assistant Chief Counsel (Income Tax and

Accounting). For further information regarding this revenue ruling, contact Mr.

5

Michaels on (202) 622-4970 (not a tollfree call).

May 26, 1998

Part III. Administrative, Procedural, and Miscellaneous

NOTE:

Following is a list of related instructions and forms for filing Information Returns Magnetically/Electronically:

䉴

1998 Instructions for Forms 1099, 1098, 5498, and W–2G

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)

䉴

Form 8508—Request for Waiver From Filing Information Returns on Magnetic Media (Forms W–2, W–2G,

1042–S, 1099, 1098, 5498, and 8027)

䉴

Form 8809, 8027,—Request for Extension of Time To File Information Returns (For Forms W–2, W–2G, 1042–S

1098, 1099, and 5498)

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. 98–35

Use this revenue procedure to prepare Tax Year 1998 information returns for submission to Internal Revenue Service (IRS) using

any of the following:

– Magnetic Tape

– Tape Cartridge

– 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 TY 1998, calendar

year 1999, as well as a significant change in record size from 420 positions to 750 positions.

To be in compliance with Year 2000 changes, the current bisynchronous electronic filing communications package will be changed next year.

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.

May 26, 1998

6

1998–21 I.R.B.

Table of 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.

Section 18.

Section 19.

Purpose

Nature of Changes—Current Year (Tax Year 1998)

Where to File and How to Contact the IRS, Martinsburg Computing Center

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 Information Returns Magnetically/ Electronically and Retention Requirements

Due Dates

Extensions of Time

Processing of Information Returns Magnetically/Electronically

Corrected Returns

Taxpayer Identification Number (TIN)

Effect on Paper Returns and Statements to Recipients

Combined Federal/State Filing Program

Definition of Terms

State Abbreviations

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.

(l)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

Section 11.

Section 12.

Section 13.

General

Tape Specifications

Tape Cartridge Specifications

8mm, 4mm, and Quarter Inch Cartridge Specifications

5 1⁄4-inch and 3 1⁄2-inch Diskette Specifications

Transmitter “T” Record—General Field Descriptions

Transmitter “T” Record—Record Layout

Payer “A” Record—General Field Descriptions

Payer “A” Record—Record Layout

Payee “B” Record—General Field Descriptions and Record Layouts

Payee “B” Record—Record Layout Positions 544–750 for Forms 1098, 1098–E, and 5498–MSA

Payee “B” Record—Record Layout Positions 544–750 for Form 1098–T

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–A

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–B

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–C

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–DIV

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–G

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–INT

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–LTC

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–MISC

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–MSA

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–OID

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–PATR

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–R

Payee “B” Record—Record Layout Positions 544–750 for Form 1099–S

Payee “B” Record—Record Layout Positions 544–750 for Form 5498

Payee “B” Record—Record Layout Positions 544–750 for Form W–2G

End of Payer “C” Record—General Field Descriptions and Record Layout

State Totals “K” Record—General Field Descriptions and Record Layout

End of Transmission “F” Record—General Field Descriptions and Record Layout

Part C. Bisynchronous (Mainframe) Electronic Filing Specifications

Section 1.

General

1998–21 I.R.B.

7

May 26, 1998

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Section 7.

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 Specification for Extensions of Time

Section 1.

Section 2.

Section 3.

General

Magnetic Tape, IBM 3480/3490, Tape Cartridge, 8mm, 4mm, and QIC (quarter in cartridge), 5 1⁄4- and 3 1⁄2-inch

Diskette, and Electronic Specifications

Record Layout

Part F. Miscellaneous Information

Section 1.

Section 2.

Addresses for Martinsburg Computing Center

Telephone Numbers for Contacting IRS/MCC

May 26, 1998

8

1998–21 I.R.B.

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 for filing Forms 1098, 1099, 5498, and W–2G magnetically or electronically, which includes 1⁄2-inch magnetic tape; IBM 3480, 3490 or AS400 compatible tape cartridges (including

8mm) or 5 1⁄4- and 3 1⁄2-inch diskettes with IRS. IRS/MCC has discontinued processing 8-inch diskettes. This revenue procedure

must be used for the preparation of Tax Year 1998 information returns and information returns for tax years prior to 1998 that are required to be filed. This revenue procedure must be used to prepare current and prior year information returns filed beginning January 1, 1999, and received by IRS/MCC or postmarked by December 15, 1999. Specifications for filing the following forms are

contained in this revenue procedure.

(a) Form 1098, Mortgage Interest Statement.

(b) Form 1098–E, Student Loan Interest Statement

(c) Form 1098–T, Tuition Payments Statement

(d) Form 1099–A, Acquisition or Abandonment of Secured Property

(e) Form 1099–B, Proceeds From Broker and Barter Exchange Transactions

(f) Form 1099–C, Cancellation of Debt

(g) Form 1099–DIV, Dividends and Distributions

(h) Form 1099–G, Certain Government Payments

(i) Form 1099–INT, Interest Income

(j) Form 1099–LTC, Long-Term Care and Accelerated Death Benefits

(k) Form 1099–MISC, Miscellaneous Income

(l) Form 1099–MSA, Distributions From Medical Savings Accounts

(m) Form 1099–OID, Original Issue Discount

(n) Form 1099–PATR, Taxable Distributions Received From Cooperatives

(o) Form 1099–R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

(p) Form 1099–S, Proceeds From Real Estate Transactions

(q) Form 5498–IRA Contribution Information

(r) Form 5498–MSA, Medical Savings Account Information

(s) Form W–2G, Certain Gambling Winnings

.02 Specifications for filing Forms W–2 on magnetic media are available from the Social Security Administration (SSA) only.

Filers can call 1-800-SSA-1213 to obtain the phone number of the SSA Magnetic Media Coordinator for their area.

.03 IRS/MCC does not process Forms W–2. Paper and/or magnetic media for Forms W–2 must be sent to SSA. IRS/MCC does,

however, process waiver requests (Form 8508), extension of time to file requests (Form 8809) for Forms W–2 and requests for extension of time to provide the employee copies of Forms W–2.

.04 Generally, the box numbers on the paper forms correspond with the amount codes used to file magnetically/electronically;

however, if discrepancies occur, the instructions in this revenue procedure govern.

.05 This revenue procedure also provides the requirements and specifications for magnetic media or electronic filing under the

Combined Federal/State Filing Program.

.06 The following revenue procedures and publications provide more detailed filing procedures for certain other information returns.

(a) 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G” provides specific instructions on completing and submitting information returns to IRS.

(b) Rev. Proc. 84–33, 1984–1 C.B. 502, regarding the optional method for agents to report and deposit backup withholding.

(c) Publication 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099, 5498, and W–2G.

(d) Publication 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated

Tips, on Magnetic Tape and 5 1⁄4- or 3 1⁄2-inch Diskettes.

(e) Publication 1187, Specifications for Filing Form 1042–S, Foreign Person’s U.S. Source Income Subject to Withholding, Electronically or on Magnetic Tape, and 5 1⁄4- or 3 1⁄2-inch Diskettes.

(f) Publication 1245, Specifications for Filing Form W–4, Employee’s Withholding Allowance Certificate, Magnetically or Electronically.

1998–21 I.R.B.

9

May 26, 1998

(g) Rev. Proc. 98–25, specifications set forth for the magnetic or electronic filing of 1999 Form 8851, Summary of Medical Savings Accounts, Magnetically/Electronically.

.07 This revenue procedure supersedes Rev. Proc. 97–34 published as Publication 1220 (Rev. 7–97), Specifications for Filing

Forms 1098, 1099, 5498, and W–2G Magnetically or Electronically.

.08 Refer to Part A, Sec. 17, 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 information returns filed

magnetically/electronically. There are two new forms for Tax Year 1998, the Form 1098–E, Student Loan Interest Statement,

and Form 1098–T, Tuition Payments Statement. However, for Tax Year 1998, Form 1098–T is not required to be reported

magnetically. Additional fields have been added to some of the existing records. IRS/MCC has redesigned the record layouts and expanded record lengths from 420 positions to 750 positions for the Payer “A” Record, the Payee “B” Record, the

End of Payer “C” Record, the State Totals “K” Record, and the End of Transmission “F” Record. In addition, a Transmitter

“T” Record has been added as the first record on the file. This record will contain transmitter information from the Form

4804, Transmittal of Information Returns Reported Magnetically/Electronically. 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

complete change in record formats, italics will not be used in this publication. Filers are encouraged to read the entire publication.

.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.

Sec. 3. Where to File and How to Contact the IRS, Martinsburg Computing Center

.01 All information returns filed magnetically or electronically are processed at IRS/MCC. Files containing information returns,

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:

IRS-Martinsburg Computing Center

Information Reporting Program

P. O. Box 1359

Martinsburg, WV 25402-1359

or

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

✈

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 Call Site may be made between 8:30 a.m. and 4:30 p.m. Eastern time,

Monday through Friday.

.04 The telephone numbers for magnetic media inquiries or electronic submissions are:

☎

304-263-8700 - Call Site - Part A, Sec 3.10

May 26, 1998

10

1998–21 I.R.B.

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)

304-264-7070 - IRP–BBS access to forms

http://www.irs.ustreas.gov - INTERNET access to forms

.05 The 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G” have been included in the Publication 1220 for transmitter

convenience. The Form 1096 is used only to transmit Copy A of paper Forms 1099, 1098, 5498, and W–2G. If filing paper returns,

follow the mailing instructions on the Form 1096 and submit the paper returns to the appropriate IRS Service Center.

.06 Requests for paper Forms 1096, 1098, 1099 and W–2G, and publications related to magnetic media/electronic filing should

be made by calling the IRS toll-free number 1-800-TAX-FORM (1-800-829-3676).

.07 Questions pertaining to magnetic media filing of Forms W–2 must be directed to the Social Security Administration (SSA).

Filers can call 1-800-SSA-1213 to obtain the phone number of the SSA Magnetic Media Coordinator for their area.

.08 Payers should not contact IRS/MCC if they have received a penalty notice and need additional information, or are requesting

an abatement of the penalty. A penalty notice contains an IRS representative’s name and/or phone number for contact purposes; or,

the payer may be instructed to respond in writing to the address provided. IRS/MCC does not issue penalty notices and does not

have the authority to abate penalties. For penalty information, refer to the Penalty section of the 1998 “Instructions for Forms 1099,

1098, 5498, and W–2G.”

.09 A taxpayer or authorized representative may request a copy of a tax return, including Form W–2 filed with a return, by submitting Form 4506, Request for Copy or Transcript of Tax Form, to IRS. This form may be obtained by calling 1-800-TAX-FORM

(1-800-829-3676).

.10 The IRS Centralized Call Site answers both magnetic media and tax law questions relating to the filing of information returns

(Forms 1096, 1098, 1099, 5498, 8027, W–2G, 1042–S, and W–4). The IRS/MCC Call Site answers tax law and paper filing related

questions about Forms W–2 and W–3, as well as handling inquiries dealing with backup withholding due to missing and incorrect

taxpayer identification numbers. The 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). Recipients of information returns (payees) should continue to contact 1-800-829-1040 or other numbers specified

in the tax return instructions with any questions on how to report information on their tax returns.

The Call Site accepts calls from all areas of the country. The number to call is 304-263-8700 or Telecommunications Device for

the Deaf (TDD) 304-267-3367. These are toll calls. 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.

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. The 250* or more requirement applies separately for each type of return and also to each type of corrected return.

*Even though as many as 249 information returns may be submitted on paper to the Internal Revenue Service,

IRS encourages filers to transmit information returns magnetically or electronically.

.02 All filing requirements that follow apply individually to each reporting entity as defined by its separate Taxpayer Identification Number (TIN) [Social Security Number (SSN), Employer Identification Number (EIN), Individual Taxpayer Identification

Number (ITIN), or Adoption Taxpayer Identification Number (ATIN)]. For example, if a corporation with several branches or locations uses the same EIN, the corporation must aggregate the total volume of returns to be filed for that EIN and apply the filing requirements to each type of return accordingly.

.03 Payers who are required to submit their information returns on magnetic media may choose to submit their documents by

electronic filing. Payers who submit their information returns electronically are considered to have satisfied the magnetic media filing requirements.

1998–21 I.R.B.

11

May 26, 1998

.04 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 24 to 48 hours

• 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.

.05 The following requirements apply separately to both originals and corrections filed magnetically/electronically:

1098

1098–E

1098–T*

1099–A

1099–B

1099–C

1099–DIV

1099–G

1099–INT

1099–LTC

1099–MISC

1099–MSA

1099–OID

1099–PATR

1099–R

1099–S

5498

5498–MSA

W–2G

250 or more of any of these forms require magnetic media or electronic filing with IRS. These are stand alone

alone documents and are not to be aggregated for purposes of determining the 250 threshold. For

example, if you must file 100 Forms 1099–B and 300 Forms 1099–INT, Forms 1099–B need not be filed

magnetically or electronically since they do not meet the threshold of 250. However, Forms 1099–INT must be

filed magnetically or electronically since they meet the threshold of 250.

*For Tax Year 1998, Form 1098–T may be reported on paper regardless of the 250 threshold.

.06 The above requirements do not apply if the payer establishes hardship (see Part A, Sec. 5).

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 payer will be subject to a penalty of $50 per return in excess of 250. (For

penalty information, refer to the Penalty section of the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G.”)

.02 If payers are required to file original or corrected returns on magnetic media, but such filing would create a hardship, they

may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns

on Magnetic Media, to IRS/MCC.

.03 Even though a payer may submit as many as 249 corrections on paper, IRS encourages magnetically or electronically submitted corrections. Once the 250 threshold has been met, filers are required to submit any returns of 250 or more magnetically or electronically. However, if a waiver for original documents is approved, any corrections for the same type of returns will be covered

under this waiver.

.04 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.

.05 A transmitter must submit a separate Form 8508 for each payer. Do not submit a list of payers.

.06 All information requested on the Form 8508 must be provided to IRS for the request to be processed.

.07 The waiver, if approved, will provide exemption from magnetic media filing for the current tax year only. Payers may not

apply for a waiver for more than one tax year at a time; application must be made each year a waiver is necessary.

May 26, 1998

12

1998–21 I.R.B.

.08 Form 8508 may be photocopied or computer-generated as long as it contains all the information requested on the original

form.

.09 Filers are encouraged to submit Form 8508 to IRS/MCC at least 45 days before the due date of the returns.

.10 File Form 8508 for the W–2 series of forms with IRS/MCC, not SSA.

.11 Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth in the regulations 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.

.12 If a waiver request is approved, the transmitter should keep the approval letter on file. The transmitter should not send a

copy of the approved waiver to the service center where the paper returns are filed.

.13 An approved waiver from filing information returns on magnetic media does not provide exemption from all filing.

The payer must timely file information returns on acceptable paper forms with the appropriate service center.

.14 Desert Storm/Operation Joint Guard (OJG) [See Note] (Bosnia Region) Contributions - If a payer is required to file a

Form 5498 magnetically/electronically, the payer may request an automatic waiver to file Forms 5498 on paper for participants of

Desert Storm or Operation Joint Guard. The payer should clearly mark Desert Storm or Operation Joint Guard on the waiver request

form.

☛ Note: Military personnel under Operation Joint Guard (OJG) will be treated the same as military personnel under Operation Joint Endeavor (OJE) for purposes of Pub. L. 104–117 and Notice 96–34, 1996–1 C.B. 379.

Sec. 6. Vendor List

.01 IRS/MCC prepares a list of vendors who support magnetic media or electronic filing. The Vendor List (Pub. 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 meeting the filing requirements engage a service bureau to prepare media on their behalf, the filers should be

careful 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 a 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 Transmitters are required to submit Form 4419, Application for Filing Information Returns Magnetically/ Electronically, to

request authorization to file information returns with IRS/MCC. A single Form 4419 should be filed no matter how many types of

returns the transmitter will be submitting magnetically/ electronically. For example, if a transmitter plans to file Forms 1099–INT,

one Form 4419 should be submitted. If, at a later date, another type of form (Forms 1098, 1099, 5498 and W–2G) is to be filed, the

transmitter does not need to submit a new Form 4419.

EXCEPTIONS

An additional Form 4419 is required for filing each of the following types of returns: Forms 1042–S, 8027, and W–4.

FORM

TITLE

EXPLANATION

1042–S

Foreign Person’s U.S.

Source Income Subject

to Withholding

Payments subject to withholding under Chapter 3

of the Code, including interest, dividends, royalties, pensions and annuities, gambling winnings

and compensation for personal services.

13

May 26, 1998

1998–21 I.R.B.

8027

Employer’s Annual

Information Return

of Tip Income and

Allocated Tips

Receipts from operations where tipping is customary. Used by the employer to report employee’s

tips or allocated tips.

W–4

(See Note)

Employee’s Withholding

Allowance Certificate

Forms received during the quarter from employees

quarter from employees still employed at the end

of the quarter who claim the following:

(a) More than 10 withholding allowances or

(b) Exempt status and wages normally would be

more than $200 a week.

☛ Note: Employers are not required to send other Forms W–4 unless notified to do so by the IRS.

.02 Magnetic tape, tape cartridge, diskette, and electronically-filed returns may not be submitted to IRS/MCC until the application has been approved. Please read the instructions on the back of Form 4419 carefully. A Form 4419 is included in the Publication

1220 for the filer’s use. This form may be photocopied. Additional forms may be obtained by calling 1-800-TAX-FORM (1-800829-3676). The form is also available on IRP–BBS at 304-264-7070 or on Internet at http://www.irs.ustreas.gov.

.03 Upon approval, a five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an approval

letter. The TCC must be coded in the Transmitter “T” Record. If a transmitter uses more than one TCC to file, each TCC must be

reported on separate media or in separate transmissions if filing electronically.

.04 Annually, a Publication 1220 containing the current revenue procedure, forms, and instructions will be sent to the attention of

the contact person indicated on Form 4419.

.05 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.

.06 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. 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). 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.

.07 IRS/MCC encourages transmitters who file for multiple payers to submit one application and to use the assigned TCC for all

payers.

.08 If a payer’s files are prepared by a service bureau, the payer may not need 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 payer. Other service bureaus

will prepare magnetic media and return the media to the payer for submission to IRS/MCC. These service bureaus may require the

payer to obtain a TCC to be coded in the Transmitter “T” Record. Payers should contact their service bureaus for further information.

.09 Once a transmitter is approved to file magnetically or electronically, it is not necessary to reapply each year unless:

(a) The payer has discontinued filing magnetically or electronically for two years; the payer’s TCC may have been reassigned by

IRS/MCC. Payers, who are aware that the TCC assigned will no longer be used, are requested to notify IRS/MCC so these

numbers may be reassigned; or

(b) The payer’s magnetic media files were transmitted in the past by a service bureau using the service bureau’s TCC, but now the

payer has computer equipment compatible with that of IRS/MCC and wishes to prepare his or her own files. The payer must

request a TCC by filing Form 4419.

.10 One Form 4419 may be submitted regardless of how many types of media or methods are used to file the return. Multiple

TCCs will only be issued to payers with multiple TINs. Only one TCC will be issued per TIN unless the filer has checked the

application for the following forms in addition to the Forms 1099; Form 1042–S, Form 8027, and/or Form W–4. A separate

TCC will be assigned for each of these forms.

.11 In accordance with Regulations section 1.6041–7(b), payments by separate departments of a health care carrier to providers

of medical and health care services may be reported on separate returns on magnetic media. In this case, the headquarters will be

considered the transmitter, and the individual departments of the company filing reports will be considered payers. A single Form

4419 covering all departments filing on magnetic media should be submitted. One TCC may be used for all departments.

.12 Approval to file does not imply endorsement by IRS/MCC of any computer software or of the quality of tax preparation services provided by a service bureau or software vendor.

Sec. 8. Test Files

.01 IRS/MCC does not require test files, except for filers wishing to participate in the Combined Federal/State Filing Program

(See Part A, Sec. 16, for further information concerning the Combined Federal/State Filing Program).

May 26, 1998

14

1998–21 I.R.B.

.02 IRS/MCC encourages first-time magnetic media or electronic filers to submit a test. The test file must consist of a sample of

each type of record:

(a) Transmitter “T” Record (all fields marked required must include transmitter information)

(b) Payer “A” Record (must not be fictitious data)

(c) Multiple Payee “B” Records (at least 11 “B” Records per each “A” Record)

(d) End of Payer “C” Record

(e) State Totals “K” Record, if participating in the Combined Federal/State Filing Program

(f) End of Transmission “F” Record (See Part B for record formats.)

.03 Use the Test Indicator “T” in Field Position 28 of the “T” Record to show this is a test file.

.04 IRS/MCC will check the file to ensure it meets the specifications of this revenue procedure. For current filers, sending a test

file will provide the opportunity to ensure their software reflects any programming changes. If unable to submit a magnetic or electronic test file, a hard copy printout that shows a sample of each record type (T, A, B, C, and F) may be submitted. The hard copy

print test is not acceptable for Combined Federal/State Filing approval.

.05 Tests should be sent to IRS/MCC between November 1 and December 15. The test file must be received at MCC by December 15 in order to be processed. Filers may begin submitting test tapes and diskettes after October 1; however, the data will not be

processed until on or after November 1.

.06 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 diskette, 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. Also, mark “TEST” on the external media label.

If submitting a hard copy printout, mark the printout as “TEST” and include name, telephone number, and address of a person

who can be contacted to discuss its acceptability.

.07 IRS/MCC will send a letter of acknowledgment to indicate the test results. Unacceptable magnetic media files, along with

documentation identifying the errors, will be returned. Resubmission of test files must be received by IRS/MCC no later than December 15.

.08 Successfully processed media will not be returned to filers.

Sec. 9. Filing of Information Returns 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 a 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, Transmittal of Information Returns Reported Magnetically/Electronically (Continuation), is a continuation of Form 4804 and should only be used if the filer is reporting more than five types of returns and/or more than five payers.

Form 4802 is not a stand-alone form; it can only accompany Form 4804.

.02 IRS/MCC allows for 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 phone communication from IRS/MCC to question the tax year.

.03 A transmitter may report for any combination of payers and/or documents in a submission. Each file must begin with a “T”

Record and end with an “F” record for the end of a transmission. For example, if reporting Forms 1099–INT for Bank A, Forms

1099–DIV for Bank B, and Forms 1098 for Bank C, three separate tapes or diskettes need not be created. All three banks and all

types of documents can be coded within a file on one tape or diskette as long as each bank or type of return has a separate “A”

Record. Multiple tapes or diskettes can be sent in one package. For each separate type of media, the first record on the file must be

the Transmitter “T” Record. A Form 4804, Transmittal of Information Returns Reported Magnetically/Electronically, must be

submitted for every Transmitter “T” Record. Filers must include Form 4804, 4802, or computer-generated substitute with

their shipment.

.04 Multiple types of media may be submitted in a shipment. However, submit a separate Form 4804 for each type of media.

.05 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.

.06 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.

.07 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.

.08 Form 4804 may be signed by the payer or the transmitter, service bureau, paying agent, or disbursing agent (all hereafter referred to as agent), on behalf of the payer. Failure to sign the affidavit on Form 4804 may delay processing or could result in

the files being returned unprocessed. 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 payer).”

1998–21 I.R.B.

15

May 26, 1998

.09 Although an authorized agent may sign the affidavit, the payer is responsible for the accuracy of the Form 4804 and the returns filed. The payer will be liable for penalties for failure to comply with filing requirements.

.10 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. 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.

.11 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).

.12 When submitting files include the following:

(a) A signed Form 4804;

(b) Form 4802, if applicable;

(c) External media label (created by filer) affixed to magnetic media;

(d) IRB Box _____ of ______ outside label.

☛ Note: See Parts C and D for Electronic Submission Requirements.

.13 If returns from different locations (using the same name and TIN) are submitted on the same file, IRS encourages the filer to

consolidate each type of information return under one “A” Record. For example, all “B” Records for the same type of return should

be together under one “A” Record and followed by the End of Payer “C” Record.

.14 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.

.15 Payers 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, with the exception of Form 1099–C. A financial entity must retain a copy of Form 1099–C, Cancellation of Debt, or have the ability to reconstruct the data required to be included on the return, for at least 4 years from the date

such return is required to be filed. Whenever backup withholding is imposed, a 4 year retention is required.

Sec. 10. Due Dates

As a result of due dates for Tax Year 1998 falling on weekends in 1999, the information returns, the recipient copies, and the participant copies will be treated as timely if filed or furnished on or before the following dates:

Forms 1098, 1099 and W–2G

Recipient Copy - February 1, 1999

IRS Copy - March 1, 1999

Forms 5498 and 5498–MSA

Participant Copy - June 1, 1999

IRS Copy - June 1, 1999

(Participants Copy Form 5498-for fair market value of account and for Education IRA Contributions-February 1, 1999)

.01 The due dates for filing paper returns with IRS also apply to magnetic media or electronic filing. Filing of information returns

is on a calendar year basis, except for Forms 5498 and 5498–MSA, which are used to report amounts contributed during or after the

calendar year (but not later than April 15).

.02 If any due date falls on a Saturday, Sunday or legal holiday, the return or statement is considered timely if filed or furnished

on the next business day (i.e., the next day that is not a Saturday, Sunday, or legal holiday).

.03 Information returns filed magnetically/electronically for Forms 1098, 1099, and W–2G must be submitted to IRS/MCC postmarked on or before March 1, 1999.

.04 Returns postmarked by the United States Postal Service (USPS) on or before March 1, 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 Notice 97–26 and Notice 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 and participants and filing Forms 5498 and

5498–MSA.

May 26, 1998

16

1998–21 I.R.B.

.05 Statements to recipients must be furnished on or before February 1, 1999 for TY98. Form 5498 statements to the participants

must be furnished on or before February 1, 1999 for TY98 for the fair market value of the account and for contributions to an education IRA and by June 1, 1999 for TY98 for contributions made to all other types of IRAs for the prior calendar year.

.06 Forms 5498 and 5498–MSA filed magnetically or electronically must be filed with IRS/MCC on or before June 1, 1999 for

TY98. Forms 5498 and 5498–MSA are filed for contributions to be applied to 1998 that are made January 1, 1998 through April 15,

1999 and/or to report the fair market value of any IRA/SEP/SIMPLE or medical savings account.

.07 Use this revenue procedure to prepare information returns filed magnetically or electronically beginning January 1, 1999 and

received by IRS/MCC no later than December 15, 1999.

Sec. 11. Extensions of Time

.01 An extension of time to file may be requested for Forms 1099, 1098, 5498, 5498–MSA, W–2G, W–2 series of forms, and

1042–S.

.02 Form 8809, Request for Extension of Time To File Information Returns, should be submitted to IRS/MCC at the addresses

listed later in this section. 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 payers (50 or less) may be done by submitting Form 8809 and attaching a list of

the payer names and their TINs (EIN or SSN). The listing must be attached to ensure that the extension is recorded for all payers. Form 8809 may be computer- generated or photocopied. Be sure that all the pertinent information is included.

.04 Requests for an extension of time to file for more than 50 payers are required to be submitted magnetically or electronically.

Requests for an extension of time for 10 to 50 payers 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- or 3 1⁄2-inch diskette, or electronically through the

IRP–BBS or mainframe.

.05 If a filer does not have an IRS/MCC assigned Transmitter Control Code (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.

.06 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

.07 Requests for extensions of time for multiple payers will be responded to with one approval letter, accompanied by a list of

payers covered under that approval.

.08 As soon as it is apparent that a 30-day extension of time to file is needed, Form 8809 may be submitted. 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.

.09 If an additional extension of time is needed, a second Form 8809 must be filed by the initial extended due date. Check line 7

on the form to indicate that an additional extension is being requested. A second 30-day extension will be approved only in cases of

extreme hardship or catastrophic event. If requesting a second 30-day extension of time, submit the information return files as

soon as prepared. Do not wait for MCC’s response to your second extension request.

.10 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 5498, submit Form 8809 postmarked on

or before March 1, 1999. Complete more than one Form 8809 to avoid this problem.

.11 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 the service center where the paper returns are filed.

.12 Request an extension for only one tax year.

1998–21 I.R.B.

17

May 26, 1998

.13 The extension request must be signed by the payer or a person who is duly authorized to sign a return, statement or other document for the payer.

.14 Failure to properly complete and sign the Form 8809 may cause delays in processing the request or result in a denial. Carefully read and follow the instructions on the back of the Form 8809.

.15 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 1220.

.16 Request an extension of time to furnish the statements to recipients of Forms 1098, 1099, 5498, W–2G, W–2 series of forms,

and 1042–S by submitting a letter to IRS/MCC containing the following information:

(a) Payer 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 payer or person duly authorized

Requests for an extension of time to furnish the statements for Forms 1098, 1099, 5498, W–2G, W–2 series of forms, and 1042–S

to recipients 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.

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 the data is formatted incorrectly, the file will be returned for replacement accompanied with a Media Tracking Slip (Form

9267). When 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 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. 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 the 45 days or if the incorrect files are returned by IRS/MCC for replacement more than two times. A penalty for intentional disregard of 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 Forms 1099, 1098, 5498, and

W–2G.”)

.04 Sample records identifying errors encountered will be provided with the returned media. It is the responsibility of the transmitter to check the entire file for similar errors.

.05 The following definitions have been provided to help distinguish between a correction and a replacement:

• A correction is an information return submitted by the transmitter to correct an information return that was previously submitted to and processed by IRS/MCC, but contained erroneous information.

• A replacement is an information return file that IRS/MCC has returned to the transmitter due to 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.

• Filers should never send anything to IRS/MCC marked “Replacement” unless IRS/MCC returned media to them.

.06 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 tracking capabilities or one that will provide proof of delivery.

.07 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 that the filer needs to correct his or her file.

.08 IRS/MCC contacts payers who have submitted payee data with missing TINs in an attempt to prevent errors that could result

in penalties. Payers who submit data with missing TINs and have taken the required steps to obtain this information are encouraged

to attach a letter of explanation to the required Form 4804. This will prevent unnecessary contact from IRS/MCC. This letter, however, will not prevent backup withholding notices (CP2100 or CP2100A Notices) or penalties for missing or incorrect TINs.

.09 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 filing requirement of information returns of 250 or more applies separately to both original and corrected

returns.

May 26, 1998

18

1998–21 I.R.B.

If a payer has 100 Forms 1099–A to be corrected, they can be

E

filed on paper since they fall under the 250 threshold. However,

X

if the payer has 300 Forms 1099–B to be corrected, they must be

A

filed magnetically or electronically since they meet the 250 threshold.

M

If for some reason a payer cannot file the 300 corrections on magnetic

P

media, to avoid penalties, a request for a waiver must be submitted before

L

filing on paper. If a waiver is approved for original documents, any corrections

E

for the same type of return will be covered under this waiver.

.02 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 by August 1 may be subject to a lesser penalty. (For information on penalties, refer to the Penalty

section of the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G.”) However, if payers 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 completed 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.

.03 There are numerous types of errors, and in some cases, more than one transaction may be required to correct the initial error.

If the original return was filed as an aggregate, the filers must consider this in filing corrected returns.

.04 Corrected returns may be included on the same medium as original returns; however, separate “A” Records are required. Corrected returns must be identified on the Form 4804 and the external media label by indicating “Correction.” If filers discover that

certain information returns were omitted on their original file, they must not code these documents as corrections. The file

must be coded and submitted as originals.

.05 If a payer discovers errors for prior years that affect a large number of payees, in addition to sending IRS the corrected returns

and notifying the payees, a letter containing the following information should be sent to IRS/MCC:

(a) Name and address of payer

(b) Type of error (please explain clearly)

(c) Tax year

(d) Payer TIN

(e) TCC

(f) Type of Return

(g) Number of Payees

This information will be forwarded to the appropriate office in an attempt to prevent erroneous notices from being sent to the payees. The correction must be submitted on an actual information return document or filed magnetically/electronically. Provide the

correct tax year in Block 2 of the Form 4804 and on the external media label.

.06 Prior year data, original and corrected, must be filed according to the requirements of this revenue procedure. If submitting

prior year corrections, use the record format for the current year and submit on separate media. However, use the actual year designation of the correction in Field Positions 2–5. If filing electronically, a separate transmission must be made for each tax year.

.07 In general, filers should submit corrections for returns filed within the last 3 calendar years (4 years if the payment is a reportable payment subject to backup withholding under section 3406 of the Code).

.08 All paper returns, whether original or corrected, must be filed with the appropriate service center.

.09 Form 4804 and Form 4802 (if applicable), must be submitted with corrected files submitted magnetically or electronically.

.10 The “B” Record provides a 20-position field for the Payer’s Account Number for the Payee. This number will help identify

the appropriate incorrect return if more than one return is filed for a particular payee. Do not enter a TIN in this field. A payer’s

account number for the payee may be a checking account number, savings account number, serial number, or any other number assigned to the payee by the payer that will distinguish the specific account. This number should appear on the initial return and on the

corrected return in order to identify and process the correction properly.

.11 The record sequence for filing corrections is the same as for original returns.

.12 Review the chart that follows. Errors normally fall under one of the two categories listed. Next to each type of error made is

a list of instructions on how to file the corrected return.

Guidelines for Filing Corrected Returns Magnetically/Electronically

Error Made on the Original Return

How To File the Corrected Return

Two (2) separate transactions are required to make the following corrections properly. Follow the directions for both Transactions 1 and 2. (See Note 1)

1. Original return was filed

with one or more of the following errors:

(a) No payee TIN (SSN, ITIN, ATIN, or EIN)

Transaction 1: Identify incorrect returns

A. Prepare a new Form 4804/4802 that includes information related

to this new file.

1998–21 I.R.B.

19

May 26, 1998

Guidelines for Filing Corrected Returns Magnetically/Electronically (Continued)

Error Made on the Original Return

(b) Incorrect payee TIN

(c) Incorrect payee name

(d) Wrong type of return indicator

How To File the Corrected Return

B. Mark “Correction” in Block 1 of Form 4804.

C. Prepare a new file. The first record on the file will be the Transmitter “T” Record.

D. Make a separate “A” Record for each type of return and each

payer being reported. The information in the “A” record will be

exactly the same as it was in the original submission with one exception, the Correction File Indicator must be set to “1” (one) in

Field Position 50.

E. The Payee “B” Records must contain exactly the same information as submitted previously, except, insert a Corrected Return Indicator Code of “G” in Field Position 6 of the “B” Records, and

for all payment amounts, enter “0” (zero).

F. Corrected returns submitted to IRS/MCC using “G” coded “B”

Records may be on the same file as those returns submitted with a

“C” code; however, separate “A” Records are required.

G. Prepare a separate “C” Record for each type of return and each

payer being reported.

H. Continue with Transaction 2 to complete the correction.

Transaction 2: Report the correct information

A. Make a separate “A” Record for each type of return and each

payer being reported. The Correction File Indicator must be set

to “1” (one) in Field Position 50.

B. The Payee “B” Records must show the correct information as

well as a Corrected Return Indicator Code of “C” in Field Position 6.

C. Corrected returns submitted to IRS/MCC using “C” coded “B”

Records may be on the same file as those returns submitted with a

“G” Codes; however, separate “A” Records are required.

D. Prepare a separate “C” Record for each type of return and each

payer being reported.

E. The last record on the file will be the End of Transmission “F”

Record.

F. Indicate “Correction” on the external media label.

☛ Note 1: Payers who can show they have reasonable cause (defined in the regulations under section 6724 of the Internal

Revenue Code) are not required to make corrections for returns filed with a missing or incorrect name and/or TIN. These

payers should change their records in order to submit correct information in the future. Payers who cannot show reasonable

cause are encouraged to make corrections for the current processing year by August 1 to reduce applicable penalties. Corrections filed by August 1 will reduce the $50 per return penalty for filing returns with missing or incorrect information to

$30. The penalty is further reduced to $15 per return if the corrections are filed within 30 days of the due date. (For penalty

information, refer to the Penalty section of the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G.”) Corrections

filed after August 1 will not reduce the penalty but will allow IRS to update the payee’s records. The regulations for IRC section 6724 are available in Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect

Name/TINs. The publication may be obtained by calling 1-800-TAX-FORM (1-800-829-3676).

One transaction is required to make the following corrections properly (See Note 2).

2. Original return was filed with one or

more of the following errors:

(a) Incorrect payment amount codes in

the Payer “A” Record

(b) Incorrect payment amounts in the

Payee “B” Record

A. Prepare a new Form 4804/4802 that includes information relating

to this new file.

B. Mark “Correction” in Block 1 of Form 4804.

C. Prepare a new file. The first record on the file will be the Transmitter “T” Record.

D. Make a separate “A” Record for each type of return and each

payer being reported. Information in the “A” Record may be the

May 26, 1998

20

1998–21 I.R.B.

Guidelines for Filing Corrected Returns Magnetically/Electronically (Continued)

Error Made on the Original Return

How To File the Corrected Return

(c) Incorrect code in the document

specific/distribution code field in the

Payee “B” Record

(d) Incorrect payee address

(e) Direct sales indicator

same as it was in the original submission. The Correction File

Indicator must be set to “1” (one) in Field Position 50.

E. The Payee “B” Records must show the correct information as well

as a Corrected Return Indicator Code of “G” in Field Position 6.

F. Corrected returns submitted to IRS/MCC using file as those returns submitted without the “G” code; however, separate “A”

Records are required.

G. Prepare a separate “C” Record for each type of return and each

payer being reported.

H. The last record on the file will be the End of Transmission “F”

Record.

I. Indicate “Correction” on the external media label.

☛ Note 2: If a filer is correcting the name and/or TIN in addition to any errors listed in item 2 of the chart, two transactions

will be required. If a filer is reporting “G” coded, “C” coded, and/or “Non-coded” (original) returns on the same media,

each category must be reported under separate “A” records.

Sec. 14. Taxpayer Identification Number (TIN)

.01 Section 6109 of the Internal Revenue Code requires a person to furnish his/her TIN to the person obligated to file the information return.

.02 The payee’s TIN and name combination is used to associate information returns reported to IRS/MCC with corresponding information on tax returns. It is imperative that correct Taxpayer Identification Numbers (TINs) for payees be provided to IRS/MCC.

Do not enter hyphens or alpha characters. Entering all zeros, ones, twos, etc., will have the effect of an incorrect TIN.

.03 The payer and payee names with associated TINs should be consistent with the names and TINs used on other tax returns.

Also, the name and TIN provided must belong to the owner of the account. If the account is recorded in more than one name, furnish the name and TIN of one of the owners of the account. The TIN provided must be associated with the name of the payee provided in the first name line of the “B” Record. For individuals, the payee TIN is generally the payee’s Social Security Number

(SSN). For other entities, the payee TIN is the payee’s Employer Identification Number (EIN). The payee TIN may also refer to an

Individual Taxpayer Identification Number (ITIN) or Adoption Taxpayer Identification Number (ATIN). For sole proprietors, the

payee TIN may be either an SSN or EIN but the sole proprietor’s name (not the business name) must be used on the first name

line.

.04 Failure to provide the correct name and corresponding TIN could result in a penalty and/or backup withholding notice (sometimes referred to as a “B” notice). (For penalty information, refer to the Penalty section of the 1998 “Instructions for Forms 1099,

1098, 5498, and W–2G.” For “B” Notice information, refer to the Backup Withholding section of the same publication.)

.05 The following charts will help payers determine the TIN to be furnished to IRS/MCC for those persons for whom they are reporting information (payees).

Chart 1. Guidelines for Social Security Numbers

For this type of

account-

In the Taxpayer

Identification

Number Field of

the Payee “B”

Record, enter the

SSN of-

In the First Payee

Name Line of the

Payee “B” Record,

enter the name of-

1. Individual

The individual

The individual

2. Joint account (Two or

more individuals, including

husband and wife)

The actual owner of the

account or, if combined

funds, the first indivdual

on the account.

The individual whose SSN is entered

1998–21 I.R.B.

21

May 26, 1998

3. Custodian account

of a minor (Uniform

Gift, or Transfers,

to Minors Act)

The minor

The minor

4. The usual revocable

savings trust account

(grantor is also trustee)

The grantor-trustee

The grantor-trustee

5. A so-called trust

account that is not a

legal or valid trust

under state law

The actual owner

The actual owner

6. Sole proprietorship

The owner (An SSN or EIN)

The owner, not the business name (The filer may

enter the business name on the second name line.)

Chart 2. Guidelines for Employer Identification Numbers

In the Taxpayer

Identification

Number Field of

the Payee “B”

Record, enter the

EIN of-

In the First Payee

Name Line of the

Payee “B” Record,

enter the name of-

1. A valid trust, estate, or

pension trust

The legal entity1

The legal trust, estate, or pension trust

2. Corporate

The corporation

The corporation

3. Association, club, religious,

charitable, educational, or other

tax-exempt organization

The organization

The organization

4. Partnership account held in

the name of the business

The partnership

The partnership

5. A broker or registed

nominee/middleman

The broker or nominee/middleman

The broker or nominee/middleman

6. Account with Department of

Agriculture in the name of a public

entity (such as a state or local

government, school district, or

prison), that receives agriculture

program payments

The public entity

The public entity

7. Sole proprietorship

The business (An EIN or SSN)

The owner, not the business name (The filer may

enter the business name on the second name line.)

For this type

of account-

1Do not furnish the identification number of the personal representative or trustee unless the name of the representative or trustee

is used in the account title.

Sec. 15. Effect on Paper Returns and Statements to Recipients

.01 Magnetic/electronic reporting of information returns eliminates the need to submit paper documents to the IRS. CAUTION!

Do not send Copy A of the paper forms to IRS/MCC in addition to magnetic media and electronic filing. This will result in duplicate filing; therefore, erroneous notices could be generated.

May 26, 1998

22

1998–21 I.R.B.

.02 Payers are responsible for providing statements to the payees as outlined in the 1998 “Instructions for Forms 1099, 1098,

5498, and W–2G.” 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 1179, “Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099,

5498, and W–2G.”

Sec. 16. Combined Federal/State Filing Program

.01 The Combined Federal/State Filing Program was established to simplify information returns filing for the taxpayer.

IRS/MCC will forward this information to participating states free of charge for approved filers. Separate reporting to those states is

not necessary. The following information returns may be filed under the Combined Federal/State Filing Program:

Form 1099–DIV _____

Form 1099–G _______

Form 1099–INT _____

Form 1099–MISC____

Form 1099–OID _____

Form 1099–PATR ____

Form 1099–R _______

Form 5498 __________

Dividends and Distributions

Certain Government Payments

Interest Income

Miscellaneous Income

Original Issue Discount

Taxable Distributions Received from Cooperatives

Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans,

Insurance Contracts, etc.

IRA

IRAs,

The following information returns may not be filed under this program:

Form 1098 __________

Form 1098–E ________

Form 1098–T ________

Form 1099–A ________

Form 1099–B ________

Form 1099–C ________

Form 1099–LTC ______

Form 1099–MSA _____

Form 1099–S ________

Form 5498–MSA _____

Form W–2G _________

Mortgage Interest Statement

Student Loan Interest Statement

Tuition Payments Statement

Acquisition or Abandonment of Secured Property

Proceeds From Broker and Barter Exchange Transactions

Cancellation of Debt

Long-Term Care and Accelerated Death Benefits

Distributions From Medical Savings Accounts

Proceeds From Real Estate Transactions

Medical Savings Account Information

Certain Gambling Winnings

.02 To request approval to participate, a magnetic media or electronic test file coded for this program must be submitted to

IRS/MCC between November l and December 15. Hard copy print tests are not acceptable for Combined Federal/State Filing

approval.

.03 Attach a letter to the Form 4804 submitted with the test file to indicate a desire to participate in this program.

.04 A test file is only required for the first year. Each record, both in the test and the actual data file, must conform to this revenue

procedure.

.05 If the test file is acceptable, IRS/MCC will send the filer an approval letter, and a Form 6847, Consent for Internal Revenue

Service to Release Tax Information, which the payer must complete, sign, and return to IRS/MCC before any tax information can be

released to the state. Filers must write their TCC on Form 6847.

.06 If the test file is not acceptable, IRS/MCC will return the media with a letter indicating the problems. The replacement test

file must be returned to IRS/MCC postmarked on or before December 15.

.07 A separate Form 6847 is required for each payer. A transmitter may not combine payers on one Form 6847 even if acting as

Attorney-in-Fact for several payers. Form 6847 may be computer-generated as long as it includes all information that is on the original form or it may be photocopied. If the Form 6847 is signed by an Attorney-in-Fact, the written consent from the payer must

clearly indicate that the Attorney-in-Fact is empowered to authorize release of the information.

.08 Only code the records for participating states and for those payers who have submitted Form 6847.

.09 Some participating states require separate notification that the payer is filing in this manner. Since IRS/MCC acts as a forwarding agent only, it is the payer’s responsibility to contact the appropriate states for further information.

.10 All corrections properly coded for the Combined Federal/State Filing Program will be forwarded to the participating states.

.11 Participating states and corresponding valid state codes are listed in Table 1 of this section. The appropriate state code must

be entered for those documents that meet the state filing requirements; do not use state abbreviations.

1998–21 I.R.B.

23

May 26, 1998

.12 To simplify filing, some of the participating states have provided their information return reporting requirements (see Table

2). Each state’s filing requirements are subject to change by the state. It is the payer’s responsibility to contact the participating states to verify the criteria provided in this table.

.13 Upon submission of the actual files, the transmitter must be sure of the following:

(a) All records should be coded exactly as required by this revenue procedure.

(b) The “C” Record must be followed by a State Totals “K” Record for each state being reported.

(c) Payment amount totals and the valid participating state code must be included in the State Totals “K” Record.

(d) The last “K” Record must be followed by an “A” Record or an End of Transmission “F” Record (if this is the last record of

the entire file).

Table 1. Participating States And Their Codes

State

Code

State

Code

State

Code

Alabama

Arizona

Arkansas

California

Delaware

District of Columbia

Georgia

Hawaii

01

04

05

06

10

11

13

15

Idaho

Indiana

Iowa

Kansas

Maine

Massachusetts

Mississippi

Missouri

16

18

19

20

23

25

28

29

Montana

New Jersey

New Mexico

North Dakota

Oregon

South Carolina

Tennessee

Wisconsin

30

34

35

38

41

45

47

55

Table 2. Dollar Criteria For State Reporting

STATE

1099–DIV

1099–G

1099–INT

099 MISC

1099–OID

1099–PATR

1099–R

5498

Alabama

Arkansas

District of

Columbiab

Hawaii

Idaho

Iowa

Mississippi

Missouri

Montana

New Jersey

Tennessee

Wisconsin

$1500

100

$ NR

2500

$1500

100

$1500

2500

$1500

2500

$1500

2500

$1500

2500

NR

600

10

NR

10

600

NR

10

1000

100

NR

600

600

10

NR

10

600

NR

10

1000

100

NR

600

600

600

600

600

1200c

600

1000

NR

600

600

10

NR

10

600

NR

10

1000

NR

NR

600

10

NR

10

600

NR

10

1000

NR

NR

600

600

NR

a

a

a

NR

10

600

NR

10

1000

NR

NR

10

600

NR

600

1000

NR

600

a

a

a

NR

NR

a

NR

NR

NR

The preceding list is for information purposes only. The state filing requirements are subject to change by the states. For complete information on state filing requirements, contact the appropriate state tax agencies.

Filing requirements for states in TABLE 1 not shown in TABLE 2 are the same as the federal requirement.

NR = No filing requirement.

Footnotes:

a. All amounts are to be reported.

b. Amounts are for aggregates of several types of income from the same payer.

c. Missouri would prefer those returns filed with respect to non-Missouri residents to be sent directly to its state agency.

Sec. 17. Definition of Terms

Element

Description

Asynchronous Protocols

This type of data transmission is most often used by microcomputers, PCs and some minicomputers. Asynchronous transmissions transfer data at arbitrary time intervals using the

start-stop method. Each character transmitted has its own start bit and stop bit.

ATIN

A temporary taxpayer identification number assigned to a child who has been placed by an

authorized placement agency in the household of a prospective adoptive parent prior to

May 26, 1998

24

1998–21 I.R.B.

Element

Description

adoption. When the adoption becomes final, the adoptive parent must apply for a social

security number for the child.

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 Smartmodem

(14400bps) modems. Standard IBM 3780 space compression is acceptable.

Correction

A correction is an information return submitted by the transmitter to correct an information 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.

CUSIP Number

A number developed by the Committee on Uniform Security Identification Procedures to

serve as a common denominator in communications among users for security transactions

and security information.

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 one Transmitter “T” Record at

the beginning of the file, followed by a Payer “A” Record, Payee “B” Records, and an End

of Payer “C” Record after each set of “B” Records. The last record on the file will be the

End of Transmission “F” Record. Nothing should be reported after the End of Transmission “F” Record.

Filer

Person (may be payer and/or transmitter) submitting information returns to IRS.

Filing Year

The actual year in which the information returns are being submitted to IRS.

Golden Parachute Payment

A payment made by a corporation to a certain officer, shareholder, or highly compensated

individual when a change in the ownership or control of the corporation occurs or when a

change in the ownership of a substantial part of the corporate assets occurs.

Incorrect Taxpayer

Identification Number

(Incorrect TIN)

A TIN may be incorrect for several reasons:

(a) The payee provided a wrong number or name (e.g., the payee is listed as the only

owner of an account but provided someone else’s TIN).

(b) A processing error (e.g., the number or name was typed incorrectly).

(c) The payee’s status changed (e.g., a payee name change was not conveyed to the IRS or

SSA so they could enter the change in their records).

Individual Taxpayer

Identification Number (ITIN)

A nine digit number issued by IRS to individuals who are required to have a U.S. Taxpayer Identification Number but are not eligible to obtain a Social Security Number (SSN).

Information Return

The vehicle for submitting required information about another person to IRS. Information

returns are filed by financial institutions and by others who make certain types of payments

as part of their trade or business. The information required to be reported on an information

return includes interest, dividends, pensions, nonemployee compensation for personal services, stock transactions, sales of real estate, mortgage interest, and other types of information. For this revenue procedure, an information return is a Form 1098, 1098–E, 1098–T,

1099–A, 1099–B, 1099–C, 1099–DIV, 1099–G, 1099–INT, 1099–LTC, 1099–MISC,

1099–MSA, 1099–OID, 1099–PATR, 1099–R, 1099–S, 5498, 5498–MSA or W–2G.

1998–21 I.R.B.

25

May 26, 1998

Element

Description

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 51⁄4- and 31⁄2-inch diskette.

Media Tracking Slip

(Form 9267)

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 the media. This

must be returned with the replacement file.

Missing Taxpayer

Identification Number

(Missing TIN)

The payee TIN on an information return is “missing” if:

(a) there is no entry in the TIN field,

(b) includes one or more alpha characters (a character or symbol other than an Arabic

number) as one of the nine digits, OR

(c) payee TIN has less than nine digits.

PS 58 Costs

The current cost of life insurance under a qualified plan taxable under section 72(m) and

section 1.72–16(b) of the Income Tax Regulations. (See Part B, Sec. 10, Payee “B”

Record, Document Specific/Distribution Code, Category of Distribution, Code 9.)

Payee

Person or organization receiving payments from the payer, or for whom an information return must be filed. The payee includes a student (Form 1098–T), borrower (Forms 1098,

1098–E, and 1099–A), a debtor (Form 1099–C), a policyholder or insured (Form 1099–

LTC), any IRA/SEP/SIMPLE plan participant (Form 5498), and a gambling winner (Form

W–2G). For Form 1099–S, the payee is the seller or other transferor.

Payer

Includes the person making payments, a recipient of mortgage interest payments, a recipient of student loan interest payments, a broker, a person reporting a real estate transaction,

a barter exchange, a creditor, a trustee or issuer of any IRA/SEP/SIMPLE, or a lender who

acquires an interest in secured property or who has reason to know that the property has

been abandoned. The payer will be held responsible for the completeness, accuracy, and

timely submission of magnetic media files.

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 payer 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 SSA to an individual for wage and tax 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 an Employer Identification Number (EIN), Social Security Number (SSN),

Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification

Number (ATIN).

Tax Year

Generally, the year in which payments were made by a payer to a payee.

Transfer Agent

The transfer agent, or paying agent, is the entity who has been contracted or authorized by

the payer to perform the services of paying and reporting backup withholding (Form 945).

Transmitter

Refers to the person or organization submitting file(s) magnetically/electronically. The

transmitter may be the payer or agent of the payer.

Transmitter Control Code

(TCC)

A five character alpha/numeric number assigned by IRS/MCC to the transmitter prior to

actual filing magnetically or electronically. This number is inserted in the “T” Record of

the files and must be present before the file can be processed. An application Form 4419

must be filed with IRS/MCC to receive this number.

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1998–21 I.R.B.

Element

Description

Vendor

Vendors include service bureaus that produce information return files on the prescribed

types of magnetic media or via electronic filing for payers. Vendors also include companies who provide software for payers who wish to produce their own media or electronic

files.

Sec. 18. State Abbreviations

.01 The following state and U.S. territory abbreviations are to be used when developing the state code portion of address fields.

This table provides state and territory abbreviations only, and does not represent those states participating in the Combined Federal/State Filing Program.

State

Code

State

Code

State

Code

Alabama

Alaska

American Samoa

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Federated States

of Micronesia

Florida

Georgia

Guam

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

AL

AK

AS

AZ

AR

CA

CO

CT

DE

DC

Kentucky

Louisiana

Maine

Marshall Islands

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Northern

Mariana Islands

KY

LA

ME

MH

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

ND

Ohio

Oklahoma

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Virgin Islands*

Washington

West Virginia

Wisconsin

Wyoming

OH

OK

OR

PA

PR

RI

SC

SD

TN

TX

UT

VT

VA

VI

WA

WV

WI

WY

FM

FL

GA

GU

HI

ID

IL

IN

IA

KS

MP

*This abbreviation applies to the United States Virgin Islands.

.02 Filers must adhere to the city, state, and ZIP Code format for U. S. addresses in the “B” Record. This also includes American

Samoa, Federated States of Micronesia, Guam, Marshall Islands, Northern Mariana Islands, Puerto Rico, and the U. S. Virgin Islands.

.03 For foreign country addresses, filers may use a 51 position free format which should include city, province or state, postal

code, and name of country in this order. This is allowable only if a “1” (one) appears in the Foreign Country Indicator, Field Position

247 of the “B” Record.

.04 When reporting APO/FPO addresses use the following format:

EXAMPLE:

Payee Name

Mailing Address

Payee City

Payee State

Payee ZIP Code

PVT Willard J. Doe

Company F, PSC Box 100

167 Infantry REGT

APO (or FPO)

AE, AA, or AP*

098010100

*AE is the designation for ZIPs beginning with 090–098, AA for ZIP 340, and AP for ZIPs 962- 966.

Sec. 19. 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 payers who have either had their

1998–21 I.R.B.

27

May 26, 1998

files prepared by a service bureau or who have purchased preprogrammed software packages. If a filer purchased a software

package for a previous tax year, it will not be valid for reporting current tax year information returns due to the new record

format.

Filers who engage a service bureau to prepare media on their behalf should be careful not to report duplicate data which

may generate penalty notices.

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. No Form 4804, Transmittal of Information Returns Reported Magnetically/Electronically

Each shipment of media sent to IRS/MCC must include a Form 4804. More than one type of media may be sent in the same shipment, (i.e., a tape, a diskette, or a tape cartridge) but must have a separate Form 4804 to accompany each type of media. In this example three separate Forms 4804 would be required in the total shipment However, multiples of one type of media (6 diskettes)

may be covered by one Form 4804. For electronically transmitted information returns, the Form 4804 must be mailed to IRS/MCC

the same day as the transmission.

2. Discrepancy between IRS/MCC totals and totals in Payer “C” Records

The “C” Record is a summary record for a type of return for a given payer as reported in the “B” Records. IRS balances the total

number of payees and payment amounts and compares them with totals in the “C” Records. Filers should verify the accuracy of the

records because imbalances may necessitate return of files for replacement.

3. The Payment Amount Fields in the “B” Record do not correspond to the Amount Codes in the “A” Record

If codes 2, 4, and 7 appear in the Amount Codes Field of the “A” Record, then the “B” Record must show payment amounts in only

Fields 2, 4, and 7, right-justified and unused positions must be zero (0) filled.

EXAMPLE:

“A” RECORD

247 bbbbbbbbb — (‘b’ denotes a blank)

(Pos. 28–39)

“B” RECORD

000000867599 —

(Pos. 67–78)

(Payment Amount 2)

000000709097 —

(Pos. 91–102)

(Payment Amount 4)

000000044985 —

(Pos. 127–138)

(Payment Amount 7)

4. Blanks or invalid characters appear in Payment Amount Fields in the “B” Record

Money amounts must be right-justified and zero (0) filled. Do not use blanks.

5. Incorrect TIN in Payer “A” Record

The Payer’s TIN reported in positions 12–20 of the “A” Record must be nine numeric characters (no alphas or special characters) in

order for IRS/MCC to process the media. The TIN provided in the “A” Record must correspond with the name provided in the first

payer name line.

6. Bad Format

NOTE: Due to major format changes in the record expansion and layout, IRS/MCC strongly encourages transmitters, vendors, and filers to read the Revenue Procedure in its entirety.

IRS/MCC receives data in prior year format. Be sure to use the current revenue procedure (Publication 1220) for formatting

data.

7. Incorrect tax year in the Transmitter “T” Record, Payer “A” Record and the Payee “B” Record

The tax year in the transmitter, payer and payee records should reflect the year of the information being reported. Filers need to

check their files to ensure this information is correct.

Due to Year 2000 compliance changes, the year format has expanded to four (4) positions.

8. Incorrect reporting of Form W–2 information to IRS

Form W–2 information is submitted to SSA, and not to IRS/MCC. SSA has its own magnetic media reporting program and specifications for wage information, and the media containing Forms W–2 is submitted to SSA. Any media received at IRS/MCC that con-

May 26, 1998

28

1998–21 I.R.B.

tains Form W–2 information will be returned to the filer. To inquire about filing Form W–2 information magnetically, call 1-800SSA–1213.

9. Excessive withholding credits

Generally, for most information returns, other than Forms 1099–G, 1099–MISC, 1099–R, and W–2G, Federal withholding amounts

should not exceed 31 percent of the income reported. Validate the total reported in the withholding field against the total income reported.

10. Incorrect format for TINs in the Payee “B” Record

A check of “B” records should be made to ensure the Taxpayer Identification Numbers (TINs) are formatted correctly. There should

be nine numerics, no alphas, hyphens, commas, or blanks. Incorrect formatting of TINs may result in a penalty.

IRS/MCC contacts filers who have submitted payee data with missing TINs in an attempt to prevent errors that could result in penalties. Payers/transmitters who submit data with missing TINs, and have taken the required steps to obtain this information are encouraged to attach a letter of explanation to the required Form 4804. This will prevent unnecessary contact from IRS/MCC. This

letter, however, will not prevent backup withholding notices (CP2100 and CP2100A Notices) or penalties for missing or incorrect

TINs. For penalty information, refer to the Penalty section of the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G.”

11. Distribution Codes for Form 1099–R reported incorrectly

Distribution codes for Form 1099–R are being reported incorrectly or not being reported. See valid distribution codes for Form

1099–R in the Payee “B” Record layout.

12. Incorrect Record Totals Listed on Form 4804

The Combined Total Payee Records listed on the Form 4804 (Block 9) are used in the verification process of information returns.

The figure in this block should be the total number of Payee “B” Records contained on the media submitted with the Form 4804.

The figures on the Form 4804 are compared against the total number of Payee “B” Records processed on the media. Imbalances

may necessitate the return of the files for replacement.

13. Invalid Use of IRA/SEP/SIMPLE Indicator (Form 1099–R)

The IRA/SEP/SIMPLE Indicator for Form 1099–R should be used only for the reporting of a distribution from a traditional

IRA/SEP/SIMPLE. The total amount distributed from a traditional IRA/SEP/SIMPLE should be reported in Payment Amount Field

A (IRA/SEP/SIMPLE Distribution).

14. Distribution Codes used incorrectly in conjunction with the IRA/SEP/SIMPLE Indicator. (Form 1099–R)

When reporting Form 1099–R information, Distribution Codes G and H MAY NOT be used in positions 545–546 of the”B” Record

if the IRA/SEP/SIMPLE Indicator (1) is present in position 548 of the “B” Record. This will cause media to be returned.

15. Failure to identify the rollover contributions and/or fair market value of the account for Form 5498

Rollover contributions (Amount Code 2 of the “A” Record) and/or fair market value of the account (Amount Code 4 of the “A”

Record) for Form 5498 must be identified as an IRA (position 547 of the “B” Record), SEP (position 548 of the “B” Record), SIMPLE (position 549 of the “B” Record), Roth IRA (position 550 of the “B” Record), Roth Conversion (position 551 of the “B”

Record), or Education IRA (position 552 of the “B” Record).

16. Media received without data

Before media is shipped, transmitters/filers should verify the presence of Form 1099 information returns on the media before sending the shipment to IRS/MCC.

Part B. Magnetic Media Specifications

Sec. 1. General

.01 The specifications contained in this part of the revenue procedure define the required format and contents of the records to be

included in the magnetic media/electronic file.

.02 A provision is made in the “B” Records for entries which are optional. If the field is not utilized, enter blanks to maintain a

fixed record length of 750 positions. Each field description explains the intended use of specific field positions.

.03 Transmitters should be consistent in the use of recording codes 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.

1998–21 I.R.B.

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May 26, 1998

Sec. 2. Tape Specifications

.01 IRS/MCC can process most magnetic tape files if the following specifications are followed:

(a) 9 track EBCDIC (Extended Binary Coded Decimal Interchange Code) with:

(1) Odd parity.

(2) A density of 1600 or 6250 CPI.

(3) If transmitters use UNISYS Series 1100, they must submit an interchange tape.

(b) 9 track ASCII (American Standard Coded Information Interchange) with:

(1) Odd parity.

(2) A density of 1600 or 6250 CPI.

Transmitters should be consistent in the use of recording codes and density on files.

.02 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.

.03 The tape records defined in this revenue procedure may be blocked subject to the following:

(a) A block must not exceed 32,250 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 9s; however, the last block of the file may be filled with 9s 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 750.

(d) Records may not span blocks.

.04 Labeled or unlabeled tapes may be submitted.

.05 For the purposes of this revenue procedure the following must be used:

Tape Mark:

(a) Signifies 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.

.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.

Sec. 3. Tape Cartridge Specifications

.01 In most instances, IRS/MCC can process tape cartridges that meet the following specifications:

(a) Must be IBM 3480, 3490, 3490E, or AS400 compatible.

(b) Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:

(1) Tape cartridges will be 1⁄2-inch tape contained in plastic cartridges which are approximately 4-inches by 5-inches by 1inch 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.

(6) The data may be compressed using EDRC (Memorex) or IDRC (IBM) compression.

(7) Either EBCDIC (Extended Binary Coded Decimal Interchange Code) or ASCII (American Standard Coded Information Interchange) may be used.

.02 The tape cartridge records defined in this revenue procedure may be blocked subject to the following:

(a) A block must not exceed 32,250 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 9s; however, the last block of the file may be filled with 9s 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 750.

(d) Records may not span blocks.

.03 Tape cartridges may be labeled or unlabeled.

.04 For the purposes of this revenue procedure, the following must be used:

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30

1998–21 I.R.B.

Tape Mark:

(a) Signifies 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.

☛ Note: Filers should indicate on the external media label and transmittal Form 4804 whether the cartridge is 36-track or

18-track.

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 system 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

1

1

Density

20 (43245 BPI)

21 (45434 BPI)

Capacity

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; IRSTAX, 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

IRSTAX.001, IRSTAX.002, and IRSTAX.003 on each cartridge of the file. The end of transmission “F” Record

should be placed only on the last cartridge 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 32,250 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 750.

(d) Various COPY commands have been successful; however, the SAVE OBJECT COMMAND is not acceptable.

(e) Extraneous data following the “F” 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. IRSTAX may be used as a suggested filename.

.04 For the purposes of this revenue procedure, the following must be used:

Tape Mark:

(a) Signifies 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 “F” Record, the file will 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.

.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.

1998–21 I.R.B.

31

May 26, 1998

(e) The general specifications for 8mm cartridges will also apply to the 4 mm 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

QIC–11

QIC–24

QIC–120

QIC–150

QIC–320

QIC–525

QIC–1000

QIC–1350

QIC–2Gb

Tracks

4/5

8/9

15

18

26

26

30

30

42

Density

4 (8000 BPI)

5 (8000 BPI)

15 (10000 BPI)

16 (10000 BPI)

17 (16000 BPI)

17 (16000 BPI)

21 (36000 BPI)

18 (51667 BPI)

34 (40640 BPI)

Capacity

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

IRS/MCC will discontinue processing 5 1⁄4 inch diskettes in the future. Filers who use 5 1⁄4 inch diskettes are encouraged to

explore other methods by which to submit information returns magnetically/electronically.

.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 should be used to format the diskette into a 1024 byte sector:

INIT IRSTAX,,FORMAT2

The save commands are as follows:

(1) The save command for System 36 is SAVE.

(2) The save command for AS400 is SAV36F.

(c) Records must be a fixed length of 750 bytes per record.

(d) Delimiter character commas (,) must not be used.

(e) Positions 749 and 750 of each record have been reserved for use as carriage return/line feed (cr/lf) characters, if applicable.

(f) Filename of IRSTAX must be used. Do not enter any other data in this field. If a file will consist of more than one diskette,

the filename IRSTAX will contain a three-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 IRSTAX.001, the second will be

IRSTAX.002, and the third will be IRSTAX.003. The first diskette, IRSTAX.001 will begin with a “T” Record and the

third diskette, IRSTAX.003 will have an “F” Record at the end of the file.

(g) A diskette will not contain multiple files. (See Part A, Section 17 for definition of a file.)

(h) Failure to comply with instructions will result in media being returned for replacement.

(i) Diskettes must meet one of the following specifications:

Capacity

1.44 mb

1.44 mb

1.2 mb

Tracks

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 “F” Record, the file will 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.

Notes: IRS/MCC will discontinue processing 5 1⁄4-inch diskettes in the future.

IRS will discontinue processing non-MS–DOS compatible diskettes in the future.

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.

May 26, 1998

32

1998–21 I.R.B.

Sec. 6. Transmitter “T” Record - General Field Descriptions

.01 The Transmitter “T” Record identifies the entity transmitting the magnetic media/electronic file and contains information

which is supplied on the Form 4804, Transmittal of Information Returns Magnetically/Electronically. The “T” Record has been created to facilitate current magnetic/ electronic processing of information returns at IRS/MCC with an eventual goal of paperless filing.

.02 The Transmitter “T” Record is the first record on each file and is followed by a Payer “A” Record. See Part A, Sec. 17, Definition of Terms for the definition of file. A file will be returned to the transmitter for replacement if the “T” Record is not present.

For transmitters with multiple diskettes, refer to Sec. 5. 5 1⁄4 -inch and 3 1⁄2- inch Diskette Specifications.

.03 The Transmitter “T” Record requires the total number of Payees (“B” Records) being reported. No money or payment

amounts are reported in the Transmitter “T” Record.

.04 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 field positions and for the indicated length.

.05 All records must be a fixed length of 750 positions.

.06 The Transmitter “T” Record must be followed by the Payer “A” Record, which must be followed with Payee “B” Records;

however, the initial record on each file must be a Transmitter “T” Record.

.07 All alpha characters entered in the “T” Record must be upper-case.

.08 When transmitting information on magnetic media or electronically, the Transmitter “T” Record must precede the first Payer

“A” Record and reflect the person actually transmitting the information to IRS/MCC.

Record Name: Transmitter “T” Record

Field

Position

Field Title

Length

Description and Remarks

1

Record Type

1

Required. Enter “T.”

2–5

Payment Year

4

Required. Enter “1998” (unless reporting prior year data; see field

position 6).

6

Prior Year

Data

Indicator

1

Required. Enter “P” only if reporting prior year data; otherwise,

enter blank.

7–15

Transmitter’s

TIN

9

Required. Enter the transmitter’s nine digit Tax Identification Number. May be an EIN or SSN.

16–20

Transmitter

Control Code

5

Required. Enter the five character alpha/numeric Transmitter Control Code (TCC) assigned by IRS/MCC. A TCC must be obtained to

file data within this program.

21–22

Replacement

Alpha Character

2

Required for replacement files only. Enter the alpha/numeric

character which appears immediately following the TCC number on

the Media Tracking Slip (Form 9267). The Form 9267 accompanies

media that has been returned by IRS/MCC due to processing problems. This field must be blank unless media has been returned. If

the file is being replaced magnetically, information is required in this

field. If the file was originally sent magnetically, but the replacement

is being sent electronically, the information is required in this field.

Otherwise, leave blank for electronic files. Left justify information

and fill unused positions with blanks. If this is not a replacement

file, enter blanks.

23–27

Blank

5

Enter blanks.

28

Test File Indicator

1

Required for test files only. Enter “T” if this is a test file, otherwise

enter a blank.

1998–21 I.R.B.

33

May 26, 1998

Record Name: Transmitter “T” Record (Continued)

Field

Position

Field Title

Length

Description and Remarks

29

Foreign Entity

Indicator

1

Enter a “1” (one) if the transmitter is a foreign entity. If the transmitter is not a foreign entity, enter a blank.

30–69

Transmitter Name

40

Required. Enter the name of the transmitter in the manner in which

it is used in normal business. Left justify and fill unused positions

with blanks.

70–109

Transmitter Name

(Continuation)

40

Enter any additional information that may be part of the name. Left

justify information and fill unused positions with blanks.

NOTE: All the information “Required” in Field Positions 110 thru 280 MUST contain the address information where

media, which IRS/MCC was unable to process is to be returned. Any correspondence relating to problem media or electronic files will also be sent to this address.

110–149

Company

Name

40

Required. Enter the name of the company to be associated with the

address where correspondence should be sent or media should be returned due to processing problems.

150–189

Company

Name

(Continuation)

40

Enter any additional information that may be part of of the name of

the company where correspondence should be sent or media should

be returned due to processing problems.

190–229

Company

Mailing

Adress

40

Required. Enter the mailing address where correspondence should

be sent or media should be returned in the event IRS/MCC is unable

to process.

230–269

Company City

40

Required. Enter the city, town, or post office where correspondence

should be sent or media should be returned in the event IRS/MCC is

unable to process.

270–271

Company State

2

Required. Enter the valid U. S. Postal Service state abbreviation for

states. Refer to the chart of valid state codes in Part A, Sec.18.

272–280

Company

ZIP Code

9

Required. Enter the valid nine digit ZIP Code assigned by the U. S.

Postal Service. If only the first five digits are known, left justify information and fill unused positions with blanks.

281–295

Blank

15

Enter blanks.

296–303

Total Number

of Payees

8

Required. Enter the total number of Payee “B” Records reported in

the file. Right justify information and fill unused positions with

zeros.

304–343

Contact Name

40

Required. Enter the name of the person to be contacted if IRS/MCC

encounters problems with the file or transmission.

344–358

Contact’s Phone

Number &

Extension

15

Required. Enter the telephone number of the person to contact

regarding magnetic/electronic files. Omit hyphens. If no extension

is available, left justify information and fill unused positions with

blanks. For example, the IRS/MCC Call Site phone number of 304263-8700 with an extension of 52345 would be 304263870052345.

May 26, 1998

34

1998–21 I.R.B.

Record Name: Transmitter “T” Record (Continued)

Field

Position

Field Title

Length

359–360

Magnetic

Tape File

Indicator

2

Required for magnetic tape/tape cartridge filer only. Enter the

letters “LS” (in uppercase only). Use of this field by filers using

other types of media will be acceptable but is not required.

361–375

Electronic

File Name

15

Required for an original or correction electronic file which was

incorrect and a replacement is being sent, enter the ORIGINAL/or

CORRECTION filename that was assigned by the IRP–BBS (Example-12345p01.DAT). Left justify information and fill unused positions with blanks. Do not enter the replacement filename. Otherwise, enter blanks.

376–748

Blank

373

Enter blanks.

749–750

Blank

2

Sec. 7.

Description and Remarks

Enter blanks, or carriage return/line feed (CR/LF) characters.

Transmitter “T” Record - Record Layout

Record

Type

Payment

Year

Prior Year

Data

Indicator

Transmitter’s

TIN

Transmitter

Control

Code

Replacement

Alpha

Character

Blank

1

2–5

6

7–15

16–20

21–22

23–27

Test

Indicator

Foreign

Entity

Indicator

Transmitter

Name

Transmitter

Name

(Continuation)

Company

Name

Company

Name

(Continuation)

28

29

30–69

70–109

110–149

150–189

Company

Mailing

Address

Company

City

Company

State

Company

ZIP

Code

Blank

Total

Number

of Payees

Contact

Name

190–229

230–269

270–271

272–280

281–295

296–303

304–343

Contact’s Phone

Number &

Extension

Magnetic

Tape File

Indicator

Electronic File

Name

Blank

Blank or

CR/LF

344–358

359–360

361–375

376–748

749–750

Sec. 8. Payer “A” Record - General Field Descriptions

.01 The Payer “A” Record identifies the institution or person making payments, a recipient of mortgage interest payments, a broker, a person reporting a real estate transaction, a barter exchange, a creditor, a trustee, or issuer of an IRA, SEP, or SIMPLE, or a

lender who acquires an interest in secured property or who has reason to know that the property has been abandoned. The payer will

be held responsible for the completeness, accuracy, and timely submission of magnetic media files. The Payer “A” Record also provides parameters for the succeeding Payee “B” Records. IRS computer programs rely on the absolute relationship between the parameters and data fields in the “A” Record and the data fields in the “B” Records to which they apply.

.02 The number of “A” Records depends on the number of payers and the different types of returns being reported. The payment

amounts for one payer and for one type of return should be consolidated under one “A” Record if submitted on the same file.

1998–21 I.R.B.

35

May 26, 1998

.03 Do not submit separate “A” Records for each payment amount being reported. For example, if a payer is filing Form

1099–DIV to report Amount Codes 1, 2, and 3, all three amount codes should be reported under one “A” Record, not three separate

“A” Records. For “B” Records that do not contain payment amounts for all three amount codes, enter zeros for those which have no

payment to be reported.

.04 The second record on the file must be an “A” Record. A transmitter may include “B” Records for more than one payer on a

tape or diskette. However, each group of “B” Records must be preceded by an “A” Record and followed by an End of Payer “C”

Record. A single tape or diskette may contain different types of returns but the types of returns must not be intermingled. A separate “A” Record is required for each payer and each type of return being reported.

.05 All records must be a fixed length of 750 positions.

.06 An “A” Record may be blocked with “B” Records; however, the initial record on a file must be a “T” Record followed by an

“A” Record. IRS/MCC will accept an “A” Record after a “C” Record.

.07 Do not begin any record at the end of a block or diskette and continue the same record into the next block or diskette.

.08 All alpha characters entered in the “A” Record must be upper-case.

.09 When filing Form 1098, Mortgage Interest Statement, and Form 1098–E, Student Loan Interest Statement, the “A” Record

will reflect the name of the recipient of the interest referred to as the payer in these instructions. The “B” Record will reflect the individual paying the interest (borrower/payer of record) and the amount paid.

.10 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.

Record Name: Payer “A” Record

Field

Position

Field Title

Length

Description and Remarks

1

Record Type

1

Required. Enter “A.”

2–5

Payment Year

4

Required. Enter “1998” (unless reporting prior year data).

6–11

Blank

6

Enter blanks.

12–20

Payer’s

Taxpayer

Identification

Number (TIN)

9

Required. Must be the valid nine-digit Taxpayer Identification

Number assigned to the payer. Do not enter blanks, hyphens,

or alpha characters. All zeros, ones, twos, etc., will have the

effect of an incorrect TIN.

☛ Note: For foreign entities that are not required to have a TIN, this field must be blank. However, the Foreign Entity Indicator, position 52 of the “A” Record, must be set to “1” (one).

21–24

Payer Name

Control

4

The Payer Name Control can be obtained only from the mail label

on the Package 1099 that is mailed to most payers each December.

To distinguish between Package 1099 and the Magnetic Media Reporting (MMR) Package, the Package 1099 contains instructions for

paper filing only, and the mail label on the package contains a four

(4) character name control. The MMR Package contains instructions

for filing magnetically or electronically. The mail label does not

contain a name control. Names of less than four (4) characters

should be left-justified, filling the unused positions with blanks. If a

Package 1099 has not been received or the Payer Name Control is

unknown, this field must be blank filled.

25

Last Filing

Indicator

1

Enter a “1” (one) if this is the last year the payer will file; otherwise,

enter blank. Use this indicator if the payer will not be filing information returns under this payer name and TIN in the future either

magnetically, electronically, or on paper.

26

Combined

Federal/State

Filer

1

Required for the Combined Federal/State Filing Program. Enter

“1” (one) if participating in the Combined Federal/State Filing

Program; otherwise, enter blank. Refer to Part A, Sec. 16, for further information. The only forms that may be filed under the

May 26, 1998

36

1998–21 I.R.B.

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Length

Description and Remarks Field

Combined Federal /State Filing Program are: Forms 1099–DIV,

1099–G, 1099–INT, 1099–MISC, 1099–OID, 1099–PATR,

1099–R, and 5498.

27

Type of Return

28–39

Amount Code

(See Note)

1

12

Required. Enter the appropriate code from the table below:

Type of Return

Code

1098

1098–E

1098–T

1099–A

1099–B

1099–C

1099–DIV

1099–G

1099–INT

1099–LTC

1099–MISC

1099–MSA

1099–OID

1099–PATR

1099–R

1099–S

5498

5498–MSA

W–2G

3

2

8

4

B

5

1

F

6

T

A

M

D

7

9

S

L

K

W

Required. Enter the appropriate amount codes for the type of

return being reported. Generally, for each amount code entered in

this field, a corresponding payment amount must appear in the

Payee “B” Record.

In most cases, the box numbers on paper information returns

correspond with the amount codes used to file magnetically/electronically. However, if discrepancies occur, this revenue procedure governs.

The Amount Codes have been expanded from nine to twelve

codes to accommodate three additional payment fields in the

Payee “B” Record. Amount Codes 1 through 9 will remain numeric. Amount Codes 10, 11, and 12 will be A, B, and C, respectively.

Example of Amount Codes:

If position 27 of the Payer “A” Record is “A” (for 1099–MISC) and positions 28–39 are “1247ACbbbbbb”, this indicates the payer

is reporting any or all six payment amounts (1247AC) in all of the following “B” Records. (In this example, “b” denotes blanks in

the designated positions. Do not enter the letter “b”.)

The first payment amount field (1) will represent rents;

the second payment amount field (2) will represent royalties;

the third payment amount field (3) will be all “0” (zeros);

the fourth payment amount field (4) will represent Federal income tax withheld;

the fifth and sixth payment amount fields (5 and 6) will be all “0” (zeros);

the seventh payment amount field (7) will represent nonemployee compensation;

the eighth and ninth payment amount fields (8 and 9) will be all “0” (zeros);

1998–21 I.R.B.

37

May 26, 1998

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Length

Description and Remarks Field

the tenth payment amount field (A) will represent crop insurance proceeds;

the eleventh payment amount field (B) will be all “0” (zeros);

and

the twelfth payment amount field (C) will represent gross proceeds paid to an attorney in connection with legal services.

Enter the amount codes in ascending sequence (i.e., 1247ACbbbbbb), left justify information, and fill unused positions with blanks.

For further clarification of the amount codes, contact IRS/MCC. (In this example, “b” denotes blanks in the designated positions. Do not enter the letter “b.”)

☛ Note: A type of return and an amount code must be present in every Payer “A” Record even if no money amounts are

being reported. For a detailed explanation of the information to be reported in each amount code, refer to the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G.”

Amount Codes Form 1098 Mortgage Interest

Statement

For Reporting Mortgage Interest Received From Payers/

Borrowers (Payer of Record) on Form 1098:

Amount

Code

1

2

3

Amount Codes Form 1098–E Student Loan Interest

Statement

Amount Codes Form 1098–T Tuition Payments

Statement

Amount Type

Mortgage interest received from payer(s)/borrower(s)

Points paid on purchase of principal residence

Refund (or credit) of overpaid interest

For Reporting Interest on Student Loans on Form 1098–E

Amount

Code

1

Amount Type

Student loan interest received

For Reporting Tuition Payments on Form 1098–T

Amount

Code

1

2

Amount Type

For filer’s use (See Note)

For filer’s use (See Note)

☛ Note: When reporting Form 1098–T magnetically/electronically, the filer must use Type of Return Code 8 in position 27,

and Amount Codes 1 and 2 in positions 28 and 29 of the Payer “A” Record. However, if no money is being reported, the payment amount fields will contain zeros. There is no requirement for filers to report money amounts on Form 1098–T for Tax

Year 1998.

Amount Codes Form 1099–A Acquisition or Abandonment

of Secured Property

(See Note)

For Reporting the Acquisition or Abandonment

of Secured Property on Form 1099–A:

Amount

Code

2

4

Amount Type

Balance of principal outstanding

Fair market value of property

☛ Note: If, in the same calendar year, a debt is canceled in connection with the acquisition or abandonment of secured

property for one debtor and the filer would be required to file both Forms 1099–A and 1099–C (Cancellation of Debt), the

filer is required to file Form 1099–C only. See the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G” for further information on coordination with Form 1099–C.

May 26, 1998

38

1998–21 I.R.B.

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Amount Codes Form 1099–B Proceeds From

Broker and

Barter Exchange

Transactions

Length

Description and Remarks Field

For Reporting Payments on Form 1099–B:

Amount

Code

2

3

4

6

7

8

9

Amount Type

Stocks, bonds, etc. (For forward contracts, see Note 1)

Bartering (Do not report negative amounts.)

Federal income tax withheld (backup withholding) (Do

not report negative amounts.)

Profit (or loss) realized on closed regulated futures or

foreign currency contracts in 1998 (See Note 2)

Unrealized profit (or loss) on open contracts-12/31/97

(See Note 2)

Unrealized profit (or loss) on open contracts-12/31/98

(See Note 2)

Aggregate profit (or loss) (See Note 2)

☛ Note 1: The payment amount field associated with Amount Code 2 may be used to report a loss from a closing transaction on a forward contract. Refer to the “B” Record - General Field Descriptions, Payment Amount Fields, for instructions

on reporting negative amounts.

☛ Note 2: Payment Amount Fields 6, 7, 8, and 9 are to be used for the reporting of regulated futures or foreign currency

contracts.

Amount Codes Form 1099–C Cancellation of Debt

(See Note 1)

For Reporting Cancellation of Debt on Form 1099–C:

Amount

Code

2

3

7

Amount Type

Amount of debt canceled

Interest, if included, in Amount Code 2

Fair market value of property (See Note 2)

☛ Note 1: If, in the same calendar year, a debt is canceled in connection with the acquisition or abandonment of secured

property for one debtor and the filer would be required to file both Forms 1099–C and 1099–A (Acquisition or Abandonment

of Secured Property), the filer is required to file Form 1099–C only. See the 1998 “Instructions for Forms 1099, 1098, 5498,

and W–2G” for further information on coordination with Form 1099–A.

☛ Note 2: Amount Code 7 will be used only if a combined Form 1099–A and 1099–C is being filed.

Amount Codes Form 1099–DIV Dividends and Distributions

See the 1998 “Instructions for

Forms 1099, 1098, 5498 and

W–2G” for further information

on Form 1099–DIV.

1998–21 I.R.B.

For Reporting Payments on Form 1099–DIV:

Amount

Code

1

2

3

4

5

6

7

8

9

A

B

39

Amount Type

Ordinary dividends

Total capital gains distributions

28% rate gain

Unrecaptured section 1250 gain

Section 1202 gain

Nontaxable distributions

Federal income tax withheld (backup withholding)

Investment expenses

Foreign tax paid

Cash liquidation distribution

Noncash liquidation distribution

May 26, 1998

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Amount Codes Form 1099–G Certain Government Payments

Length

Description and Remarks Field

For Reporting Payments on Form 1099–G:

Amount

Code

1

2

4

6

7

Amount Codes Form 1099–INT Interest Income

For Reporting Payments on Form 1099–INT:

Amount

Code

1

2

3

4

5

Amount Codes Form 1099–LTC Long-Term Care and

Accelerated Death Benefits

Amount Codes Form 1099–MISC Miscellaneous Income

Amount Type

Unemployment compensation

State or local income tax refunds, credits, or offsets

Federal income tax withheld (backup withholding) or

voluntary withholding on unemployment compensation

or Commodity Credit Corporation Loans, or certain crop

disaster payments

Taxable grants

Agriculture payments

Amount Type

Interest income not included in Amount Code 3

Early withdrawal penalty

Interest on U.S. Savings Bonds and Treasury obligations

Federal income tax withheld (backup withholding)

Foreign tax paid

For Reporting Payments on Form 1099–LTC:

Amount

Code

1

2

Amount Type

Gross long-term care benefits paid

Accelerated death benefits paid

For Reporting Payments on Form 1099–MISC:

Amount

Code

1

2

3

4

5

6

7

8

A

B

C

Amount Type

Rents (See Note 1)

Royalties (See Note 2)

Other income

Federal income tax withheld (backup withholding or

withholding on payments of Indian gaming profits)

Fishing boat proceeds

Medical and health care payments

Nonemployee compensation

Substitute payments in lieu of dividends or interest

Crop insurance proceeds

Excess golden parachute payments

Gross proceeds paid to an attorney in connection with

legal services

☛ Note 1: If reporting the Direct Sales Indicator only in position 547 of the Payee “B” Record, use Type of Return Code A

for 1099–MISC in position 27, and Amount Code 1 in position 28 of the Payer “A” record. All payment amount fields in the

Payee “B” record will contain zeros.

☛ Note 2: Do not report timber royalties under a “pay-as-cut” contract; these must be reported on Form 1099–S.

May 26, 1998

40

1998–21 I.R.B.

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Amount Codes Form 1099–MSA Distributions From

Medical Savings Accounts

Length

Description and Remarks Field

For Reporting Distributions from Medical Savings Accounts

on Form 1099–MSA:

Amount

Code

1

2

Amount Codes Form 1099–OID Original Issue Discount

For Reporting Payments on Form 1099–OID:

Amount

Code

1

2

3

4

Amount Codes Form 1099–PATR Taxable Distributions Received From

Cooperatives

Amount Type

Gross distribution

Earnings on excess contributions

Amount Type

Original issue discount for 1998

Other periodic interest

Early withdrawal penalty

Federal income tax withheld (backup withholding)

For Reporting Payments on Form 1099–PATR:

Amount

Code

1

2

3

4

5

6

7

8

9

Amount Type

Patronage dividends

Nonpatronage distributions

Per-unit retain allocations

Federal income tax withheld (backup withholding)

Redemption of nonqualified notices and retain allocations

Pass-Through Credits (See Note)

For filers’ use for pass through credits

Investment credit

Work opportunity credit

Patron’s alternative minimum tax (AMT) adjustment

☛ Note: Amount Codes 6, 7, 8, and 9 are reserved for the patron’s share of unused credits that the cooperative is passing

through to the patron. Other credits, such as the Indian employment credit may be reported in Amount Code 6. The title of

the credit reported in Amount Code 6 may be reported in the Special Data Entries Field in the Payee “B” Record. The

amounts shown for Amount Codes 6, 7, 8, and 9 must be reported to the payee. These Amount Codes and the Special Data

Entries Field are for the convenience of the filer. This information is not needed by IRS/MCC.

Amount Codes Form 1099–R Distributions From

Pensions, Annuities,

Retirement or ProfitSharing Plans, IRAs,

Insurance Contracts, etc.

1998–21 I.R.B.

For Reporting Payments on Form 1099–R:

Amount

Code

1

2

3

4

5

6

8

9

A

41

Amount Type

Gross distribution (See Note 1)

Taxable amount (See Note 2)

Capital gain (included in Amount Code 2)

Federal income tax withheld (See Note 3)

Employee contributions or insurance premiums

Net unrealized appreciation in employer’s securities

Other

Total employee contributions

Traditional IRA/SEP/SIMPLE distribution (See Note 4)

May 26, 1998

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Length

Description and Remarks Field

☛ Note 1: If the payment shown for Amount Code 1 is a total distribution, enter a “1” (one) in position 549 of the “B”

Record. An amount must be shown in Payment Amount Field 1 unless reporting an amount ONLY in Payment Amount

Field 8. If a distribution is a loss, do not enter a negative amount. For example, if stock is distributed but the value is less

than the employee’s after-tax contributions, enter the value of the stock in Payment Amount Field 1, enter “0” (zero) in Payment Amount Field 2, and enter the employee’s contributions in Payment Amount Field 5.

☛ Note 2: If the taxable amount cannot be determined, enter a “1” (one) in position 547 of the “B” Record. For a traditional IRA, SEP, or SIMPLE distribution, generally enter in Payment Amount Field A the same amount entered in Payment

Amount Field 1.

☛ Note 3: See the l998 “Instructions for Forms 1099, 1098, 5498, and W–2G” for information concerning Federal income

tax withheld for Form 1099–R.

☛ Note 4: For Form 1099–R, generally, report the total amount distributed from an IRA, SEP, or SIMPLE in Payment

Amount Field A (IRA/SEP/SIMPLE Distribution), as well as Payment Amount Field 1 (Gross Distribution) of the “B”

Record. Refer to the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G” for exceptions.

Amount Codes Form 1099–S Proceeds From

Real Estate

Transactions

For Reporting Payments on Form 1099–S:

Amount

Code

2

5

Amount Type

Gross proceeds (See Note)

Buyer’s part of real estate tax

☛ Note: Include payments of timber royalties made under a “pay-as-cut” contract, reportable under section 6050N. If timber royalties are being reported, enter “TIMBER” in the description field of the “B” record.

Amount Codes Form 5498 IRA Contribution Information

(See Note)

For Reporting Payments on Form 5498:

Amount

Code

1

2

3

4

5

7

8

9

A

Amount Type

IRA contributions (other than amounts in Amount Codes

2, 3, 7, 9 and A)

Rollover contributions

Roth conversion amount

Fair market value of account

Life insurance cost included in Amount Code 1

Employer SEP contributions

SIMPLE contributions

Roth IRA contributions

Education IRA contributions

☛ Note: For information regarding Inherited IRAs, refer to the 1998 “Instructions for Forms 1099, 1098, 5498, and W–2G”

and Rev. Proc. 89–52, 1989–2 C.B. 632. Beneficiary information must be given in the Payee Name Line Field of the “B”

Record.

If reporting IRA contributions for a Desert Storm/Shield participant for other than 1998 or an Operation Joint Guard

(OJG) (Bosnia Region) participant, enter “DS” for Desert Storm or Joint Endeavor or “JG” for Joint Guard, the year for

which the contribution was made, and the amount of the contribution in the Special Data Entries Field of the “B” Record.

Do not enter the contributions in Amount Code 1. For information concerning Desert Storm/Shield participant reporting,

refer to the 1994 “Instructions for Forms 1099, 1098, 5498, and W–2G,” or Notice 91–17, 1991–1 C.B. 319. The instructions

for filing Form 5498 for Desert Storm/Shield participants will also apply to participants of Joint Endeavor or Operations

Joint Guard (OJG) of the Bosnia Region.

May 26, 1998

42

1998–21 I.R.B.

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Length

Amount Codes Form 5498–MSA Medical Saving Account

Information

Description and Remarks Field

For Reporting Contributions to Medical Savings Accounts:

Amount

Code

1

2

3

4

5

Amount Type

Employee or self-employed person’s MSA contributions

made in 1998 and 1999 for 1998

Total MSA contributions made in 1998

Total MSA contributions made in 1999 for 1998

MSA rollover contributions (not included in Amount

Code 1, 2, or 3) (See Note 1)

Fair market value of account (See Note 2)

☛ Note 1: This is the amount of any rollover made to this MSA in 1998 after a distribution from another MSA. For detailed

information on reporting, see 1998 “Instructions for Forms 1099, 1098, 5498 and W–2G.”

☛ Note 2: This is the fair market value (FMV) of the account at the end of 1998.

Amount Codes Form W–2G Certain Gambling

Winnings

For Reporting Payments on Form W–2G:

Amount

Code

1

2

7

Amount Type

Gross winnings

Federal income tax withheld

Winnings from identical wagers

40–47

Blank

8

Enter blanks.

48

Original File

Indicator

1

Required for original files only. Enter “1” (one) if the information is original data. Otherwise, enter a blank.

49

Replacement

File Indicator

1

Required for replacement files only. Enter “1” (one) if the purpose

of this file is to replace a file that IRS/MCC returned to the transmitter due to errors encountered in processing. This is a file that has not

been successfully processed by IRS. Otherwise, enter a blank.

50

Correction

File Indicator

1

Required for correction files only. Enter “1” (one) if the purpose

of this file is to correct information which was previously submitted

to IRS/MCC, was processed, but contained erroneous information.

Do not submit original information as corrections. Any information

return which was inadvertently omitted from a file must be submitted as original. Otherwise, enter a blank.

51

Blank

1

Enter a blank.

52

Foreign

Entity

Indicator

1

Enter a “1” (one) if the payer is a foreign entity and income is

paid by the foreign entity to a U. S. resident. If the payer is

not a foreign entity, enter a blank (See Note).

☛ Note: If payers report the Foreign Entity Indicator erroneously, they may be subject to a penalty for providing incorrect

information to IRS.

1998–21 I.R.B.

43

May 26, 1998

Record Name: Payer “A” Record (Continued)

Field

Position

53–92

Field Title

Length

First

Payer Name

Line

40

Description and Remarks Field

Required. Enter the name of the payer whose TIN appears in positions 12–20 of the “A” Record. Any extraneous information must

be deleted. Left justify information, and fill unused positions with

blanks. (Filers should not enter a transfer agent’s name in this field.

Any transfer agent’s name should appear in the Second Payer Name

Line Field.)

☛ Note: When reporting Form 1098, Mortgage Interest Statement, and Form 1098–E, Student Loan Interest Statement,

the “A” Record will reflect the name and TIN of the recipient of the interest or payment, the filer of Forms 1098 and 1098–E

(the payer). The “B” Record will reflect the individual paying the interest (the borrower/payer of record) and the amount

paid. For Form 1099–S, the “A” Record will reflect the person responsible for reporting the transaction (the filer of the

Form 1099–S) and the “B” Record will reflect the seller/transferor. When reporting Form 1098–T, Tuition Payments Statement, the “A” Record will reflect the name and TIN of the educational institution receiving tuition payments. The “B”

Record will reflect the name and TIN of the student on whose behalf the tuition is being paid.

93–132

Second

Payer Name

Line

40

If the Transfer (or Paying) Agent Indicator (position 133) contains

a “1” (one), this field must contain the name of the transfer (or paying) agent. If the indicator contains a “0” (zero), this field may contain either a continuation of the First Payer Name Line or blanks.

Left justify information and fill unused positions with blanks.

133

Transfer Agent

Indicator

1

Required. Identifies the entity in the Second Payer Name Line

Field. (See Part A, Sec. 17 for a definition of transfer agent.)

134–173

Payer Shipping

Addres

40

Code

1

Meaning

The entity in the Second Payer Name Line Field is the

transfer (or paying) agent.

0 (zero)

The entity shown is not the transfer (or paying) agent

(i.e., the Second Payer Name Line Field contains either a

continuation of the First Payer Name Line Field or

blanks).

Required. If the Transfer Agent Indicator in position 133 is a “1”

(one), enter the shipping address of the transfer (or paying) agent.

Otherwise, enter the actual shipping address of the payer. The street

address should include number, street, apartment or suite number (or

P. O. Box if mail is not delivered to street address). Left justify information, and fill unused positions with blanks.

For U.S. addresses, the payer city, state, and ZIP code must be reported as a 40, 2, and 9 position field, respectively. Filers must

adhere to the correct format for the payer city, state, and ZIP code.

For foreign addresses, filers may use the payer city, state, and ZIP code as a continuous 51 position field. Enter information in

the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the Foreign

Entity Indicator in position 52 must contain a “1” (one).

174–213

May 26, 1998

Payer City

40

Required. If the Transfer Agent Indicator in position 133 is a “1”

(one), enter the city, town, or post office of the transfer agent. Otherwise, enter the city, town, or post office of the payer. Left justify information, and fill unused positions with blanks. Do not enter state

and ZIP code information in this field.

44

1998–21 I.R.B.

Record Name: Payer “A” Record (Continued)

Field

Position

Field Title

Length

214–215

Payer State

2

Required. Enter the valid U.S. Postal Service state abbreviations for

states. Refer to the chart of valid state abbreviations in Part A,

Sec.18.

216–224

Payer ZIP

Code

9

Required. Enter the valid nine digit ZIP code assigned by the U.S.

Postal Service. If only the first five digits are known, left justify information and fill the unused positions with blanks. For foreign

countries, alpha characters are acceptable as long as the filer has entered a “1” (one) in the Foreign Entity Indicator, located in Field Position 52 of the “A” Record.

225–239

Payer’s Phone

Number &

Extension

15

Enter the payer’s phone number and extension.

240–748

Blank

509

Enter blanks.

749–750

Blank

2

Description and Remarks Field

Enter blanks or carriage return/line feed (CR/LF) characters.

Sec. 9. Payer “A” Record - Record Layout

Record

Type

Payment

Year

Blank

Payer’s

TIN

Payer Name

Control

Last Filing

Indicator

1

2–5

6–11

12–20

21–24

25

Combined

Federal/State

Filer

Type

of

Return

Amount

Codes

Blank

Original

File

Indicator

Replacement

File

Indicator

Correction

File

Indicator

26

27

28–39

40–47

48

49

50

Blank

Foreign

Entity

Indicator

First

Payer Name

Line

Second

Payer Name

Line

Transfer

Agent

Indicator

Payer

Shipping

Address

51

52

53–92

93–132

133

134–173

Payer

City

Payer

State

Payer

ZIP

Code

Payer’s Phone

Number and

Extension

Blank

Blank or

CR/LF

174–213

214–215

216–224

225–239

240–748

749–750

Sec. 10. Payee “B” Record - General Field Descriptions and Record Layouts

.01 The “B” Record contains the payment information from the information returns. When filing information returns, the format

for the “B” Records will remain constant and is a fixed length of 750 positions. The record layout for field positions 1 through 543

is the same for all types of returns. Field positions 544 through 750 vary for each type of return to accommodate special fields for individual forms. In the “A” Record, the amount codes that appear in field positions 28 through 39 will be left-justified and filled with

blanks. In the “B” Record, the filer must allow for all twelve Payment Amount Fields. For those fields not used, enter “0s” (zeros).

For example, a payer reporting on Form 1099–MISC should enter “A” in field position 27 of the “A” Record, Type of Return. If re-

1998–21 I.R.B.

45

May 26, 1998

porting payments for Amount Codes 1, 2, 4, 7, A and C, the payer would report field positions 28 through 39 of the “A” Record as

“1247ACbbbbbb.” (In this example, “b” denotes blanks. Do not enter the letter “b”.) In the “B” Record:

Positions 55 through 66 for Payment Amount 1 will represent rents.

Positions 67–78 for Payment Amount 2 will represent royalties.

Positions 79–90 for Payment Amount 3 will be “0’s” (zeros).

Positions 91–102 for Payment Amount 4 will represent Federal income tax withheld.

Positions 103–126 for Payment Amounts 5 and 6 will be “0’s” (zeros).

Positions 127–138 for Payment Amount 7 will represent nonemployee compensation.

Positions 139–162 for Payment Amounts 8 and 9 will be “0’s” (zeros).

Positions 163–174 for Payment Amount A will represent crop insurance proceeds.

Positions 175–186 for Payment Amount B will be “0’s” (zeros).

Positions 187–198 for Payment Amount C will represent gross proceeds paid to an attorney in connection with legal services.

.02 The following specifications include a field in the payee records called “Name Control” in which the first four characters of

the payee’s surname are to be entered by the filer.

(a) If filers are unable to determine the first four characters of the surname, the Name Control Field may be left blank. Compliance with the following will facilitate IRS computer programs in identifying the correct name control:

(1) The surname of the payee whose TIN is shown in the “B” Record should always appear first. If, however, the records

have been developed using the first name first, the filer must leave a blank space between the first and last names.

(2) In the case of multiple payees, only the surname of the payee whose TIN (SSN, EIN, ITIN, or ATIN) is shown in the

“B” Record must be present in the First Payee Name Line. Surnames of any other payees may be entered in the Second

Payee Name Line.

.03 See Part A, Sec. 14 for further information concerning Taxpayer Identification Numbers (TINs).

.04 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 field position(s) and for the indicated length.

.05 All records must be a fixed length of 750 positions.

.06 A field is also provided in these specifications for Special Data Entries. This field may be used to record information required

by state or local governments, or for the personal use of the filer. IRS does not use the data provided in the Special Data Entries

Field; therefore, the IRS program does not check the content or format of the data entered in this field. It is the filer’s option to use

the Special Data Entry Field. This field will not affect the processing of the “B” Records.

.07 Following the Special Data Entries Field in the “B” Record, payment fields have been allocated for State Income Tax Withheld and Local Income Tax Withheld. These fields are for the convenience of the filers. The information will not be used by

IRS/MCC.

.08 Those payers participating in the Combined Federal/State Filing Program must adhere to all of the specifications in Part A,

Sec. 16, to participate in this program. Filers may not file Forms 1098, 1098–E, 1098–T, 1099–A, 1099–B, 1099–C, 1099–LTC,

1099–MSA, 1099–S, 5498–MSA, and W–2G under the Combined Federal/State Filing Program.

.09 All alpha characters in the “B” Record must be uppercase.

.10 Do not use decimal points (.) to indicate dollars and cents. Ten dollars must appear as 000000001000 in the payment amount

field.

.11 IRS strongly encourages transmitters to review the data for accuracy before submission to prevent issuance of erroneous notices. Transmitters should be especially careful that the names, TINs, account numbers, types of income, and income amounts are

correct.

.12 When reporting Form 1098, Mortgage Interest Statement and Form 1098–E, Student Loan Interest Statement, the “A” Record

will reflect the name and TIN of the recipient of the interest or payment, the filer of the Forms 1098 and 1098–E (the payer). The “B”

Record will reflect the individual paying the interest (borrower/payer of record) and the amount paid. For Form 1099–S, the “A”

Record will reflect the person responsible for reporting the transaction (the filer of the Form 1099–S) and the “B” record will reflect

the seller/transferor. When reporting Form 1098–T, Tuition Payments Statement, the “A” Record will reflect the name and TIN of

the educational institution receiving tuition payments. The “B” Record will reflect the name and TIN of the student on whose behalf

the tuition is being paid.

Record Name: Payee “B” Record

Field

Position

Field Title

Length

1

Record Type

1

May 26, 1998

Description and Remarks Field

Required. Enter “B.”

46

1998–21 I.R

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