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Bulletin No. 1996–27

July 1, 1996

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

limitation of section 412(c)(7) of the Code as amended

by the Omnibus Budget Reconciliation Act of 1987 and

by the Uruguay Round Agreements Act (GATT).

T.D. 8673, page 4.

Final regulations under section 1394 of the Code relate to

enterprise zone facility bonds issued by state and local

governments.

EXEMPT ORGANIZATIONS

Announcement 96–61, page 72.

A list is provided of organizations that no longer qualify

as organizations to which contributions are deductible

under section 170 of the Code.

Rev. Rul. 96–33, page 4.

Low-income housing credit; satisfactory bond; ‘‘bond

factor’’ amounts for the period April through June 1996.

This ruling announces the monthly bond factor amounts

to be used by taxpayers who dispose of qualified lowincome buildings or interests therein during the period

April through June 1996.

ADMINISTRATIVE

Rev. Proc. 96–36, page 11.

Electronic filing; magnetic media; 1996 form specifications. Specifications are set forth for the magnetic or

electronic filing of 1996 Forms 1098, 1099, 5498,

and W–2G. The forms may be filed with the Service

using 1⁄2 inch magnetic tape; IBM 3480/3490 or

AS400 compatible tape cartridges; 8 mm tape cartridges (pilot program) or 51⁄4-, 3 1⁄2-inch diskettes. Rev.

Procs. 95–29 and 95–29A superseded.

EMPLOYEE PLANS

Notice 96–36, page 11.

Guidelines are set forth for determining for June 1996

the weighted average interest rate and the resulting

permissible range of interest rates used to calculate

current liability for purposes of the full funding

Finding Lists begin on page 75.

Announcement of Disbarments and Suspensions begins on page 73.

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Mission of the Service

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 products and services; and perform in a

manner warranting the highest degree of public

confidence in our integrity, efficiency and fairness.

Statement of Principles

of Internal Revenue

Tax Administration

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.

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.

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.

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.

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Introduction

The Internal Revenue Bulletin is the authoritative

instrument of the Commissioner of Internal Revenue for

announcing official rulings and procedures of the

Internal Revenue Service and for publishing Treasury

Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general

interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription basis. Bulletin contents of a permanent nature are

consolidated semiannually into Cumulative Bulletins,

which are sold on a single-copy basis.

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.

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.

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 procedures 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.

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).

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.

The first Bulletin for each month includes an index for

the matters published during the preceding month.

These monthly indexes are cumulated on a quarterly

and semiannual basis, and are published in the first

Bulletin of the succeeding quarterly and semi-annual

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, D.C. 20402.

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

Section 42.—Low-Income Housing

Credit

Low-income housing credit; satisfactory bond; ‘‘bond factor’’ amounts for

the period April through June 1996.

This ruling announces the monthly

bond factor amounts to be used by

taxpayers who dispose of qualified

low-income buildings or interests

therein during the period April through

June 1996.

Rev. Rul. 96–33

In Rev. Rul. 90–60, 1990–2 C.B. 3,

the Internal Revenue Service provided

guidance to taxpayers concerning the

general methodology used by the

Treasury Department in computing the

bond factor amounts used in calculating

the amount of bond considered satisfactory by the Secretary under § 42(j)(6)

of the Internal Revenue Code. It further

announced that the Secretary would

publish in the Internal Revenue Bulletin a table of ‘‘bond factor’’ amounts

for dispositions occurring during each

calendar month.

This revenue ruling provides in

Table 1 the bond factor amounts for

calculating the amount of bond considered satisfactory under § 42(j)(6) for

dispositions of qualified low-income

buildings or interests therein during the

period April through June 1996.

Table 1

Rev. Rul. 96–33

Monthly Bond Factor Amounts for Dispositions Expressed

As a Percentage of Total Credits

Calendar Year Building Placed in Service or, if Section 42(f)(1)

Election Was Made, the Succeeding Calendar Year

Month of

Disposition

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Apr ’96

May ’96

Jun ’96

76.76

76.54

76.32

78.26

78.03

77.81

79.91

79.68

79.46

81.94

81.71

81.48

84.43

84.19

83.95

87.38

87.12

86.86

90.40

90.12

89.85

93.16

92.86

92.58

95.61

95.32

95.06

97.21

For a list of bond factor amounts

applicable to dispositions occurring

during other calendar years, see the

following revenue rulings: Rev. Rul.

90–60, 1990–2 C.B. 3, for dispositions

occurring during calendar years 1987,

1988, and 1989; Rev. Rul. 90–88,

1990–2 C.B. 7, for dispositions occurring during calendar year 1990; Rev.

Rul. 91–67, 1991–2 C.B. 13, for dispositions occurring during calendar

year 1991; Rev. Rul. 92–101, 1992–2

C.B. 9, for dispositions occurring during calendar year 1992; Rev. Rul 93–

83, 1993–2 C.B. 6, for dispositions

occurring during calendar year 1993;

Rev. Rul. 94–71, 1994–2 C.B. 4, for

dispositions occurring during calendar

year 1994; Rev. Rul. 95–83, 1995–52

I.R.B. 5, for dispositions occurring

during calendar year 1995; and Rev.

Rul. 96–16, 1996–11 I.R.B. 4, for dispositions occurring during the period

January through March 1996.

Assistant Chief Counsel (Passthroughs

and Special Industries). For further

information regarding this revenue ruling, contact Mr. Malgeri at (202)

622-3040 (not a toll-free call).

DRAFTING INFORMATION

ACTION: Final regulations.

The principal author of this revenue

ruling is Jack Malgeri of the Office of

SUMMARY: This document contains

final regulations relating to enterprise

Section 1394.—Tax-Exempt

Enterprise Zone Facility Bonds

26 CFR 1.1394–1: Enterprise zone facility

bonds.

T.D. 8673

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Enterprise Zone Facility Bonds

AGENCY: Internal Revenue Service

(IRS), Treasury.

zone facility bonds issued by State and

local governments. These regulations

reflect changes to the law made by the

Omnibus Budget Reconciliation Act of

1993. These regulations affect issuers

of enterprise zone facility bonds.

EFFECTIVE DATE: These regulations

are effective May 31, 1996.

For dates of applicability of these

regulations to enterprise zone facility

bond issues, see §1.1394–1(q) of these

regulations.

FOR FURTHER INFORMATION

CONTACT: Loretta J. Finger, (202)

622-3980 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

On December 30, 1994, proposed

regulations (FI–72–88 [1995–1 C.B.

859]) were published in the Federal

guidance under sections 141 (relating

to private activity bonds and to

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qualified bonds), 145 (relating to

qualified 501(c)(3) bonds), 148 (relating to arbitrage), 150 (relating to

change of use), and 1394 (relating to

enterprise zone facility bonds). On June

8, 1995, the IRS held a public hearing

on the proposed regulations. Written

comments responding to the proposed

regulations were received.

This Treasury decision addresses the

issues relating to enterprise zone facility bonds. Later guidance will be published relating to sections 141, 145,

148, and 150. After consideration of all

the comments, the proposed regulations

under section 1394 (relating to enterprise zone facility bonds) are

adopted as revised by this Treasury

decision. The principal revisions to the

proposed regulations under section

1394 are discussed below.

Explanation of Provisions

Section 1394 applies to bonds issued

to provide enterprise zone facilities in

both empowerment zones and enterprise communities (zones).

compliance with the requirements applicable to enterprise zone facility

bonds is not required after the date on

which the last of the enterprise zone

facility bonds of the issue cease to be

outstanding.

1. Start of compliance period.

Commentators requested that the

testing date provisions be extended to

all businesses, not just start-up businesses. Commentators also suggested

lengthening the start-up period. The

final regulations follow the recommendation to expand the testing date

provisions to all issuers and principal

users of property financed with enterprise zone facility bonds if the issuer

and the principal user reasonably expect that the requirements will be met

by the testing date and proceed with

due diligence to comply with the

requirements. The start-up period is

increased to the later of 18 months

after the issue date or 18 months after

the date on which the financed property

is placed in service.

A. Period of compliance.

2. Compliance period for certain

requirements.

The proposed regulations in general

require compliance with the requirements applicable to enterprise zone

facility bonds throughout the term of

the enterprise zone facility bonds. The

proposed regulations provide two exceptions to this general rule: (i) a

business that is first established in

connection with the issuance of enterprise zone facility bonds does not

need to meet the requirements of an

enterprise zone business and enterprise

zone property until the ‘‘testing date,’’

which is the later of one year after the

issue date or one year after the date on

which the financed property is placed

in service, and (ii) the issuer and

principal user of the facility are permitted a one-year period to cure noncompliance.

The final regulations modify the

general rule to require compliance with

the requirements applicable to enterprise zone facility bonds throughout

the greater of (i) the remainder of the

period during which the zone designation is in effect under section 1391

(zone designation period), and (ii) the

period that ends on the weighted

average maturity date of the enterprise

zone facility bonds. The final regulations also provide that, in general,

Commentators suggested that compliance with the requirements for an

enterprise zone business should be

based only on reasonable expectations

on the issue date. Commentators suggested that, alternatively, the required

compliance period should be reduced to

either (i) three years (similar to the test

period for qualified small issue manufacturing bonds), or (ii) the remainder

of the zone designation period.

Issuers and principal users should be

required to meet the requirements

applicable to enterprise zone facility

bonds for a meaningful period of time

in order to further the goals of

economic development in the zones.

Therefore, for purposes of meeting the

requirements applicable to enterprise

zone facility bonds, the final regulations in general require issuers and

principal users of financed property to

meet the requirements throughout the

greater of (i) the remainder of the zone

designation period, and (ii) the period

that ends on the weighted average

maturity date of the enterprise zone

facility bonds.

While compliance is generally not

required after the enterprise zone facility bonds are retired, the final regula-

tions do require issuers and principal

users to meet the requirements of an

enterprise zone business and enterprise

zone property for a minimum compliance period of at least three years

after the initial testing date. The final

regulations permit the issuer to identify

an alternative initial testing date. This

alternative initial testing date is a date

after the issue date of the enterprise

zone facility bonds and prior to the

initial testing date that would have

been otherwise determined under the

final regulations.

Principal users are subject to the

change in use penalty of section

1394(e) throughout the greater of (i)

the remainder of the zone designation

period, and (ii) the period that ends on

the weighted average maturity date of

the enterprise zone facility bonds.

3. Measurement of compliance.

The proposed regulations provide

guidance on meeting the enterprise

zone business definitions. Commentators pointed out several difficulties in

meeting the tests in the proposed

regulations and in curing noncompliance within a one-year period.

Commentators also asked for guidance

on how part-time employees are to be

treated for the 35 percent resident

employee requirement.

In general, each of the enterprise

zone business requirements applies

over taxable year periods. The beginning and end of the period of required

compliance, however, may not correspond to the beginning and ending

dates of the principal user’s taxable

year. The proposed regulations do not

address the treatment of a taxable year

only a part of which falls in a required

compliance period. The final regulations provide that a taxable year is

disregarded if the part of the year that

falls in a required compliance period

does not exceed 90 days.

Although the final regulations generally require annual compliance for the

requirements under sections 1397B and

1397C, the final regulations allow a

five-year averaging, taking into account

only immediately preceding years

going back to the taxable year that

includes the initial testing date. The

requirements under sections 1397B and

1397C include requirements relating to

location of performance of employee

services, location of tangible and intangible property, source of gross income

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from the active conduct of business,

and the residence of employees. The

averaging approach permits principal

users who exceed the requirements to

provide a cushion for future unanticipated noncompliance (for example, a

non-recurring extraordinary payment

for services performed outside the

zone).

The final regulations allow the 35

percent resident employee requirement

to be met on any reasonable basis (for

example, on a per-employee basis or on

the basis of employee actual work

hours). For purposes of the peremployee fraction, employees working

less than 15 hours a week are not

included in the numerator or the

denominator. The principal user must

consistently apply the method to determine compliance with the 35 percent

resident employee requirement throughout the required compliance period.

The final regulations also provide

that a zone employee who moves out

of the zone may continue to be treated

as a resident of the zone, provided that

employee was a bona fide resident of

the zone, that employee continues to

perform services for the principal user

in an enterprise zone business in the

zone and substantially all of those

services are performed in the zone, and

the principal user hires a resident of the

zone for the next available comparable

(or lesser) position.

The final regulations reduce the

‘‘substantially all’’ requirement for

purposes of various tests under sections

1397B and 1397C from 90 percent to

85 percent.

B. Qualified zone property definition.

The proposed regulations provide that

property that has been abandoned for

more than one year meets the original

use requirement. The final regulations

provide that if real property is vacant

for at least a one-year period including

the date of zone designation, use prior

to that period is disregarded for purposes of determining original use.

C. Other rules.

Commentators requested guidance on

the appropriate method for treating

activities within the zone as though

they constituted a separately incorporated business for purposes of the

enterprise zone business test.

The final regulations allow a business

to treat its activities within a zone as

part of a separately incorporated business if it allocates income and activities

attributable to the business within the

zone using a reasonable allocation

method and has evidence of its allocations sufficient to establish compliance

with the various requirements.

Assistant Chief Counsel (Financial Institutions and Products). However,

other personnel from the IRS and

Treasury Department participated in

their development.

Adoption of Amendments to the

Regulations

D. Principal user.

The proposed regulations do not

address the requirement that ‘‘the principal user’’ of the enterprise zone

facility bond proceeds be an enterprise

zone business. Commentators suggested

that principal user generally be defined

in the same manner as in the regulations applicable to qualified small issue

bonds and qualified 501(c)(3) bonds,

which relate to use of bond proceeds

by ‘‘any’’ principal user, but without

applying the definition to customers.

One commentator (relying on the definition of a qualifying business) suggested that financing for commercial

real estate owned by a business that is

not an enterprise zone business should

be permitted, so long as 50 percent of

the gross rental income comes from

lessees that are enterprise zone

businesses.

The final regulations provide that an

owner of financed property is the

principal user except that, in the case

of commercial real estate, the lessee

may be treated as the principal user if

the rental of the property is a qualified

business under section 1397B(d)(2).

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It also has been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not

apply to these regulations, and, therefore, a Regulatory Flexibility Analysis

is not required. Pursuant to section

7805(f) of the Internal Revenue Code,

the notice of proposed rulemaking

preceding these regulations was submitted to the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is Loretta J. Finger, Office of

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding an

entry in numerical order to read as

follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.1394–1 also issued under 26

U.S.C. 1397D.

Par. 2. Sections 1.1394–0 and

1.1394–1 are added under the undesignated centerheading ‘‘DEFINITIONS;

SPECIAL RULES’’ to read as follows:

§1.1394–0 Table of contents.

This section lists the major paragraph headings contained in §1.1394–1.

§1.1394–1 Enterprise zone facility

bonds.

(a) Scope.

(b) Period of compliance.

(1) In general.

(2) Compliance after an issue is

retired.

(3) Deemed compliance.

sections 1397B and 1397C.

(1) Start of compliance period.

(2) Compliance period for certain

prohibited activities.

(3) Minimum compliance period.

(4) Initial testing date.

(d) Testing on an average basis.

(e) Resident employee requirements.

(1) Determination of employee

status.

(2) Employee treated as zone

resident.

(3) Resident employee percentage.

(f) Application to pooled financing

bond and loan recycling

programs.

(g) Limitation on amount of bonds.

(1) Determination of outstanding

amount.

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(2) P o o l e d f i n a n c i n g b o n d

programs.

(h) Original use requirement for purposes of qualified zone property.

(i) Land.

(j) Principal user.

(1) In general.

(2) Rental of real property.

(3) Pooled financing bond program.

(k) Treatment as separately incorporated business.

(l) Substantially all.

(m) Application of sections 142 and

146 through 150.

(1) In general.

(2) Maturity limitation.

(3) Volume cap.

(4) Remedial actions.

(n) Continuing compliance and

change of use penalties.

(1) In general.

(2) Coordination with deemed

compliance provisions.

(3) Application to pooled financing bond and loan recycling

programs.

(4) Section 150(b)(4) inapplicable.

(o) Refunding bonds.

(1) In general.

(2) Maturity limitation.

(p) Examples.

(q) Effective dates.

(1) In general.

(2) Elective retroactive application in whole.

§1.1394–1 Enterprise zone facility

bonds.

(a) Scope. This section contains

rules relating to tax-exempt bonds

under section 1394 (enterprise zone

facility bonds) to provide enterprise

zone facilities in both empowerment

zones and enterprise communities

(zones). See sections 1394, 1397B, and

1397C for other rules and definitions.

(b) Period of compliance—(1) In

general. Except as provided in paragraphs (b)(2) and (c) of this section,

the requirements under sections 1394(a)

and (b) applicable to enterprise zone

facility bonds must be complied with

throughout the greater of the

following—

(i) The remainder of the period

during which the zone designation is in

effect under section 1391 (zone designation period); and

(ii) The period that ends on the

weighted average maturity date of the

enterprise zone facility bonds.

(2) Compliance after an issue is

retired. Except as provided in paragraph (c)(3) of this section, the requirements applicable to enterprise zone

facility bonds do not apply to an issue

after the date on which no enterprise

zone facility bonds of the issue are

outstanding.

(3) Deemed compliance—(i) General

rule. An issue is deemed to comply

with the requirements of sections

1394(a) and (b) if—

(A) The issuer and the principal user

in good faith attempt to meet the

requirements of sections 1394(a) and

(b) throughout the period of compliance required under this section; and

(B) Any failure to meet these requirements is corrected within a oneyear period after the failure is first

discovered.

(ii) Exception. The provisions of

paragraph (b)(3)(i) of this section do

not apply to the requirements of section

1397B(d)(5)(A) (relating to certain prohibited business activities).

(iii) Good faith. In order to satisfy

the good faith requirement of paragraph

(b)(3)(i)(A) of this section, the principal user must at least annually demonstrate to the issuer the principal user’s

monitoring of compliance with the requirements of sections 1394(a) and (b).

sections 1397B and 1397C—(1) Start

of compliance period. Except as provided in paragraph (c)(2) of this

section, the requirements of sections

1397B (relating to qualification as an

enterprise zone business) and 1397C

(relating to satisfaction of the rules for

qualified zone property) do not apply

prior to the initial testing date (as

defined in paragraph (c)(4) of this

section) if—

(i) The issuer and the principal user

reasonably expect on the issue date of

the enterprise zone facility bonds that

those requirements will be met by the

principal user on or before the initial

testing date; and

(ii) The issuer and the principal user

exercise due diligence to meet those

requirements prior to the initial testing

date.

(2) Compliance period for certain

prohibited activities. The requirements

of section 1397B(d)(5)(A) (relating to

certain prohibited business activities)

must be complied with throughout the

term of the enterprise zone facility

bonds.

(3) Minimum compliance period.

The requirements of sections 1397B(b)

or (c) and 1397C must be satisfied for

a continuous period of at least three

years after the initial testing date,

notwithstanding that—

(i) The period of compliance required under paragraph (b)(1) of this

section expires before the end of the

three-year period; or

(ii) The enterprise zone facility

bonds are retired before the end of the

three-year period.

(4) Initial testing date—(i) In general. Except as otherwise provided in

paragraph (c)(4)(ii) of this section, the

initial testing date is the date that is 18

months after the later of the issue date

of the enterprise zone facility bonds or

the date on which the financed property

is placed in service; provided, however,

it is not later than—

(A) Three years after the issue date;

(B) Five years after the issue date, if

the issue finances a construction project

for which both the issuer and a

licensed architect or engineer certify on

or before the issue date of the enterprise zone facility bonds that more

than three years after the issue date is

necessary to complete construction of

the project.

(ii) Alternative initial testing date. If

the issuer identifies as the initial testing

date a date after the issue date of the

enterprise zone facility bonds and prior

to the initial testing date that would

have been determined under paragraph

(c)(4)(i) of this section, that earlier date

is treated as the initial testing date.

(d) Testing on an average basis.

Compliance with each of the requirements of section 1397B(b) or (c) is

tested each taxable year. Compliance

with any of the requirements may be

tested on an average basis, taking into

account up to four immediately preceding taxable years plus the current

taxable year. The earliest taxable year

that may be taken into account for

purposes of the preceding sentence is

the taxable year that includes the initial

testing date. A taxable year is disregarded if the part of the taxable year

that falls in a required compliance

period does not exceed 90 days.

(e) Resident employee requirements—(1) Determination of employee

status. For purposes of the requirement

of section 1397B(b)(6) or (c)(5) that at

least 35 percent of the employees are

residents of the zone, the issuer and the

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principal user may rely on a certification, signed under penalties of perjury

by the employee, provided—

(i) The certification provides to the

principal user the address of the

employee’s principal residence;

(ii) The employee is required by the

certification to notify the principal user

of a change of the employee’s principal

residence; and

(iii) Neither the issuer nor the principal user has actual knowledge that

the principal residence set forth in the

certification is not the employee’s

principal residence.

(2) Employee treated as zone resident. If an issue fails to comply with

the requirement of section 1397B(b)(6)

or (c)(5) because an employee who

initially resided in the zone moves out

of the zone, that employee is treated as

still residing in the zone if—

(i) That employee was a bona fide

resident of the zone at the time of the

certification described in paragraph

(e)(1) of this section;

(ii) That employee continues to perform services for the principal user in

an enterprise zone business and substantially all of those services are

performed in the zone; and

(iii) A resident of the zone meeting

the requirements of section 1397B(b)(5) or (c)(4) is hired by the principal

user for the next available comparable

(or lesser) position.

(3) Resident employee percentage.

For purposes of meeting the requirement of section 1397B(b)(6) or (c)(5)

that at least 35 percent of the

employees of an enterprise zone business are residents of a zone, paragraphs

(e)(3)(i) and (ii) of this section apply.

(i) The term employee includes a

self-employed individual within the

meaning of section 401(c)(1).

(ii) The resident employee percentage is determined on any reasonable

basis consistently applied throughout

the period of compliance required

under this section. The per-employee

fraction (as defined in paragraph

(e)(3)(ii)(A) of this section) or the

employee actual work hour fraction (as

defined in paragraph (e)(3)(ii)(B) of

this section) are both reasonable

methods.

(A) The term per-employee fraction

means the fraction, the numerator of

which is, during the taxable year, the

number of employees who work at

least 15 hours a week for the principal

user, who reside in the zone, and who

are employed for at least 90 days, and

the denominator of which is, during the

same taxable year, the aggregate number of all employees who work at least

15 hours a week for the principal user

and who are employed for at least 90

days.

(B) The term employee actual work

hour fraction means the fraction, the

numerator of which is the aggregate

total actual hours of work for the

principal user of employees who reside

in the zone during a taxable year, and

the denominator of which is the aggregate total actual hours of work for the

principal user of all employees during

the same taxable year.

(f) Application to pooled financing

bond and loan recycling programs. In

the case of a pooled financing bond

program described in paragraph (g)(2)

of this section or a loan recycling

program described in paragraph (m)(2)(ii) of this section, the requirements of

paragraphs (b) through (e) of this

section apply on a loan-by-loan basis.

See also paragraphs (g)(2) (relating to

limitation on amount of bonds), (m)(2)

(relating to maturity limitations), (m)(3)

(relating to volume cap), and (m)(4)

(relating to remedial actions) of this

section.

(g) Limitation on amount of bonds—

(1) Determination of outstanding

amount. Whether an issue satisfies the

requirements of section 1394(c) (relating to the $3 million and $20 million

aggregate limitations on the amount of

outstanding enterprise zone facility

bonds) is determined as of the issue

date of that issue, based on the issue

price of that issue and the adjusted

issue price of outstanding enterprise

zone facility bonds. Amounts of outstanding enterprise zone facility bonds

allocable to any entity are determined

under rules contained in section 144(a)(10)(C) and the underlying regulations.

Thus, the definition of principal user

for purposes of section 1394(c) is

different from the definition of principal user for purposes of paragraph (j)

of this section.

(2) Pooled financing bond programs—(i) In general. The limitations

of section 1394(c) for an issue for a

pooled financing bond program are

determined with regard to the amount

of the actual loans to enterprise zone

businesses rather than the amount lent

to intermediary lenders as defined in

paragraph (g)(2)(ii) of this section. This

paragraph (g)(2) applies only to the

extent the proceeds of those enterprise

zone facility bonds are loaned to one or

more enterprise zone businesses within

42 months of the issue date of the

enterprise zone facility bonds or are

used to redeem enterprise zone facility

bonds of the issue within that 42-month

period.

(ii) Pooled financing bond program

defined. For purposes of this section, a

pooled financing bond program is a

program in which the issuer of enterprise zone facility bonds, in order to

provide loans to enterprise zone businesses, lends the proceeds of the

enterprise zone facility bonds to a bank

or similar intermediary (intermediary

lender) which must then relend the

proceeds to two or more enterprise

zone businesses.

(h) Original use requirement for

purposes of qualified zone property. In

general, for purposes of section

1397C(a)(1)(B), the term original use

means the first use to which the

property is put within the zone. For

purposes of section 1394, if property is

vacant for at least a one-year period

including the date of zone designation,

use prior to that period is disregarded

for purposes of determining original

use. For this purpose, de minimis

incidental uses of property, such as

renting the side of a building for a

billboard, are disregarded.

(i) Land. The determination of

whether land is functionally related and

subordinate to qualified zone property

is made in a manner consistent with the

rules for exempt facilities under section

142.

(j) Principal user—(1) In general.

Except as provided in paragraph (j)(2)

of this section, the term principal user

means the owner of financed property.

(2) Rental of real property—(i) A

lessee as the principal user. If an

owner of real property financed with

enterprise zone facility bonds is not an

enterprise zone business within the

meaning of section 1397B, but the

rental of the property is a qualified

business within the meaning of section

1397B(d)(2), the term principal user

for purposes of sections 1394(b) and

(e) means the lessee or lessees.

(ii) Allocation of enterprise zone

facility bonds. If a lessee is the

principal user of real property under

paragraph (j)(2)(i) of this section, then

proceeds of enterprise zone facility

bonds may be allocated to expenditures

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for real property only to the extent of

the property allocable to the lessee’s

leased space, including expenditures for

common areas.

(3) Pooled financing bond program.

An intermediary lender in a pooled

financing bond program described in

paragraph (g)(2) of this section is not

treated as the principal user.

(k) Treatment as separately incorporated business. For purposes of section

1394(b)(3)(B), a trade or business may

be treated as separately incorporated if

allocations of income and activities

attributable to the business conducted

within the zone are made using a

reasonable allocation method and if

that trade or business has evidence of

those allocations sufficient to establish

compliance with the requirements of

paragraphs (b) through (f) of this

section. Whether an allocation method

is reasonable will depend upon the

facts and circumstances. An allocation

method will not be considered to be

reasonable unless the allocation method

is applied consistently by the trade or

business and is consistent with the

purposes of section 1394.

(l) Substantially all. For purposes of

sections 1397B and 1397C(a), the term

substantially all means 85 percent.

(m) Application of sections 142 and

146 through 150—(1) In general. Except as provided in this paragraph (m),

enterprise zone facility bonds are

treated as exempt facility bonds that

are described in section 142(a), and all

regulations generally applicable to exempt facility bonds apply to enterprise

zone facility bonds. For this purpose,

enterprise zone businesses are treated

as meeting the public use requirement.

Sections 147(c)(1)(A) (relating to limitations on financing the acquisition of

land), 147(d) (relating to financing the

acquisition of existing property), and

142(b)(2) (relating to limitations on

financing office space) do not apply to

enterprise zone facility bonds. See also

paragraph (n)(4) of this section.

(2) Maturity limitation—(i) Requirements. An issue of enterprise zone

facility bonds, the proceeds of which

are to be used as part of a loan

recycling program, satisfies the requirements of section 147(b) if—

(A) Each loan satisfies the requirements of section 147(b) (determined by

treating each separate loan as a separate issue); and

(B) The term of the issue does not

exceed 30 years.

(ii) Loan recycling program defined.

A loan recycling program is a program

in which—

(A) The issuer reasonably expects as

of the issue date of the enterprise zone

facility bonds that loan repayments

from principal users will be used to

make additional loans during the zone

designation period;

(B) Repayments of principal on

loans (including prepayments) received

during the zone designation period are

used within six months of the date of

receipt either to make new loans to

enterprise zone businesses or to redeem

enterprise zone facility bonds that are

part of the issue; and

loans (including prepayments) received

after the zone designation period are

used to redeem enterprise zone facility

bonds that are part of the issue within

six months of the date of receipt.

(3) Volume cap. For purposes of

applying section 146(f)(5)(A) (relating

to elective carryforward of unused

volume limitation), issuing enterprise

zone facility bonds is a carryforward

purpose.

(4) Remedial actions. In the case of

a pooled financing bond program described in paragraph (g)(2) of this

section or a loan recycling program

described in paragraph (m)(2)(ii) of this

section, if a loan fails to meet the

requirements of paragraphs (b) through

(f) of this section, within six months of

noncompliance (after taking into account the deemed compliance provisions of paragraph (b)(3) of this

section, if applicable), an amount equal

to the outstanding loan principal must

be prepaid and the issuer must—

(i) Reloan the amount of the prepayment; or

(ii) Use the prepayment to redeem an

amount of outstanding enterprise zone

facility bonds equal to the outstanding

principal amount of the loan that no

longer meets those requirements.

(n) Continuing compliance and

change of use penalties—(1) In general. The penalty provisions of section

1394(e) apply throughout the period of

compliance required under paragraph

(b)(1) of this section.

(2) Coordination with deemed compliance provisions. Section 1394(e)(2)

does not apply during any period

during which the issue is deemed to

comply with the requirements of section 1394 under the deemed compliance

provisions of paragraph (b)(3) of this

section.

(3) Application to pooled financing

bond and loan recycling programs. In

the case of a pooled financing bond

program described in paragraph (g)(2)

of this section or a loan recycling

program described in paragraph

(m)(2)(ii) of this section, section

1394(e) applies on a loan-by-loan

basis.

(4) Section 150(b)(4) inapplicable.

Section 150(b)(4) does not apply to

enterprise zone facility bonds.

(o) Refunding bonds—(1) In general. An issue of bonds issued after the

zone designation period to refund enterprise zone facility bonds (other than

in an advance refunding) are treated as

enterprise zone facility bonds if the

refunding issue and the prior issue, if

treated as a single combined issue,

would meet all of the requirements for

enterprise zone facility bonds, except

the requirements in section 1394(c).

For example, the compliance period

described in paragraph (b)(1) of this

section is calculated taking into account

any extension of the weighted average

maturity of the refunding issue compared to the remaining weighted average maturity of the prior issue. The

proceeds of the refunding issue are

allocated to the same expenditures and

purpose investments as the prior issue.

(2) Maturity limitation. The maturity

limitation of section 147(b) is applied

to a refunding issue by taking into

account the issuer’s reasonable expectations about the economic life of the

financed property as of the issue date

of the prior issue and the actual

weighted average maturity of the combined refunding issue and prior issue.

(p) Examples. The following examples illustrate paragraphs (a) through

(o) of this section:

Example 1. Averaging of enterprise zone

business requirements. City C issues enterprise

zone facility bonds, the proceeds of which are

loaned by C to Corporation B to finance the

acquisition of equipment for its existing business

located in a zone. On the issue date of the

enterprise zone facility bonds, B meets all of the

requirements of section 1397B(b), except that

only 25% of B’s employees reside in the zone. C

and B reasonably expect on the issue date to

meet all requirements of section 1397B(b) by the

date that is 18 months after the equipment is

placed in service (the initial testing date). In each

of the first, second, and third taxable years after

the initial testing date, 35%, 40% and 45%,

respectively, of B’s employees are zone residents. In the fourth year after the testing date,

only 25% of B’s employees are zone residents. B

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continues to meet the 35% resident employee

requirement, because the average of zone resident employees for those four taxable years is

approximately 36%. The percentage of zone

residents employed by B before the initial testing

date is not included in determining whether B

continues to comply with the 35% resident

employee requirement.

Example 2. Measurement of resident employee

percentage. Authority D issues enterprise zone

facility bonds, the proceeds of which are loaned

to Sole Proprietor F to establish an accounting

business in a zone. In the first year after the

initial testing date, the staff working for F

includes F, who works 40 hours per week and

does not live in the zone, one employee who

resides in the zone and works 40 hours per week,

one employee who does not reside in the zone

and works 20 hours per week, and one employee

who does not reside in the zone and works 10

hours per week. F meets the 35% resident

employee test by calculating the percentage on

the basis of employee actual work hours as

described in paragraph (e)(3)(ii)(B) of this

section. If F uses the per-employee basis as

described in paragraph (e)(3)(ii)(A) of this

section to determine if the resident employee test

is met, the percentage of employees who are

zone residents on a per-employee basis is only

33% because F must exclude from the numerator

and the denominator the employee who works

only 10 hours per week. If F calculates the

resident employee test as a percentage of

employee actual work hours as described in

paragraph (e)(3)(ii)(B) of this section in the first

year, F must calculate the resident employee test

as a percentage of employee actual work hours

each year.

Example 3. Active conduct of business within

the zone. State G issues enterprise zone facility

bonds and loans the proceeds to Corporation H

to finance the acquisition of equipment for H’s

mail order clothing business, which is located in

a zone. H purchases the supplies for its clothing

business from suppliers located both within and

outside of the zone and expects that orders will

be received both from customers who will reside

or work within the zone and from others outside

the zone. All orders are received and filled at,

and are shipped from, H’s clothing business

located in the zone. H meets the requirement that

at least 80% of its gross income is derived from

the active conduct of business within the zone.

Example 4. Enterprise zone business definition. City J issues enterprise zone facility bonds,

the proceeds of which are loaned to Partnership

K to finance the acquisition of equipment for its

printing operation located in the zone. All orders

are taken and completed, and all billing and

accounting activities are performed, at the print

shop located in the zone. K, on occasion, uses its

equipment (including its trucks) and employees

to deliver large print jobs to customers who

reside outside of the zone. So long as K is able

to establish that its trucks are used in the zone at

least 85% of the time and its employees perform

at least 85% of services for K in the zone, K

meets the requirements of sections 1397B(b)(3)

and (5).

Example 5. Treatment as a separately incorporated business. The facts are the same as in

Example 4 except that six years after the issue

date of the enterprise zone facility bonds, K

determines to expand its operations to a second

location outside of the boundaries of the zone.

Although the expansion would result in the

failure of K to meet the tests of 1397B(b), K,

using a reasonable allocation method, allocates

income and activities to its operations within the

zone and has evidence of these allocations

sufficient to establish compliance with the

requirements of paragraphs (b) through (f) of this

section. The bonds will not fail to be enterprise

zone facility bonds merely because of the

expansion.

Example 6. Treatment of pooled financing

bond programs. Authority L issues bonds in the

aggregate principal amount of $5,000,000 and

loans the proceeds to Bank M pursuant to a

loans-to-lenders program. M does not meet the

definition of enterprise zone business contained

in section 1397B. Prior to the issue date of the

bonds, L held a public hearing regarding

issuance of the bonds for the loans-to-lenders

program, describing the projects of identified

borrowers to be financed initially with

$4,000,000 of the proceeds of the bonds. The

applicable elected representative of L approved

issuance of the bonds subsequent to the public

hearing. The loan agreement between L and M

provides that the other proceeds of the bonds

will be held by M and loaned to borrowers that

qualify as enterprise zone businesses, following a

public hearing and approval by the applicable

elected representative of L of each loan by M to

an enterprise zone business. None of the loans

will be in principal amounts in excess of

$3,000,000. The loans by M will otherwise meet

the requirements of section 1394. The bonds will

be enterprise zone facility bonds.

Example 7. Original use requirement for

purposes of qualified zone property. City N

issues enterprise zone facility bonds, the proceeds of which are loaned to Corporation P to

finance the acquisition of equipment. P uses the

proceeds after the zone designation date to

purchase used equipment located outside of the

zone and places the equipment in service at its

location in the zone. Substantially all of the use

of the equipment is in the zone and is in the

active conduct of a qualified business by P. The

equipment is treated as qualified enterprise zone

property under section 1397C because P makes

the first use of the property within the zone after

the zone designation date.

Example 8. Principal user. State R issues

enterprise zone facility bonds and loans the

proceeds to Partnership S to finance the construction of a small shopping center to be located

in a zone. S is in the business of commercial real

estate. S is not an enterprise zone business, but

has secured one anchor lessee, Corporation T, for

the shopping center. T would qualify as an

enterprise zone business. S will derive 60% of its

gross rental income of the shopping center from

T. S does not anticipate that the remaining rental

income will come from enterprise zone businesses. T will occupy 60% of the total rentable

space in the shopping center. S can use

enterprise zone facility bond proceeds to finance

the portion of the costs of the shopping center

allocable to T (60%) because T is treated as the

principal user of the enterprise zone facility bond

proceeds.

Example 9. Remedial actions. State W issues

pooled financing enterprise zone facility bonds,

the proceeds of which will be loaned to several

enterprise zone businesses in the two enterprise

communities and one empowerment zone in W.

Proceeds of the pooled financing bonds are

loaned to Corporation X, an enterprise zone

business, for a term of 10 years. Six years after

the date of the loan, X expands its operations

beyond the empowerment zone and is no longer

able to meet the requirements of section 1394. X

does not reasonably expect to be able to cure the

noncompliance. The loan documents provide that

X must prepay its loan in the event of noncompliance. W does not expect to be able to

reloan the prepayment by X within six months of

noncompliance. X’s noncompliance will not

affect the qualification of the pooled financing

bonds as enterprise zone facility bonds if W uses

the proceeds from the loan prepayment to redeem

outstanding enterprise zone facility bonds within

six months of noncompliance in an amount

comparable to the outstanding amount of the

loan immediately prior to prepayment. X will be

denied an interest expense deduction for the

interest accruing from the first day of the taxable

year in which the noncompliance began.

(q) Effective dates—(1) In general.

Except as otherwise provided in this

section, the provisions of this section

apply to all issues issued after July 30,

1996, and subject to section 1394.

(2) Elective retroactive application

in whole. An issuer may apply the

provisions of this section in whole, but

not in part, to any issue that is

outstanding on July 30, 1996, and is

subject to section 1394.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved May 22, 1996.

Leslie Samuels,

Assistant Secretary of the Treasury.

(Filed by the Office of the Federal Register on

May 30, 1996, 8:45 a.m., and published in the

issue of the Federal Register for May 31,

1996, 61 F.R. 27258)

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Part III. Administrative, Procedural, and Miscellaneous

Weighted Average Interest Rate

Update

Notice 96–36

Notice 88–73 provides guidelines for

determining the weighted average interest rate and the resulting permissible

range of interest rates used to calculate

current liability for the purpose of the

full funding limitation of § 412(c)(7) of

the Internal Revenue Code as amended

by the Omnibus Budget Reconciliation

Act of 1987 and as further amended by

the Uruguay Round Agreements Act,

Pub. L. 103–465 (GATT).

Month

Year

Weighted

Average

June

1996

6.92

The average yield on the 30-year

Treasury Constant Maturities for May

1996 is 6.93 percent.

The following rates were determined

for the plan years beginning in the

month shown below.

90% to 108%

Permissible

Range

90% to 110%

Permissible

Range

6.23 to 7.48

6.23 to 7.61

Drafting Information

The principal author of this notice is Donna Prestia of the Employee Plans Division. For further information regarding this

notice, call (202) 622-6076 between 2:30 and 4:00 p.m. Eastern time (not a toll-free number). Ms. Prestia’s number is (202)

622-7377 (also not a toll-free number).

Rev. Proc. 96–36

Use this revenue procedure to prepare Tax Year 1996 information returns for submission to Internal Revenue Service

(IRS) using any of the following:

— Magnetic Tape

— Tape Cartridge

— 8mm (.315-inch) Tape Cartridge

*(Pilot for AS400 Operating Systems)

— 51⁄4-inch Diskette

— 31⁄2-inch Diskette

— Electronic Filing

— (Bisynchronous)

— (Asynchronous)

IRS/MCC has discontinued processing 8-inch diskettes for tax year 1996, calendar year 1997. If you currently file

information returns on 8-inch diskette, you need to change to one of the options listed above.

*For Tax Year 1996, the processing of 8mm tape cartridge as an acceptable form of magnetic media is offered as a

pilot program for transmitters using AS400 systems only.

Please read this publication carefully. Persons or businesses required to file information returns may be subject to

penalties for failure to file or include correct information if they do not follow the instructions in this revenue procedure.

Table of Contents

Part A. General

Section 1.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Section 7.

Section 8.

Section 9.

Purpose

Nature of Changes—Current Year (Tax Year 1996)

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

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Section 10.

Section 11.

Section 12.

Section 13.

Section 14.

Section 15.

Section 16.

Section 17.

Section 18.

Section 19.

Due Dates

Extensions of Time

Processing of Information Returns Magnetically/Electronically

Corrected Returns

Taxpayer Identification Number (TIN)

Effect on Paper Returns

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.

Section 11.

General

Tape Specifications

Tape Cartridge Specifications

8mm (.315-inch) Tape Cartridge Specifications

51⁄4-inch and 31⁄2-inch Diskette Specifications

Payer/transmitter ‘‘A’’ Record—General Field Descriptions

Payer/transmitter ‘‘A’’ Record—Record Layout

Payee ‘‘B’’ Record—General Field Descriptions and Record Layouts

End of Payer ‘‘C’’ Record—Record Layout

State Totals ‘‘K’’ Record—Record Layout

End of Transmission ‘‘F’’ Record—Record Layout

Part C. Bisynchronous (Mainframe) Electronic Filing Specifications

Section 1.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Section 7.

General

Electronic Filing Approval Procedure

Test Files

Electronic Submissions

Transmittal Requirements

IBM 3780 Bisynchronous Communication Specifications

Bisynchronous Electronic Filing Record Specifications

Part D. Asynchronous (IRP–BBS) Electronic Filing Specifications

Section 1.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Section 7.

General

Electronic Filing Approval Procedure

Test Files

Electronic Submissions

Transmittal Requirements

Information Reporting Program Bulletin Board System (IRP–BBS) Specifications

IRP–BBS First Logon Procedures

Part E. Magnetic/Electronic Specification for Extensions of Time

Section 1.

Section 2.

Section 3.

General Information

Magnetic Tape, Tape Cartridge, 51⁄4- and 31⁄2-inch Diskette, and IRP–BBS Specifications

Record Layout

Part F. Miscellaneous Information

Section 1.

Section 2.

Section 3.

Section 4.

Addresses for MCC

Phone Numbers for Contacting IRS/MCC Magnetic Media Reporting Program/ Information Returns Branch

Preparation Instructions for External Label

Related Forms for Filing Information Returns Magnetically/Electronically

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Part A. General

Revenue procedures are generally

revised annually to reflect legislative

and form changes. Comments concerning this revenue procedure, or suggestions for making it more helpful, can

be addressed to:

Internal Revenue Service

Martinsburg Computing Center

Attn: IRB, Information Support

Section

P. O. Box 1359, MS–360

Martinsburg, WV 25401

Sec. 1. Purpose

.01 The purpose of this revenue

procedure is to provide the specifications for filing Forms 1098, 1099

series, 5498, and W–2G electronically

or on magnetic media, which includes

1⁄2-inch magnetic tape; IBM 3480, 3490

or AS400 compatible tape cartridges;

or 5 1⁄4- and 31⁄2-inch diskettes with IRS.

IRS/MCC has discontinued processing

8-inch diskettes. This revenue procedure must be used for the preparation

of Tax Year 1996 information returns

and information returns for years prior

to 1996 that are required to be filed.

This revenue procedure must be used to

prepare current and prior year information returns filed between January 1,

1997, and December 31, 1997. Specifications for filing the following forms

are contained in this revenue

procedure.

(a) Form 1098, Mortgage Interest

Statement.

(b) Form 1099–A, Acquisition or

Abandonment of Secured

Property.

Broker and Barter Exchange

Transactions.

(d) Form 1099–C, Cancellation

of Debt.

(e) Form 1099–DIV, Dividends

and Distributions.

(f) Form 1099–G, Certain Government Payments.

(g) Form 1099–INT, Interest

Income.

(h) Form 1099–MISC, Miscellaneous Income.

(i) Form 1099-OID, Original Issue Discount.

(j) Form 1099–PATR, Taxable

Distributions Received from

Cooperatives.

(k) Form 1099–R, Distributions

from Pensions, Annuities, Retirement or Profit-Sharing

Plans, IRAs, Insurance Contracts, etc.

Form 1099–S, Proceeds from

Real Estate Transactions.

(m) Form 5498, Individual Retirement Arrangement

Information.

(n) 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 1-800SSA-1213 to obtain the phone number

of the SSA Magnetic Media Coordinator for their area.

.03 The Internal Revenue Service,

Martinsburg Computing Center (IRS/

MCC) has the responsibility for processing Forms 1098, 1099 series, 5498,

and W–2G filed magnetically or

electronically. 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) and extension of time requests (Form 8809)

for filing Forms W–2.

.04 In most cases, 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) 1996 ‘‘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.

Specifications for Private

Printing of Substitute Forms

1096, 1098, 1099 Series,

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 51⁄4- or 31⁄2inch Diskettes.

(l)

(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 51⁄4- or

31⁄2-inch Magnetic Diskettes.

(f) Publication 1245, Specifications for Filing Form W–4,

Employee’s Withholding Allowance Certificate, on Magnetic Tape, and 51⁄4- or 31⁄2inch Magnetic Diskette.

.07 This revenue procedure supersedes Rev. Proc. 95–29 and 95–29A

published as Publication 1220 (Rev. 6–

95), 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 1996)

.01 In this publication, all pertinent

changes for Tax Year 1996 have been

emphasized by the use of italics. This

has been done for the convenience of

the filers in identifying new information. Filers are still advised to read the

publication in its entirety.

.02 Programming Changes

a. Payer/Transmitter ‘‘A’’ Record

Changes:

(1) For all forms, Payment Year,

Field Positions 2–3 must be incremented by one (from 95 to 96) unless

reporting prior year data.

b. Payer/Transmitter ‘‘B’’ Record

Changes:

(1) For all forms, Payment Year,

Field Positions 2–3 must be incremented by one (from 95 to 96) unless

reporting prior year data.

(2) Part B, Sec. 8: For Form

1099–R Distribution Codes, Field Positions 4–5, acceptable combinations of

numeric distribution codes now include

codes 8 and 4.

(3) Part B, Sec. 8: For Form 5498,

a SEP Indicator has been added in

Field Position 44.

.03 Editorial Changes—General

(a) Eight inch diskette processing

has been eliminated by IRS/MCC. All

references to 8-inch diskette processing

have been deleted from this

publication.

(b) Part A, Sec. 4.04 was included

to inform payers of electronic filing

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methods; i.e., Mainframe and Information Reporting Program Bulletin Board

System (IRP–BBS) electronic filing,

and a brief overview of options available on the IRP–BBS.

have been added for obtaining an

automatic waiver for filing Form 5498

for participants of Operation Joint

Endeavor (Bosnia Region).

(d) Part A, Sec. 7.01: A chart has

been added to clarify the guidelines for

applications for a transmitter control

code (TCC).

(e) Part A, Sec. 12.02 and 12.03:

Information has been added regarding

the Media Tracking Slip (Form 9267)

which accompanies media returned to

filers due to processing problems.

(f) Part A, Sec. 17: The Definition

of Terms section has been expanded.

(g) Part B, Sec. 3.01(a): Tape cartridge specifications have been expanded to include IBM 3490E as

acceptable media.

(h) Part F: Information in this part

has been provided as a quick reference

point for addresses and telephone numbers for IRS/MCC.

(i) Numerous statements have been

added and bolded throughout the publication instructing filers not to report

duplicate data which may result in

erroneous penalty notices being

generated.

.04 Editorial Changes—Magnetic

Media Specifications

(a) Part B, Sec. 4: 8mm (.315-inch)

tape cartridge specifications have been

added. This is a pilot program for

transmitters with AS400 operating systems only.

(b) Part B, Sec. 6: Instructions have

been included for reporting IRA contributions for Operation Joint Endeavor

(Bosnia Region) participants.

‘‘A’’ Record—General Field Descriptions—Field Positions 23–31, Form

5498: A note was added directing the

filer to enter ‘‘1’’ in the IRA/SEP

Indicator Field (position 44 of the

Payee ‘‘B’’ Record) for a simplified

employee pension (SEP).

(d) Part B, Sec. 8: A separate Payee

‘‘B’’ Record Layout Position 322–420,

has been created for Form 1099–R.

(e) Part B, Sec. 8, Payee ‘‘B’’ Field

Positions 4–5, Document Specific

Code/Distribution Code for the Tax

Year of Refund for 1099–G: A statement has been added to instruct filers

to report the distribution code that

reflects the tax year for which the

REFUND was made, not 1996. Refund

Years have been added to identify the

valid corresponding code.

(f) Part B, Sec. 8, Payee ‘‘B’’

Record General Field Descriptions and

Record Layout—IRA/SEP Indicator,

Field Position 44: Text was added to

the Description and Remarks to enter

‘‘1’’ for Form 5498 if reporting a

contribution to a simplified employee

pension (SEP). A note was also added

to reflect the change.

(g) Part C, Sec. 6: IBM 3780

Bisynchronous communication has

been expanded to include the specifications and circuit number of

304-264-7045 for Hayes OPTIMA 288

V.FC Smartmodem for 14400 bps

transmissions.

(h) Part C, Sec. 7: A Type of File

Indicator has been added in Field

Position 44 for Extension File in the

Bisynchronous Electronic Filing Record

Specifications.

(i) Part E, Sec. 3, RECORD LAYOUT, Field Positions 6–14: Reference

to the Foreign Entity Indicator has been

corrected to read, Field Position 176,

must be set to ‘‘X.’’

Sec. 3. Where to File and How to

Contact the IRS, Martinsburg

Computing Center (MCC)

.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

P. O. Box 1359, MS-360

Martinsburg, WV 25401-1359

✈

If by truck or air freight:

IRS-Martinsburg Computing Center

Information Reporting Program

Route 9 and Needy Road, MS-360

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

Attn: Extension of Time

Coordinator

P. O. Box 879, MS-360

Kearneysville, WV 25430

If by truck or air freight: ✈

IRS-Martinsburg Computing

Center

Attn: Extension of Time

Coordinator

Route 9 and Needy Road, MS-360

Martinsburg, WV 25401

.03 Inquiries may be made between

8:30 a.m. and 4:30 p.m. Eastern time.

The telephone numbers for magnetic

media inquiries or electronic submissions are:

304-263-8700—Call Site—PART A,

Sec 3.19

304-264-7070—IRP–BBS (Information Reporting Program Bulletin

Board System)—PART D

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, CALL:

1-800-TAX-FORM (1-800829-3676)

.04 The 1996 ‘‘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.

.05 Requests for paper Forms 1096,

1098, 1099 and W–2G, and publications unrelated to magnetic media/

electronic filing should be requested by

calling the ‘‘Forms Only Number’’

listed in your local telephone directory

or by calling the IRS toll-free number

1-800-TAX-FORM (1-800-829-3676).

.06 Questions pertaining to magnetic

media filing of Forms W–2 must be

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directed to the Social Security Administration (SSA). Filers can call 1-800SSA-1213 to obtain the phone number

of the SSA Magnetic Media Coordinator for their area.

.07 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. Penalty notices contain 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

1996 ‘‘Instructions for Forms 1099,

1098, 5498, and W–2G.’’

.08 A taxpayer or authorized representative may request a copy of a tax

return or a 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).

.09 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–2, W–2G, W–3,

Questionable W–4’s, and 1042S). The

IRS/MCC Call Site also handles 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 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 payers’, transmitters’,

and employers’ questions. 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 Under section 6011(e)(2)(A) of

the Internal Revenue Code, 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 payers may not be required to

file magnetically/electronically, IRS encourages them to do so.

.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), or

Employer Identification Number

(EIN)]. 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.

.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 Social Security bulletin

board systems

● Access to information reporting

publications

● Access to shareware

● Access to forms 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

● IRP–BBS is available for public

use and can be reached by dialing

304-264-7070

● Telephone lines are available 24

hours a day, 7 days a week.

Routine maintenance is performed

daily, at approximately 7:00 a.m.

Eastern Time Zone.

● 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:

250 or more of any of

1098

these forms require mag1099–A

netic media or electronic

1099–B

filing with IRS. These are

1099–C

1099–DIV stand alone documents

and are not to be aggre1099–G

1099–INT gated for purposes of de1099–MISC termining the 250 thresh1099–OID old. For example, if you

1099–PATR must file 100 Forms

1099–B and 300 Forms

1099–R

1099–S

1099–INT, Forms 1099–B

5498

need not be filed magnetW–2G

ically 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.

.06 The above requirements do not

apply if the payer establishes undue

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. (For penalty information, refer to the Penalty section of the

1996 ‘‘Instructions for Forms 1099,

1098, 5498, and W–2G.’’)

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.02 If payers are required to file

original or corrected returns on magnetic media, but such filing would

create an undue 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

up to 249 corrections on paper, IRS/

MCC 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.

.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.

However, new brokers and new barter

exchanges may request an undue hardship waiver by the end of the second

month following the month in which

they became a broker or barter

exchange.

.10 File Form 8508 for Forms W–2

with IRS/MCC, not SSA.

.11 Waivers are evaluated on a caseby-case basis and are approved or

denied based on criteria set forth under

section 6011(e) of the Internal Revenue

Code. The transmitter must allow a

minimum of 30 days for IRS/MCC to

respond to a waiver request.

.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 submission processing site.

.14 Desert Storm/Operation Joint

Endeavor (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 Operations Joint Endeavor.

The payer should clearly mark Desert

Storm or Operations Joint Endeavor on

the waiver request form.

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 provided,

upon request, as a courtesy and in no

way implies IRS/MCC approval or

endorsement.

☛ Note: If filers meet the filing

requirements and 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.

.02 A payer may request a Vendor

List (Pub. 1582) by contacting IRS/

MCC at 304-263-8700 or by way of

letter (see Part A, Sec. 3). This information is also available from the

Information Reporting Program Bulletin Board System (refer to Part D).

Vendor names will not be provided

over the telephone.

.03 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 be submitted by August

15 and must include:

(a) Company name

(b) Address (include city, state,

and ZIP code)

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, 51⁄4- or 31⁄2-inch

diskettes, or electronic filing)

(g) Type of return

.04 The vendor list is updated annually. Therefore, any changes to information already on the vendor list must

also be received by IRS/MCC no later

than August 15 to be included on the

most current vendor list.

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 is to be filed, the

transmitter does not need to submit a

new Form 4419.

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EXCEPTIONS

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

Questionable 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.

8027

Employer’s Annual Information

Return of Tip Income and

Allocated Tips

Receipts from food or beverage operations, tips reported by

employees, and allocated tips.

Questionable W–4

(See Note)

Employee’s Withholding Allowance Certificate

Forms received during the 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.

If filers wish to report both

electronically and magnetically, only

one Form 4419 needs to be submitted.

.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

(1-800-829-3676).

.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 Payer ‘‘A’’

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 A magnetic media reporting

package containing the current revenue

procedure, forms, and instructions will

be sent to the attention of the contact

person indicated on Form 4419. This

package will be sent annually.

.05 If any of the information on the

Form 4419 changes, please notify IRS/

MCC in writing so that the IRS/MCC

database can be updated. The transmitter should include the TCC in all

correspondence.

.06 Form 4419 can be submitted at

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 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. Include a

list of all payers and TINs with the

Form 4419. Transmitters are encouraged to provide an updated list to

IRS/MCC annually.

.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 ‘‘A’’ 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 three years; the

payer’s TCC may have been

reassigned by IRS/MCC.

(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 used to file the

return. A payer may apply for more

than one TCC, but must code only one

TCC per media. Notify IRS/MCC of

any TCCs that will not be used so

these numbers may be reassigned.

.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 the computer software or of the quality of tax

preparation services provided.

Sec. 8. Test Files

.01 IRS/MCC does not require test

files, except for filers wishing to

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participate in the Combined Federal/

State Filing Program (see Part A, Sec.

16, for further information concerning

the Combined Federal/State Filing

Program).

.02 IRS/MCC encourages first-time

magnetic media or electronic filers to

submit a test. The test file should

consist of a sample of each type of

record:

(a) Payer ‘‘A’’ Record (must not

be fictitious data)

(b) Multiple Payee ‘‘B’’ Records

(at least 11 ‘‘B’’ Records

per each ‘‘A’’ Record)

(d) State Totals ‘‘K’’ Record, if

participating in the Combined

Federal/State Filing Program

(e) End of Transmission ‘‘F’’

Record

See PART B for record formats.

.03 Use the Test Indicator in the

‘‘A’’ Record to show that 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 that their

software reflects any programming

changes.

If unable to submit a magnetic or

electronic test file, a hardcopy printout

that shows a sample of each record

type (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 31. The test file must be

received at MCC by December 31 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, 51⁄4- and

31⁄2-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,

check ‘‘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 31.

.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 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 four

types of returns and/or more than four

payers. Form 4802 is not a stand-alone

form; it can only accompany Form

4804.

.02 IRS/MCC encourages the use of

computer-generated substitutes for

Form 4804/4802 (See Note). 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.

☛ Note: When using computergenerated forms, be sure to

very clearly mark 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. 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 on one tape or

diskette as long as each filing entity or

type of return is separated by an ‘‘A’’

Record. Only one ‘‘F’’ Record may be

used at the end of a transmission.

Multiple tapes or diskettes can be sent

in one package. Filers must include

Form 4804, 4802, or computergenerated 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. 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).’’

☛ Note: Failure to sign the affidavit

on Form 4804 may delay

processing or could result

in the files being returned

unprocessed.

.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 An external media label, must be

affixed to each tape and diskette. 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.

For instructions on how to prepare an

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external media label, refer to PART F

‘‘Miscellaneous Information.’’

.11 On the outside of the shipping

container, affix or attach a label which

reads IRB

reflecting

the number of containers in the shipment (See labels in PART F). 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;

magnetic media;

(d) IRB

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 In general, 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

.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 Form 5498,

which is used to report amounts contributed during, or after (but not later

than April 15) of the calendar year.

.02 Information returns filed

magnetically/electronically for Forms

1098, 1099, and W–2G must be submitted to IRS/MCC postmarked no

later than February 28. If using a

delivery service other than postal service, the actual date of receipt by IRS/

MCC will be used as the submission

date. This should be considered in

meeting filing requirements timely.

.03 The due date for furnishing

statements to recipients is January 31.

Form 5498 statements are due to the

participants by January 31 for the fair

market value of the account and by

May 31 for contributions made to IRAs

for the prior calendar year.

.04 Form 5498 filed magnetically/

electronically must be submitted to

IRS/MCC postmarked no later than

May 31. Form 5498 is filed for contributions to be applied to 1996 that are

made January 1, 1996, through April

15, 1997, and/or to report the fair

market value of the IRA/SEP.

.05 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 day

that is not a Saturday, Sunday, or legal

holiday.

.06 Use this revenue procedure to

prepare information returns filed magnetically or electronically beginning

January 1, 1997, and received by IRS/

MCC no later than December 31, 1997.

Sec. 11. Extensions of Time

.01 An extension of time to file may

be requested for Forms 1099, 1098,

5498, W–2G, W–2, and 1042–S.

.02 Form 8809, Request for Extension of Time to File Information

Returns, should be submitted to IRS/

MCC. This form may be used to request an extension of time to file

information returns submitted on paper,

magnetically or electronically.

.03 Requesting an extension of time

for multiple payers 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 (See Note). Requests

for an extension of time for 10 to 50

payers are encouraged to be filed

magnetically or electronically via IRP–

BBS. (See Part E, Sec. 3, for the record

format.) The request may be filed on

tape, tape cartridge, 51⁄4- or 31⁄2-inch

diskette, or electronically through the

IRP–BBS or mainframe.

☛ Note: Form 4419, Application for

Filing Information Returns

Magnetically/Electronically,

must be completed in order

to file an extension request

magnetically/electronically.

.05 A magnetically filed request for

an extension of time should be sent

using the following addresses:

If by Postal Service: ✉

IRS-Martinsburg Computing

Center

Attn: Extension of Time

Coordinator

P. O. Box 879, MS-360

Kearneysville, WV 25430

If by truck or air freight: ✈

IRS-Martinsburg Computing

Center

Attn: Extension of Time

Coordinator

Route 9 and Needy Road, MS-360

Martinsburg, WV 25401

.06 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.

.07 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.

.08 If an additional extension of

time is needed, a second Form 8809

must be requested before the end of the

initial extension. Line 7 on the form

should be checked 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 events. When

requesting a second 30-day extension

of time, do not hold your files waiting

for a response.

.09 Form 8809 must be postmarked no later than the due date of

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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 February 28.

Complete more than one Form 8809

to avoid this problem.

.10 If an extension request is approved, the approval letter should be

kept on file. (The approval letter or

copy of the approval letter for 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.)

.11 Request an extension for only

one tax year.

.12 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.

.13 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.

.14 Form 8809 may be obtained by

calling 1-800-TAX-FORM (1-800829-3676).

.15 Request an extension of time to

furnish the statements to recipient of

Forms 1098, 1099, 5498, W–2G, W–2,

and 1042–S by submitting a letter to

IRS/MCC or to the payer’s local

District Director containing the following information:

(a) Payer Name

(b) TIN

(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 of Forms 1098,

1099, 5498, W–2G, W–2, 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. If the request is denied,

the statements must be sent to the

recipients timely. 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). If media is

returned, it is because IRS/MCC encountered errors (not limited to format)

and was unable to process the media,

therefore, requiring a replacement.

Open all packages immediately.

.03 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 1996

‘‘Instructions for Forms 1099, 1098,

5498, and W–2G.’’) When possible,

IRS/MCC may return only the portion

of the file that needs replacement.

.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

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 blue and white 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

tracing 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.

☛ Note: 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 requirements of 250 information returns

applies separately to both original and

corrected returns.

E If a payer has 100 Forms 1099–A to

X be corrected, they can be filed on

A paper since they fall under the 250

M threshold. However, if the payer has

P 300 Forms 1099–B to be corrected,

L they must be filed magnetically or

E electronically since they meet the

250 threshold. If for some reason a

payer cannot file the 300 corrections

on magnetic media, to avoid penalties, a request for a waiver must be

submitted before filing on paper. No

waiver is required for corrections that

fall under the required threshold.

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.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 prior to August 1 may

be subject to a lesser penalty. (For

information on penalties, refer to the

Penalty Section of the 1996 ‘‘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 that 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.’’

☛ Note: If filers discover that certain information returns

were omitted on their

original file, they must

not submit these documents as corrections.

They must submit them

as 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)

(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 Box 2 of the Form 4804 and

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 2–3. If filing electronically, a

separate transmission must be made for

each tax year.

.07 In general, filers should submit

corrections for returns to be filed

within the last three calendar years

(four 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, must

be submitted with corrected files submitted magnetically or electronically.

.10 The ‘‘B’’ Record provides a 20position 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. Following directions for both

Transations 1 and 2 (See Note 1).

1. Original return was filed with one or more of the

following errors:

Transaction 1: Identify incorrect returns

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

related to this file.

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Guidelines for Filing Corrected Returns Magnetically/Electronically (Continued)

Error Made on the Original Return

How To File the Corrected Return

(a) No Payee TIN (SSN or EIN)

(b) Incorrect Payee TIN

(d) Wrong type of return indicator

B. Mark ‘‘Correction’’ in Block 1 of Form 4804.

C. Prepare a new file.

Make a separate ‘‘A’’ Record for each type of return

being reported. The information in the ‘‘A’’ Record will

be exactly the same as it was in the original submission.

D. The Payee ‘‘B’’ Record must contain exactly the same

information as submitted previously, except, insert a

‘‘G’’ in field position 7 of the ‘‘B’’ Record, and for all

payment amounts, enter ‘‘0’’ (zero).

E. Corrected returns submitted to IRS/MCC using a ‘‘G’’

coded ‘‘B’’ Record may be on the same tape or diskette

as those returns submitted without the ‘‘G’’ code;

however, separate ‘‘A’’ Records are required.

F. Prepare a ‘‘C’’ Record.

Transaction 2: Report the correct information

A. Prepare a new file with the correct information in all

records.

B. Make a separate ‘‘A’’ Record for each type of return and

each payer being reported.

C. The ‘‘B’’ Record must show the correct Information as

well as a ‘‘C’’ in field position 7.

D. Corrected returns submitted to IRS/MCC using a ‘‘C’’

coded ‘‘B’’ Record may be on the same tape or diskette

as those returns submitted without the ‘‘C’’ code;

however, separate ‘‘A’’ Records are required.

E. Prepare a ‘‘C’’ Record.

F. Indicate ‘‘Correction’’ on the external media label.

☛ Note 1: Payers who can show that they have reasonable cause (defined in the regulations under sections 6721-6724

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 $15 or

$30. (For penalty information, refer to the Penalty section of the 1996 ‘‘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 sections 6721-6724 are available in Publication 1586,

Reasonable Cause Regulations and Requirements as They Apply to Missing and Incorrect 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 ‘‘A’’

Record

(b) Incorrect Payment amounts in the ‘‘B’’ Record

Distribution Code Field in the ‘‘B’’ Record

(d) Incorrect Payee Address

(e) Direct Sales Indicator

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. Make separate ‘‘A’’ Records for each

type of return being reported. Information in the ‘‘A’’

Record may be the same as it was in the original

submission.

D. The ‘‘B’’ Record must show the correct information as

well as a ‘‘G’’ in field position 7.

E. Corrected returns submitted to IRS/MCC using a ‘‘G’’

coded ‘‘B’’ Record may be on the same tape or diskette

as those returns submitted without the ‘‘G’’ code;

however, separate ‘‘A’’ Records are required.

F. Prepare a ‘‘C’’ Record.

G. Mark ‘‘Correction’’ on the external media label.

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Guidelines for Filing Corrected Returns Magnetically/Electronically (Continued)

Error Made on the Original Return

How To File the Corrected Return

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

two transactions will be required. If a filer is reporting ‘‘G’’ coded, ‘‘C’’ coded, and/or ‘‘Non-coded’’

(original) returns on the same media, they 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 Social Security and Employer Identification Numbers

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. For other entities, the payee TIN is the payee’s Employer Identification Number. 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.

.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 1996 ‘‘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

In the Taxpayer Identification Number

field of the Payee ‘‘B’’ Record, enter

the SSN of-

For this type of account1. Individual

2. Joint account (Two or more individuals, including husband and wife)

3. Custodian account of a minor

(Uniform Gift, or Transfers, to Minors

Act)

4. The usual revocable savings trust

account (grantor is also trustee)

5. A so-called trust account that is not

a legal or valid trust under state law

6. Sole proprietorship

In the First Payee Name Line of the

Payee ‘‘B’’ Record, enter the name of-

The individual

The actual owner of the account or, if

combined funds, the first individual on

the account.

The minor

The individual

The individual whose SSN is entered

The grantor-trustee

The actual owner

The owner (An SSN or EIN)

The owner, not the business name (the

filer may enter the business name on

the second name line).

The minor

Chart 2. Guidelines for Employer Identification Numbers

For this type of account1. A valid trust, estate, or pension trust

2. Corporate

3. Association, club, religious, charitable, educational, or other tax-exempt

organization

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-

Legal entity1

The corporation

The organization

The legal trust, estate, or pension trust

The corporation

The organization

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Chart 2. Guidelines for Employer Identification Numbers (Continued)

For this type of account4. Partnership account held in the name

of the business

5. A broker or registered 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

7. Sole proprietorship

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-

The partnership

The broker or nominee/middleman

The public entity

The business (An EIN or SSN)

The owner, not the business name (the

filer may enter the business name on

the second name line).

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

.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.

.02 Payers are responsible for

providing statements to the payees as

outlined in the 1996 ‘‘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 Series,

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 not be filed under this program:

Form 1098—Mortgage Interest

Statement

Form 1099–A—Acquisition or

Abandonment of Secured Property

Form 1099–B—Proceeds for

Broker and Barter Exchange

Transactions

Form 1099–C—Cancellation of

Debt

Form 1099–S—Proceeds From

Real Estate Transactions

and

Form W–2G—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 31. 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. 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 31.

.06 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.

.07 Only code the records for participating states and for those payers

who have submitted Form 6847.

.08 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.

.09 All corrections properly coded

for the Combined Federal/ State Filing

Program will be forwarded to the

participating states.

.10 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.

.11 To simplify filing, some of the

participating states have provided their

information return reporting requirements (see Table 2). Each state filing

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regulations 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.

.12 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 total ‘‘K’’

Record for each state being

reported.

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

Idaho

Indiana

Iowa

Kansas

Maine

Massachusetts

Minnesota

Mississippi

Missouri

Montana

New Jersey

New Mexico

North Carolina

North Dakota

Oregon

South Carolina

Tennessee

Wisconsin

Table 2. Dollar Criteria For State Reporting

STATE

Alabama

Arkansas

District of Columbiab

Hawaii

Idaho

Iowa

Minnesota

Mississippi

Missouri

Montana

New Jersey

North Carolina

Tennessee

Wisconsin

1099–DIV

1099–G

1099–INT

$1500

100

600

100

600

1000

100

$ NR

2500

600

$1500

100

600

1000

600

1000

100

1000

600

1000

100

1099–MISC 1099–OID

$1500

2500

600

1000

600

1200 c

600

1000

600

$1500

2500

600

1000

600

1000

100

1099–PATR 1099–R 5498

$1500

2500

600

1000

600

1000

100

$1500

2500

600

1000

600

1000

100

600

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 any state 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 their state agency.

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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.

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.

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) or AT&T 2296A (9600bps)

modems. Standard IBM 3780 space compression is

acceptable.

A correction is an information return submitted by the payer

to correct erroneous information previously submitted to

IRS/MCC.

Bisynchronous Protocols

Correction

☛ 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

Employer Identification Number (EIN) Electronic Filing

File

Filer

Filing Year

Golden Parachute Payment

Incorrect Taxpayer Identification Number (Incorrect TIN)

Information Return

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.

A nine-digit number assigned by IRS for federal tax

reporting purposes. 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.

For purposes of this revenue procedure, a file consists of all

records submitted by a payer or transmitter, either magnetically or electronically.

Person responsible for submitting information returns to IRS.

The year in which the information returns are being

submitted to IRS/MCC (if magnetically) or service center (if

paper).

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.

A TIN may be incorrect for several reasons:

(a) The payee gave a wrong number (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 was typed

incorrectly).

was not conveyed to the IRS or SSA so that they could

enter the change in their records).

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.

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Element

Magnetic Media

Media Tracking Slip

Missing Taxpayer Identification Number (Missing TIN)

PS 58 Costs

Payee

Payer

Replacement

Description

The information required to be reported on an information

return includes interest, dividends, pensions, nonemployed

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 Form 1098, 1099–A, 1099–B, 1099–C, 1099–DIV,

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

1099–R, 1099–S, 5498, or W–2G.

For this revenue procedure, the term ‘‘magnetic media’’

refers to 1⁄2-inch magnetic tape; IBM 3480/3490/3490E or

AS400 compatible tape cartridge; or 51⁄4- and 31⁄2-inch

diskette.

Form 9267 accompanies media that IRS/MCC has returned

to the filer for correction due to format or fatal errors

encountered when trying to process media. THIS MUST BE

RETURNED WITH THE REPLACEMENT FILE.

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

The current cost of life insurance under a qualified plan

taxable under section 72(m) and Regulations section 1.72–

16(b). (See Part B, Sec. 7, Payee ‘‘B’’ Record, Document

Specific/Distribution Code, Category of Distribution, Code

9.)

Person or organization receiving payments from the payer,

or for whom an information return must be filed. The payee

includes a borrower (Form 1099–A), a debtor (1099–C), a

participant (Form 5498), and a gambling winner (Form W–

2G). For Form 1098, the payee is the individual paying the

interest. For Form 1099–S, the payee is the seller or other

transferor.

Includes the 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 an issuer of an IRA or SEP, 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.

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

Social Security Number (SSN)

Special Character

SSA

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.

A nine-digit number assigned by SSA to an individual for

wage and tax reporting purposes.

Any character that is not a numeral, an alpha, or a blank.

Social Security Administration.

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Element

Description

Statement to Recipient

For purposes of this revenue procedure, the copy of Form

1099, 1098, 5498, or W–2G that is required to be sent by

the payer to the recipient to provide information to be

reported on the recipient’s tax return. When reporting Form

1098, the payer is the receiver of the mortgage interest and

the recipient is the person making the interest payment.

When reporting Form 1099–S, the payer is the entity

reporting the transaction and the recipient is the seller or

other transferor.

May be either an Employer Identification Number (EIN) or

Social Security Number (SSN).

The year in which payments were made by a payer to a

payee.

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). The payer may be required to submit to IRS/MCC a

Form 2678, Employer Appointment of Agent Under Section

3504 of the Internal Revenue Code, which notifies IRS/MCC

of the transfer agent relationship.

Person or organization submitting file(s) magnetically/

electronically. May be payer or agent of payer.

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 ‘‘A’’ 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.

Service bureaus that will produce information return files on

the prescribed types of magnetic media or via electronic

filing for payers who meet the 250 threshold or may be

unable to prepare their own media. Companies who provide

software for payers who wish to produce their own media or

electronic files.

Taxpayer Identification Number (TIN)

Tax Year

Transfer Agent

Transmitter

Transmitter Control Code (TCC)

Vendor

Sec. 18. State Abbreviations

.01 The following state abbreviations are to be used when developing the state code portion of address fields. This table

provides state 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

Kentucky

Louisiana

Maine

Marshall Islands

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

Ohio

Oklahoma

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Virgin Island

Washington

West Virginia

Wisconsin

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State

Code

State

Code

State

Code

Illinois

Indiana

Iowa

Kansas

North Carolina

North Dakota

Northern

Mariana Islands

Wyoming

.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

Virgin Islands.

.03 For foreign country addresses, filers may use a 40 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 of the ‘‘B’’ Record.

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

EXAMPLE:

PVT Willard J. Doe

Company F, PSC Box 100

167 Infantry REGT

APO (or FPO)

AE, AA, or AP

098010100

Payee Name

Mailing Address

Payee City

*Payee State

Payee ZIP Code

* 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 files prepared by a service bureau (see Note) or who have purchased preprogrammed software packages. If a

filer purchased a software package for a previous tax year, it may no longer be valid for reporting current tax year

information returns. Following are some of the most frequently encountered problems with magnetic/electronic files

submitted to IRS/MCC.

Some of the problems listed in the Major Problems Encountered may result in media being returned for replacement.

☛ Note: If filers meet the filing requirements and engage a service bureau to prepare media on their behalf, the

filers should be careful not to report duplicate data which may generate penalty notices.

1. 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.

2. 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

‘‘B’’ RECORD

247bbbbbb

(Pos. 23–31)

0000867599

(Pos. 61–70)

0000709097

(Pos. 81–90)

0000044985

(Pos. 111–120)

—

(‘b’ denotes a blank)

—

(Payment Amount 2)

—

(Payment Amount 4)

—

(Payment Amount 7)

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3. 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.

4. Incorrect TIN in Payer ‘‘A’’ Record

The Payer’s TIN reported in positions 7–15 of the ‘‘A’’ Record must be correct in order for IRS/MCC to process the media.

The TIN provided in the ‘‘A’’ Record should correspond with the name provided in the first payer name line.

5. Bad Format

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

formatting data.

6. Incorrect tax year in the Payer ‘‘A’’ Record and the Payee ‘‘B’’ Record

The tax year in both the payee and payer record should reflect the year of the information that is being reported. Filers need

to check their files to ensure that this information is correct.

7. 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 contains Form W–2 information will be returned to the filer. The local SSA office should be contacted for

information concerning filing Forms W–2 on magnetic media.

8. Excessive withholding credits

Generally, for most information returns, other than Forms 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.

9. 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. (For penalty information, refer to the Penalty section of the 1996 ‘‘Instructions for Forms 1099, 1098, 5498, and

W–2G.’’)

IRS/MCC contacts filers who have submitted payee data with missing TINs in an attempt to prevent erroneous notices.

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 1996 ‘‘Instructions for Forms 1099,

1098, 5498, and W–2G.’’)

10. 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

1099–R in the Payee ‘‘B’’ Record layout.

11. Incorrect Record Totals Listed on Form 4804

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

returns. The figure in this box 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.

12. Invalid Use of IRA/SEP Indicator

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

total amount distributed from an IRA or SEP should be reported in Payment Amount Field 2 (IRA/SEP Distribution).

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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 file.

.02 A provision is made in the ‘‘B’’

Records for Special Data Entries. These

entries are optional. If the field is not

utilized, enter blanks to maintain a

fixed record length of 420 positions.

The field is intended to serve one or

both of these purposes:

(a) Contain information required

by state or local governments. Filers

who wish to use this option for

satisfying state or local reporting requirements should contact the state or

local department of revenue for filing

instructions. (Also refer to Part A, Sec.

16.)

(b) Contain information for the

filer’s own personal use and used at the

discretion of the filer to include information related to each individual return. IRS/MCC will not use the information supplied in this field. The

length of this field will vary depending

on the type of return.

.03 Transmitters should be consistent

in the use of recording codes and

density on files. If the media does not

meet these specifications, it could 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.

.04 Use ‘‘K’’ Records only if the

payer is an approved Combined

Federal/State filer.

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), 81⁄2-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

32,760 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.

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 420.

(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) Used to signify the physical

end of the recording on tape.

(b) For even parity, use BCD

configuration 001111 (8421).

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 1⁄2inch tape contained in plastic cartridges which are approximately 4-inches by

5-inches by 1-inch in

dimension.

(2) Magnetic tape will be chromium dioxide particle based

1⁄2-inch tape.

(3) Cartridges must be 18-track

or 36-track parallel (See

Note).

(4) Cartridges will contain

37,871 CPI or 75,742 CPI

(characters per inch).

(5) Mode will be full function.

(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

32,760 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.

and trailer labels, may be

blocked or unblocked. A rec-

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ord 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 420.

(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:

Tape Mark:

(a) Used to signify the physical

end of the recording on tape.

(b) For even parity, use BCD

configuration 001111 (8421).

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 36track or 18-track.

Sec. 4. 8mm (.315-inch) Tape

Cartridges

For Tax Year 1996, the processing

of 8mm tape cartridge (also referred to

as cassette) as an acceptable form of

magnetic media is offered as a pilot

program for transmitters with AS400

operations systems only.

.01 In most instances, IRS/MCC can

process tape cartridges that meet the

following specifications:

(a) Must meet American National

Standard Institute (ANSI)

standards, and have the following characteristics:

(1) 8mm (.315-inch) tape cartridges will be 21⁄2-inch by

33⁄4-inch.

(2) Magnetic tape will be chromium dioxide particle based

8mm tape.

(3) Mode will be full function.

(4) Compressed data is not

acceptable.

(5) 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.

(6) 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 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.

.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

32,760 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.

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 420.

(d) ‘COPY’ or ’SAVE’ command

must be used to store data on

the cartridge.

(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) Used to signify the physical

end of the recording on tape.

(b) For even parity, use BCD

configuration 001111 (8421).

and precede and/or follow the

trailer label.

.05 If extraneous data follows the

end of the file ‘‘F’’ Record, the file

must be returned for replacement.

Therefore, IRS/MCC encourages transmitters to use blank tape cartridges

rather than cartridges previously used,

in the preparation of data when submitting information returns.

.06 IRS/MCC can only read one data

file on a tape. A data file is a group of

records which may or may not begin

with a tapemark, but must end with a

trailer label. Any data beyond the

trailer label cannot be read by IRS

programs.

Sec. 5. 51⁄4-inch and 31⁄2-inch

Diskette Specifications

.01 To be compatible, a diskette file

must meet the following specifications:

(a) 51⁄4- or 31⁄2-inches in diameter.

(b) Data must be recorded in

standard ASCII code. For 51⁄4inch diskettes, data may be

recorded using EBCDIC if the

diskette is created on an IBM

System 36.

of 420 bytes per record.

(d) Delimiter character commas

(,) must not be used.

(e) Positions 419 and 420 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 dis-

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kettes within the file. For example, the first diskette will be named IRSTAX.001, the second diskette will be

IRSTAX.002, etc.

(g) A diskette file may consist of multiple diskettes as long as the file naming conventions are followed.

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

Capacity

1.44 mb

1.2 mb

720 kb

360 kb

320 kb

180 kb

160 kb

Tracks

96tpi

135tpi

96tpi

48tpi

.02 IRS/MCC encourages transmitters to use blank or currently formatted

diskettes when preparing files (See

Note). If extraneous data follows the

end of file ‘‘F’’ Record, the file must

be returned for replacement.

.03 IRS/MCC prefers that 51⁄4- and

3 ⁄2-inch diskettes be created using MSDOS; however, diskettes created using

other operating systems may be acceptable.

☛ Note: 31⁄2-inch Diskettes Created

on a System 36 or AS400

Are Not Acceptable.

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 51⁄4- and 31⁄2-inch diskettes,

especially if their data was not created

using MS-DOS.

.04 Transmitters are encouraged to

use high density diskettes. Low density

diskettes are acceptable but must be

formatted in low density.

.05 Transmitters should check media

for viruses before submitting media to

IRS/MCC.

Sec. 6. Payer/Transmitter ‘‘A’’

Record—General Field Descriptions

.01 The Payer/Transmitter ‘‘A’’ Record identifies the payer and transmitter

Sides/Density

ds/dd

ss/dd

of the magnetic media file and 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.

.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 first 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

Sector Size

512

is required for each payer and each

type of return being reported.

.05 All records must be a fixed

length of 420 positions.

.06 An ‘‘A’’ Record may be blocked

with ‘‘B’’ Records, however, the initial

record on a file must be 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.

.08 All alpha characters entered in

the ‘‘A’’ Record must be upper-case.

.09 When filing Form 1098, Mortgage 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.

☛ Note: For all fields marked Required, a transmitter must

provide the information described under Description

and Remarks. For fields not

marked Required, a transmitter must allow for the

field, but may be instructed

to enter blanks or zeros in

the indicated media position(s) and for the indicated

length. All records are now a

fixed length of 420 positions.

Record Name: Payer/Transmitter ‘‘A’’ Record

Field

Position

Field Title

Length

Description and Remarks

Record Type

Required. Enter ‘‘A.’’

2–3

Payment Year

Required. Enter ‘‘96’’ (unless reporting prior year data).

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Record Name: Payer/Transmitter ‘‘A’’ Record—Continued

Field

Position

Field Title

Length

Description and Remarks

4–6

Reel Sequence

Number

The reel sequence number is incremented by 1 for each tape or diskette on the

file starting with 001. The transmitter may enter blanks or zeros in this field.

IRS/MCC bypasses this information. Indicate the proper sequence on the

external media label.

7–15

Payer’s TIN

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. For foreign

entities that are not required to have a TIN, this field may be blank. However,

the Foreign Entity Indicator, position 49 of the ‘‘A’’ Record, should be set to

‘‘1’’ (one).

16–19

Payer Name

Control

Not a required field. 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.

Last Filing

Indicator

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.

Combined Federal/

State Filer

Required for the Combined Federal/State Filing Program. Enter ‘‘1’’ (one) if

participating in the Comb

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