Bulletin No. 1997–30

Bulletin No. 1997–30

July 28, 1997

Internal Revenue

bulletin

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.

EMPLOYMENT TAX

T.D. 8723, page 4.

Final and temporary regulations under section 6302 of the

Code relate to the deposit of federal taxes by electronic

funds transfer (EFT).

Notice 97–43, page 9.

This notice provides guidance relating to the waiver of the

failure-to-deposit penalty for certain taxpayers required to

begin using electronic funds transfer on or after July 1,

1997.

ADMINISTRATIVE

Rev. Proc. 97–34, page 14.

Electronic filing; magnetic media; 1997 form specifications. Specifications are set forth for the magnetic or

electronic filing of 1997 Forms 1098, 1099, 5498, and W-2G.

The forms may be filed with the IRS using 1/2 inch magnetic tape; IBM 3480/3490 or AS400 compatible tape cartridges; 8 mm tape cartridges; 4 mm cartridges; quarter

inch cartridges; or 5 1/4-, 3 1/2-inch diskettes. Rev. Proc.

96–36 superseded.

Announcement 97–73, page 86.

An updated edition of Publication 939, General Rule for

Pensions and Annuities (revised June 1997), will be available

in August.

Rev. Proc. 97–33, page 10.

Tax forms and instructions. Information is provided to taxpayers about the Electronic Federal Tax Payment System

(EFTPS). EFTPS is an electronic remittance system for making federal tax deposits and federal tax payments.

Finding Lists begin on page 90.

Announcement of Disbarments and Suspensions begins on page 87.

Department of the Tr e a s u r y

Internal Revenue Service

Mission of the Service

ucts and services; and perform in a manner warranting

the highest degree of public confidence in our integrity, efficiency and fairness.

The purpose of the Internal Revenue Service is to collect

the proper amount of tax revenue at the least cost; serve

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that

care be exercised not to raise an issue or to ask a court to

adopt a position inconsistent with an established Service

position.

The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue

is determined by Congress.

With this in mind, it is the duty of the Service to carry out that

policy by correctly applying the laws enacted by Congress;

to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them;

and to perform this work in a fair and impartial manner, with

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax devices and

fraud.

At the heart of administration is interpretation of the Code. It

is the responsibility of each person in the Service, charged

with the duty of interpreting the law, to try to find the true

meaning of the statutory provision and not to adopt a

strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only

when we ascertain and apply the true meaning of the statute.

2

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold

on a single-copy basis.

dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings

are issued by the Department of the Treasury’s Office of the

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

the application of the law to the pivotal facts stated in the

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

will not be relied on, used, or cited as precedents by Service

personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce-

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a 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.Acitation 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.

3

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

Section 6302.—Mode or Time of

Collection

26 CFR 31.6302–1: Federal tax deposit rules for

withheld income taxes and taxes under the Federal

Insurance Contributions Act (FICA) attributable to

payments made after December 31, 1992.

T.D. 8723

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, and 40

Federal Tax Deposits by Electronic

Funds Transfer

A G E N C Y: Internal Revenue Service

(IRS), Treasury.

ACTION: Final and temporary regulations.

S U M M A RY: This document contains

final regulations relating to the deposit of

Federal taxes by electronic funds transfer

(EFT). The regulations provide rules regarding which taxpayers must make deposits by EFT, the types of Federal taxes

that must be deposited by EFT, and when

deposits by EFT must begin. The regulations affect taxpayers required to make deposits of Federal taxes by EFT. The final

regulations reflect changes to the Internal

Revenue Code of 1986 (Code) made by

the North American Free Trade A g r e e m e n t

Implementation Act and the Small Business Job Protection Act of 1996.

DATES: The final regulations are effective July 14, 1997. For dates of applicability of these regulations, see §31.6302–

1(h)(2).

FOR FURTHER INFORMATION CONTA C T: Vincent G. Surabian, 202-6226232 (not a toll-free number).

SUPPLEMENTARYINFORMATION:

Background

Section 523 of the North American Free

Trade Agreement Implementation A c t ,

Public Law 103–182, 107 Stat. 2057 (December 8, 1993), amended section 6302 of

the Code by enacting a new subsection (h)

requiring the Secretary of the Treasury to

prescribe such regulations as may be nec-

1997–30 I.R.B.

essary for the development and implementation of an EFT system to be used for the

collection of depository taxes.

On July 11, 1994, the IRS published

temporary regulations (T.D. 8553) in the

Federal Register (59 FR 35414) relating

to the deposit of Federal taxes by EFT. A

notice of proposed rulemaking

(IA–03–94) cross-referencing the temporary regulations was also published in the

Federal Register for the same day (59 FR

35418). Subsequently, on March 21,

1996, additional temporary regulations

( T.D. 8661) were published in the Federal

Register (61 FR 11548) as well as a notice

of proposed rulemaking (IA–03–94, 61

FR 11595) that both cross–referenced the

temporary regulations published that day

and amended the notice of proposed rulemaking published July 11, 1994. Many

written comments were received in response to these notices of proposed rulemaking. Apublic hearing on the 1994 notice was held on October 3, 1994. T h e r e

were no requests for a public hearing on

the 1996 notice and none was held.

Section 1809 of the Small Business Job

Protection Act of 1996, Public Law

104–188, 110 Stat. 1755 (August 20,

1996), delayed the date by which certain

taxpayers must begin EFT deposits.

After consideration of all comments,

the regulations proposed by IA–03–94 are

adopted as revised by this Treasury decision, and the corresponding temporary

regulations are removed. The revisions

are discussed below.

Explanation of Provisions

Under the temporary regulations, the requirement to deposit by EFT is based on

the taxpayer’s total deposits of certain

taxes during certain “determination periods.” If the taxpayer’s deposits of the

taxes during a determination period exceed a prescribed dollar threshold, the taxpayer must use EFT to make deposits on

and after the date prescribed in the temporary regulations.

DELAY IN JANUARY 1, 1997,

START-UP DATE

The Small Business Job Protection A c t

of 1996 provides that taxpayers first required by the temporary regulations to de-

4

posit by EFT for return periods beginning

on and after January 1, 1997, need not

begin to deposit by EFTuntil July 1, 1997.

The final regulations provide that these

taxpayers must use EFT to make deposits

that are due on or after July 1, 1997, and

relate to return periods beginning on or

after January 1, 1997. For example, a corporation to which this rule applies, and

which files its income tax returns on a calendar year basis, must use EFT to make

corporate and estimated income tax deposits that are due on or after July 1, 1997.

Thus, the corporation’s September 15,

1997, and subsequent estimated tax payments must be made by EFT.

PENALTY RELIEF

Under Notice 97–43, (1997–30 I.R.B.),

the IRS announced that no penalties for

failure to deposit by EFT will be imposed

through December 31, 1997, on any taxpayer first required to deposit by EFT on

or after July 1, 1997. These taxpayers

will remain liable for the failure-to-deposit penalty (absent reasonable cause)

under section 6656 if they fail to make a

required deposit (using either EFT o r

paper coupons) in a timely manner.

THRESHOLD FOR

JANUARY 1, 1999 MANDATE

The temporary regulations provide that

if a taxpayer’s employment tax deposits

during 1997 exceed $20,000, or, if no employment taxes are deposited, the other

taxes deposited in 1997 exceed $20,000,

the taxpayer must begin depositing by

EFT for return periods beginning on and

after January 1, 1999. Based on information available in 1994, the IRS and Treasury Department concluded that the

$20,000 threshold was necessary to assure that 94% of employment taxes and

94% of other depository taxes would be

collected by EFT in fiscal year 1999 and

subsequent years as required by section

6302(h). Based on information currently

available, the IRS and Treasury Department have concluded that the statutory requirement for 1999 and subsequent years

will be satisfied without the need to reduce the threshold below $50,000. A cc o r d i n g l y, the final regulations raise the

threshold for the January 1, 1997 through

July 28, 1997

December 31, 1997 determination period

from $20,000 to $50,000.

in threshold determinations. Payments

submitted with a return are not “deposits”

and are, therefore, not taken into account

TECHNICALCORRECTION––FIRST

in determining if a threshold has been exREQUIRED DEPOSIT

ceeded for EFT purposes.

Other commentators stated that the deThe final regulations revise the special termination period for EFT should be the

rule requiring taxpayers with no employ- same as the lookback period used in dement tax deposits to use EFT if their de- termining a taxpayer’s deposit status

posits of other taxes exceed a specified (semi-weekly or monthly) for employthreshold. As revised, the requirement to ment tax deposit purposes. This suggesdeposit by EFT “applies to all depository tion was not adopted because the looktaxes due with respect to deposit obliga- back periods for determining a taxpayer’s

tions incurred for return periods begin- deposit status with respect to employment

ning on and after the applicable effective tax vary depending upon the type of emdate.” The words “for return periods be- ployment tax being deposited (for examginning” were inadvertently omitted in ple, Form 943 and 945 depositors have a

the temporary regulations.

calendar year lookback period whereas

Form 941 depositors do not).

MISCELLANEOUS

Several commentators suggested employers need a safe harbor more generous

The definition of time deemed de than the current 98 percent rule because

posited has been revised solely for purdeposits by EFT must be initiated earlier

poses of clarity.

than current paper coupon deposits. The

Certain obsolete provisions in the temIRS and Treasury Department do not beporary regulations relating to agreements

lieve it is necessary to change the safe

entered into by the Commissioner with

harbor. EFTdepositors may use the Same

third party bulk data processors for the

Day Payment option (Electronic Tax Apperiod prior to January 1, 1995, have been

plication (ETA)) and, when using this opdeleted.

tion, are not required to initiate deposits

any earlier than paper coupon depositors.

Public Comment

Thus, EFT depositors will have as much

Some commentators asked if the IRS in- time as they have always had to determine

tends to notify each affected taxpayer of the the amount they are required to deposit.

One commentator indicated that folEFT requirement before the date on which

the taxpayer must begin depositing by EFT. lowing the ACH Holiday Schedule will

The IRS mailed several advance notices to cause problems for $100,000 next-day deeach taxpayer that became subject to the positors. The IRS and Treasury DepartE F Trequirement in 1997, and plans to pro- ment believe that the availability of ETA

vide similar notices to taxpayers required to will alleviate any problems caused by the

ACH Holiday Schedule.

begin depositing by EFT in 1998.

Another commentator noted that many

Other commentators stated that it would

be easier for taxpayers to determine securities firms that have next-day dewhether they are subject to the rules if the posits will be unable to comply with the

thresholds were based on deposit liabilities EFT deposit requirement because of the

i n c u rre d during the calendar year rather nature of the securities business. T h e

than deposits made during the calendar commentator recommends either exempty e a r. Although the specific suggestion was ing nonpayroll related income tax denot adopted, the IRS is addressing the un- posits from the EFT deposit requirement

derlying concern in other ways. The IRS or allowing the use of Fedwire on a reguwill make the threshold determination for lar basis. Since ETA includes Fedwire

a ffected taxpayers and, as indicated above, value transfers, Fedwire non-value transnotify those taxpayers, in advance, of their fers, and Direct Access transactions, and

is available for taxpayers to use on a reguobligation to begin depositing by EFT.

Some commentators suggested that the lar basis, securities firms should be able

final regulations should clarify whether to comply with the next-day deposit rule.

tax payments made with returns by check,

Another commentator suggested that a

money order, etc. are taken into account deposit by EFT should be considered

1997–30 I.R.B.

5

timely if initiated with the A u t o m a t e d

Clearing House (ACH) in a timely and

correct manner and that the taxpayer

should not be responsible for possible

ACH breakdowns. Rev. Rul. 94–46

(1994–2 C.B. 278), has been published to

address this situation. The revenue ruling

provides guidance on establishing reasonable cause for abatement of the failure-todeposit penalty in certain situations involving deposits by EFT.

A commentator suggested that the regulations should allow taxpayers to make

deposits by EFT from any institution that

has the ability to make ACH credit or

debit transfers and should not require the

taxpayers to open accounts with a Tr e asury Financial Agent. A taxpayer is not

required to open an account with a Treasury Financial Agent. The ACH debit and

ACH credit options allow a taxpayer to

make a deposit from any of the many institutions that have the ability to make

ACH credit or debit transfers.

One commentator suggested that a

$500 minimum threshold should be provided for EFT deposits. This change

would unduly complicate administration

of the rules and has not been adopted.

Some of the issues raised in comments

on the notice of proposed rulemaking published on July 11, 1994, were addressed in

changes made to the temporary regulations by T.D. 8661. These issues were discussed in the preamble to T.D. 8661 and

will not be addressed again here. In addition, several other comments that were

outside the scope of this regulations project have not been addressed here.

Special Analyses

It has been determined that this Tr e asury 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) does not

apply to these regulations, and, because

the notices of proposed rulemaking preceding the regulations were issued prior

to March 29, 1996, a Regulatory Flexibility Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, the two notices of proposed rulemaking preceding these regulations were

submitted to the Chief Counsel for Advo-

July 28, 1997

cacy of the Small Business A d m i n i s t r ation for comment on their impact on small

business.

Drafting Information

The principal author of these regulations is Vincent G. Surabian, Office of the

Assistant Chief Counsel (Income Tax &

Accounting). However, other personnel

from the IRS and Treasury Department

participated in their development.

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Amendments to the Regulations

Accordingly, 26 CFR parts 1, 31, and

40 are amended as follows:

PART1––INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by removing the citations for “Section 1.6302–1(a)”, and Sections 1.6302–1T, 1.6302–2T a n d

1.6302–3T”, and “Section 1.6302–4T”

and adding entries in numerical order to

read as follows:

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

Section 1.6302–1 also issued under 26

U.S.C. 6302(c) and (h).

Section 1.6302–2 also issued under 26

U.S.C. 6302(h).

Section 1.6302–3 also issued under 26

U.S.C. 6302(h).

Section 1.6302–4 also issued under 26

U.S.C. 6302(a) and (c). * * *

Par. 2. Section 1.6302–1 is amended as

follows:

1. The heading for paragraph (b) is revised.

2. The text of paragraph (b) is redesignated as paragraph (b)(1) and a heading

for (b)(1) is added.

3. Paragraph (b)(2) is added.

4. The OMB parenthetical at the end of

the section is removed.

The revised and added provisions read

as follows:

corporation income and estimated income

taxes and certain taxes of tax-exempt organizations by electronic funds transfer,

see §31.6302–1(h) of this chapter. A taxpayer not required to deposit by electronic

funds transfer pursuant to §31.6302–1(h)

of this chapter remains subject to the rules

of paragraph (b)(1) of this section.

§1.6302–1T [Removed]

Par. 3. Section 1.6302–1T is removed.

Par. 4. Section 1.6302–2 is amended as

follows:

1. The heading for paragraph (b) is revised.

2. Paragraph (c) is redesignated as

paragraph (b)(6).

3. Anew paragraph (c) is added.

4. The OMB parenthetical at the end of

the section is removed.

The revised and added provisions read

as follows:

§1.6302–3T [Removed]

Par. 7. Section 1.6302–3T is removed.

P a r. 8. Section 1.6302–4 is added to

read as follows:

§1.6302–4 Use of financial institutions in

connection with individual income taxes.

Voluntary payments by electronic funds

transfer. An individual may voluntarily

remit by electronic funds transfer all payments of tax imposed by subtitle A of the

Code, including any payments of estimated tax. Such payments must be made

in accordance with procedures to be prescribed by the Commissioner.

§1.6302–4T [Removed]

§1.6302–2 Use of Government deposi Par. 9. Section 1.6302–4T is removed.

taries for payment of tax withheld on non resident aliens and foreign corporations.

PART31––EMPLOYMENT TAXES

AND COLLECTION OF INCOME TAX

*

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*

*

AT SOURCE

( b ) Deposits by Federal tax deposit

Par. 10. The authority citation for Part

coupon. * * *

31

is amended by removing the entries for

(c) Deposits by electronic funds trans “Section

31.6302–1T”, and “Section

fer. For the requirement to deposit taxes

31.6302(c)–3T”

and revising the entry

withheld on nonresident aliens and foreign

“Sections

31.6302–1

through 31.6302–3”

corporations by electronic funds transfer,

and

by

adding

an

entry

for “Section

see §31.6302–1(h) of this chapter. A t a x31.6302(c)–3”

to

read

as

follows:

payer not required to deposit by electronic

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

funds transfer pursuant to §31.6302–1(h)

Sections

31.6302–1 through 31.6302–3

of this chapter remains subject to the rules

also

issued

under 26 U.S.C. 6302(a), (c),

of paragraph (b) of this section.

and (h). * * *

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*

*

*

*

Section 31.6302(c)–3 also issued under

26 U.S.C. 6302(h).

§1.6302–2T [Removed]

P a r. 11. In §31.0–1, paragraph (a) is

amended

by adding a sentence at the end

Par. 5. Section 1.6302–2T is removed.

of

the

paragraph

to read as follows:

P a r. 6. In §1.6302–3, paragraph (c) is

revised to read as follows:

§1.6302–3 Use of Government deposi §1.6302–1 Use of Government deposi - taries in connection with estimated taxes

taries in connection with corporation in - of certain trusts.

come and estimated income taxes and

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*

certain taxes of tax-exempt organizations.

(c) Cross-references. For further guid*

*

*

*

*

ance and instructions for certain banks and

(b) Manner of deposit––(1) Deposit by financial institutions acting as fiduciaries

Federal tax deposit coupon. * * *

with respect to taxable trusts, see Rev.

(b)(2) Deposits by electronic funds Proc. 89–49 (1989–2 C.B. 615), (see

transfer. For the requirement to deposit §601.601(d)(2) of this chapter) or any suc-

1997–30 I.R.B.

cessor revenue procedure. For the requirement to deposit estimated tax payments of taxable trusts by electronic funds

t r a n s f e r, see §31.6302–1(h) of this chapter.

6

§31.0–1 Introduction.

(a) * * * The regulations in this part

also provide rules relating to the deposit

of other taxes by electronic funds transfer.

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*

P a r. 12. In §31.0–3, paragraph (f) is

amended by adding a sentence at the end

of the paragraph to read as follows:

§31.0–3 Scope of regulations.

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July 28, 1997

(f) * * * Subpart G of this part also

provides rules relating to the deposit of

other taxes by electronic funds transfer.

Par. 13. In §31.6302–1, paragraph (h) is

redesignated as paragraph (i), and new

paragraph (h) is added to read as follows:

applicable effective date is January 1,

(ii) Once a taxpayer is required to de1998, or thereafter, the requirement to de- posit by electronic funds transfer pursuant

posit by electronic funds transfer applies to this paragraph (h)(2), the taxpayer must

to all deposits required to be made with continue to deposit by electronic funds

respect to deposit obligations incurred for transfer. Until such time as a taxpayer is

return periods beginning on or after the required by this section to deposit by elecapplicable effective date. In general, each tronic funds transfer, the taxpayer may

§31.6302–1 Federal tax deposit rules for applicable effective date has one 12- voluntarily make deposits by electronic

withheld income taxes and taxes under month determination period. However, funds transfer, but remains subject to the

the Federal Insurance Contributions A c t for the applicable effective date January rules of paragraph (i) of this section, per(FICA) attributable to payments made 1, 1996, there are two determination peri- taining to deposits by Federal tax deposit

after December 31, 1992.

ods. If the applicable threshold amount is (FTD) coupon, in making deposits other

exceeded in either of those determination than by electronic funds transfer.

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* *

*

*

periods, the taxpayer becomes subject to

(3) Taxes required to be deposited by

(h) Time and manner of deposit––de - the requirement to deposit by electronic e l e c t ronic funds transfer. The requireposits re q u i red to be made by electro n i c funds transfer, effective January 1, 1996. ment to deposit by electronic funds transfunds transfer––(1) In general. Section The threshold amounts, determination pe- fer under paragraph (h)(2) of this section

6302(h) requires the Secretary to prescribe riods and applicable effective dates for applies to all the taxes required to be desuch regulations as may be necessary for purposes of this paragraph (h)(2)(i)(A) posited under §§1.6302–1, 1.6302–2, and

the development and implementation of an are as follows:

1.6302–3 of this chapter; §§31.6302–1,

electronic funds transfer system to be used

for the collection of the depository taxes as T h reshold A m o u n t

Determination Period

Applicable Effective Date

described in paragraph (h)(3) of this sec$78 million

1–1–93 to 12–31–93

January 1, 1995

tion. Section 6302(h)(2) provides a phase$47 million

1–1–93 to 12–31–93

January 1, 1996

in schedule that sets forth escalating mini$47 million

1–1–94 to 12–31–94

January 1, 1996

mum percentages of those depository taxes

$50 thousand

1–1–95 to 12–31–95

July 1, 1997

to be deposited by electronic funds trans$50 thousand

1–1–96 to 12–31–96

January 1, 1998

f e r. This paragraph (h) prescribes the rules

$50 thousand

1–1–97 to 12–31–97

January 1, 1999

necessary for implementing an electronic

funds transfer system for collection of de(B) Unless exempted under paragraph 31.6302–2, 31.6302–3, 31.6302–4, and

pository taxes and for effecting an orderly (h)(5) of this section, a taxpayer that does 31.6302(c)–3; and §40.6302(c)–1 of this

and expeditious phase-in of that system.

not deposit any of the taxes imposed by chapter.

(2) T h reshold amounts, determination chapters 21, 22, and 24 during the applic(4) Definitions––(i) E l e c t ronic funds

periods, and effective dates. (i)(A) Tax- able determination periods set forth in transfer. An e l e c t ronic funds transfer is

payers whose aggregate deposits of the paragraph (h)(2)(i)(A) of this section, but any transfer of depository taxes made in

taxes imposed by Chapters 21 (Federal that does make deposits of other deposi- accordance with Revenue Procedure

Insurance Contributions Act), 22 (Rail- tory taxes (as described in paragraph 97–33, (1997–30 I.R.B.), (see

road Retirement Tax Act), and 24 (Collec- (h)(3) of this section), is nevertheless sub- §601.601(d)(2) of this chapter), or in action of Income Tax at Source on Wages) ject to the requirement to deposit by elec- cordance with procedures subsequently

of the Internal Revenue Code during a 12- tronic funds transfer if the taxpayer’s ag- prescribed by the Commissioner.

month determination period exceed the gregate deposits of all depository taxes

(ii) Taxpayer. For purposes of this secapplicable threshold amount are required exceed the threshold amount set forth in tion, a taxpayer is any person required to

to deposit all depository taxes described this paragraph (h)(2)(i)(B) during an ap- deposit federal taxes, including not only

in paragraph (h)(3) of this section by elec- plicable 12-month determination period. individuals, but also any trust, estate,

tronic funds transfer (as defined in para- This requirement to deposit by electronic partnership, association, company or corgraph (h)(4) of this section) unless ex- funds transfer applies to all depository poration.

empted under paragraph (h)(5) of this taxes due with respect to deposit obliga(5) Exemptions. If any categories of

section. If the applicable effective date is tions incurred for return periods begin- taxpayers are to be exempted from the reJanuary 1, 1995, or January 1, 1996, the ning on or after the applicable eff e c t i v e quirement to deposit by electronic funds

requirement to deposit by electronic funds date. The threshold amount, determina- t r a n s f e r, the Commissioner will identify

transfer applies to all deposits required to tion periods, and applicable eff e c t i v e those taxpayers by guidance published in

be made on or after the applicable effec- dates for purposes of this paragraph the Internal Revenue Bulletin. (See

tive date. If the applicable effective date (h)(2)(i)(B) are as follows:

§601.601(d)(2)(ii)(b) of this chapter.)

is July 1, 1997, the requirement to deposit

by electronic funds transfer applies to all T h reshold A m o u n t

Determination Period

Applicable Effective Date

deposits required to be made on or after

$50 thousand

1–1–95 to 12–31–95

January 1, 1998

July 1, 1997 with respect to deposit oblig$50 thousand

1–1–96 to 12–31–96

January 1, 1998

ations incurred for return periods begin$50 thousand

1–1–97 to 12–31–97

January 1, 1999

ning on or after January 1, 1997. If the

1997–30 I.R.B.

7

July 28, 1997

(6) Separation of deposits. A deposit

for one return period must be made separately from a deposit for another return

period.

(7) Payment of balance due. If the aggregate amount of taxes reportable on the

applicable tax return for the return period

exceeds the total amount deposited by the

taxpayer with regard to the return period,

then the balance due must be remitted in

accordance with the applicable form and

instructions.

(8) Time deemed deposited. A deposit

of taxes by electronic funds transfer will

be deemed made when the amount is

withdrawn from the taxpayer’s account,

provided the U.S. Government is the

payee and the amount is not returned or

reversed.

(9) Time deemed paid. In general, an

amount deposited under this paragraph

(h) will be considered to be a payment of

tax on the last day prescribed for filing the

applicable return for the return period (determined without regard to any extension

of time for filing the return) or, if later, at

the time deemed deposited under paragraph (h)(8) of this section. In the case of

the taxes imposed by chapters 21 and 24

of the Internal Revenue Code, solely for

purposes of section 6511 and the regulations thereunder (relating to the period of

limitation on credit or refund), if an

amount is deposited prior to April 15th of

the calendar year immediately succeeding

the calendar year that includes the period

for which the amount was deposited, the

amount will be considered paid on April

15th.

*

*

*

*

*

§31.6302–1T [Removed]

P a r. 14. Section 31.6302–1T is removed.

P a r. 15. Section 31.6302(c)–3 is

amended as follows:

1. The heading for paragraph (b) is revised.

2. Paragraph (c) is revised.

1997–30 I.R.B.

3. Paragraph (d) is added.

The revised and added provisions read

as follows:

P a r. 18. Section 40.6302(c)–1 is

amended as follows:

1. The text of paragraph (d) is redesignated paragraph (d)(1) and a paragraph

§31.6302(c)–3 Use of Government de - heading is added for (d)(1).

positaries in connection with tax under

2. Paragraph (d)(2) is added.

the Federal Unemployment Tax Act.

The added provisions read as follows:

*

*

*

*

*

(b) Manner of deposit––deposits re quired to be made by Federal tax deposit

(FTD) coupon. * * *

(c) Manner of deposit––deposits re q u i red to be made by electronic funds

transfer. For the requirement to deposit

tax under the Federal Unemployment Tax

Act by electronic funds transfer, see

§31.6302–1(h). A taxpayer not required

to deposit by electronic funds transfer

pursuant to §31.6302–1(h) remains subject to the rules of paragraph (b) of this

section.

(d) Effective date. The provisions of

paragraphs (a) and (b) of this section

apply with respect to calendar quarters

beginning after December 31, 1969. T h e

provisions of paragraph (c) of this section apply with respect to calendar quarters beginning on or after January 1,

1995.

§40.6302(c)–1 Use of Government de positaries.

*

*

*

*

*

(d) Remittance of deposits—(1) Deposits

by Federal tax deposit coupon. * * *

(2) Deposits by electronic funds trans fer. For the requirement to deposit excise

taxes by electronic funds transfer, see

§31.6302–1(h) of this chapter. Ataxpayer

not required to deposit by electronic funds

transfer pursuant to §31.6302–1(h) of this

chapter remains subject to the rules of this

paragraph (d). * * * * *

§40.6302(c)–1T [Removed]

P a r. 19. Section 40.6302(c)–1T is removed.

Michael P. Dolan,

Acting Commissioner

of Internal Revenue.

§31.6302(c)–3T [Removed]

Approved June 27, 1997.

P a r. 16. Section 31.6302(c)–3T is removed.

PART 40––EXCISE TAX PROCEDURAL REGULATIONS

Par. 17. The authority citation for part

40 is amended by revising the entry for

“Sections 40.6302(c)–1, 40.6302(c)–2,

40.6302(c)–3, and 40.6302(c)–4” and removing the entry for “Section

40.6302(c)–1T” to read as follows:

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

Section 40.6302(c)–1 also issued under

26 U.S.C. 6302(a) and (h).

Sections 40.6302(c)–2, 40.6302(c)–3, and

40.6302(c)–4 also issued under 26 U.S.C.

6302(a).

8

Donald C. Lubick,

Acting Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on July

11, 1997, 8:45 a.m., and published in the issue of the

Federal Register for July 14, 1997, 62 F.R. 37490)

26 CFR 31.6302–1: Federal tax deposit rules for

withheld income taxes and taxes under the Federal

Insurance Contributions Act (FICA) attributable to

payments made after December 31, 1992.

Information is provided to taxpayers

about the Electronic Federal Tax Payment

System (EFTPS). EFTPS is an electronic

remittance system for making federal tax

deposits and federal tax payments.

July 28, 1997

Part III. Administrative, Procedural, and Miscellaneous

Electronic Funds Transfer —

Temporary Waiver of Failure-ToDeposit Penalty for Certain Taxpayers and Request for Comments on Future Guidance

Notice 97–43

This notice provides guidance relating

to the waiver of penalties announced in

News Release IR–97–32, issued June 2,

1997. In IR–97–32, the Internal Revenue

Service announced that it will waive the

failure to deposit penalty under § 6656 of

the Internal Revenue Code for certain taxpayers first required to make federal tax

deposits by electronic funds transfer on or

after July 1, 1997. This notice also requests comments regarding possible alternatives for future amendments to §

31.6302–1(h) of the Employment Ta x e s

and Collection of Income Tax at Source

Regulations with respect to the requirement to deposit by electronic funds transfer for periods beginning after 1999.

Background

Section 6302(h)(1)(A) provides that the

Secretary will prescribe regulations necessary for the development and implementation of an electronic funds transfer

system for the collection of depository

taxes. Section 6302(h)(2) provides a

phase-in schedule for the new system.

Section 31.6302–1(h) prescribes rules

for implementing an electronic funds

transfer system for the collection of depository taxes. Under the regulation, taxpayers are required to deposit taxes by

electronic funds transfer if the amount of

their depository taxes in a specified earlier year exceeds the applicable threshold

amount. The regulation provides that taxpayers with more than $50,000 of federal

employment tax deposits in calendar year

1995 must use electronic funds transfer to

make deposits that are due on or after July

1, 1997 and relate to return periods beginning on or after January 1, 1997. For example, a corporation to which this rule

applies, and which files its income tax returns on a calendar year basis, must use

electronic funds transfer to make corporate and estimated income tax deposits

that are due on or after July 1, 1997.

Therefore, the corporation’s September

1997–30 I.R.B.

15, 1997, and subsequent estimated tax

payments must be made by electronic

funds transfer.

Section 6656(a) provides that in the

case of any failure by any person to deposit taxes on the prescribed date in an

authorized government depository, a

penalty applies unless the failure is due to

reasonable cause and not due to willful

neglect. Rev. Rul. 95–68, 1995–2 C.B.

272, provides that, absent reasonable

cause, a taxpayer that is required to deposit federal taxes by electronic funds

transfer is subject to the 10 percent failure

to deposit penalty if the taxpayer deposits

the taxes by means other than electronic

funds transfer.

Temporary Waiver of Penalty for Certain

Taxpayers

Although taxpayers with more than

$50,000 of federal employment tax deposits in calendar year 1995 are required

to make federal tax deposits electronically

on and after July 1, 1997, the Service will

not impose the 10 percent § 6656 penalty

solely for the failure to make those deposits by electronic funds transfer. However, a taxpayer will remain liable for the

failure to deposit penalty under § 6656

(absent reasonable cause) if the taxpayer

fails to make a required deposit (using either electronic funds transfer or paper

coupons) in a timely manner.

This waiver of the failure to deposit

penalty applies only to deposit obligations

incurred on or before December 31, 1997.

The penalty waiver includes deposits

made after December 31, 1997, so long as

the deposit obligation was incurred on or

before December 31, 1997.

This waiver of the failure to deposit

penalty does not apply to taxpayers that

were required to begin using electronic

funds transfer in 1995 or 1996.

Request for Comments on Future Guidance

Under § 31.6302–1(h), taxpayers that

are not currently required to use electronic funds transfer must begin making

federal tax deposits electronically in 1999

if they exceed a $50,000 threshold in

1997. Currently, § 31.6302–1(h) provides

no requirement that a new or growing taxpayer that exceeds $50,000 in annual deposits only after 1997 use electronic funds

9

transfer. In addition, a taxpayer that deposits employment taxes but never exceeds $50,000 a year in employment tax

deposits is not currently required to use

electronic funds transfer even if its deposits of other taxes have exceeded

$50,000 per year. The Service and Treasury Department intend to develop regulations that will address these matters. At

this time, two options are being considered.

The first option would be a twopronged test. If during a calendar year

determination period the taxpayer deposits more than $50,000 of the employment taxes imposed by chapters 21, 22,

and 24, or more than $50,000 of other depository taxes, the taxpayer becomes subject to the requirement to deposit electronically in the second succeeding

calendar year.

The second option would be an aggregate deposits test. If during a calendar

year determination period the taxpayer’s

aggregate deposits of all depository taxes

exceed $50,000, the taxpayer becomes

subject to the requirement to deposit electronically in the second succeeding calendar year.

The Service and Treasury Department

invite public comment on these two options and also welcome any suggestions

for a different future rule. Comments and

suggestions are requested by October 10,

1997. An original and eight copies of

written comments should be sent to:

Internal Revenue Service

Attn: CC:DOM:CORP:R

Room 5228 (IT&A:Br4)

P.O. Box 7604

Ben Franklin Station

Washington, DC 20044,

or hand delivered between the hours of

8:00 a.m. and 5:00 p.m to:

Courier’s Desk

Internal Revenue Service

Attn: CC:DOM:CORP:R

Room 5228 (IT&A:Br4)

1111 Constitution Ave., NW

Washington, DC

A l t e r n a t i v e l y, comments may be submitted electronically via the Service’s Internet site at “http://www. i r s . u s t r e a s .

gov/prod/tax_regs/comments.html”. A l l

comments will be available for public inspection and copying in their entirety.

July 28, 1997

For Further Information on Electro n i c

Funds Transfer

For information on the Treasury’s electronic funds transfer system — the Electronic Federal Tax Payment System

(EFTPS) — or to get a form to enroll in

EFTPS, call either of the two Treasury Financial Agents for EFTPS at (800) 9458400 or (800) 555-4477. Taxpayers may

also request enrollment forms by calling

the Service Distribution Center at (800)

829-3676.

Drafting Information

The principal author of this notice is

Robert J. Basso of the Office of A s s i s t a n t

Chief Counsel (Income Tax and A c c o u n ting). For further information regarding

the penalty waiver, contact Mr. Basso. For

further information regarding the comments on future guidance, contact Vi n c e n t

G. Surabian. Both can be contacted at

(202) 622-4940 (not a toll-free call).

26 CFR 601.602: Tax Forms and Instructions. (Also

Part I, § 6302; 31.6302–1.)

Rev. Proc. 97–33

CONTENTS

SECTION 1 PURPOSE

SECTION 2 BACKGROUND

SECTION 3 DEFINITIONS

SECTION 4 ENROLLMENT

SECTION 5 ASSIGNMENTTO A

FINANCIALAGENT

SECTION 6 TIMELY INITIATION

OF FTD OR FTP

SECTION 7 ACH DEBIT ENTRY

SECTION 8 ACH CREDIT ENTRY

SECTION 9 ELECTRONIC TAX

APPLICATION (ETA)

SECTION 10 PROOF OF PAYMENT

SECTION 11 REFUNDS

SECTION 12 ENROLLMENTFORMS

AND

ADDITIONAL

INFORMATION

ABOUT EFTPS

SECTION 13 EF F E C T ON OTHER

DOCUMENTS

SECTION 14 EFFECTIVE DATE

1997–30 I.R.B.

SECTION 15 IN T E R N A LREVENUE

S E RVICE OFFICE

CONTACT

SECTION 16 PAPERWORK

REDUCTION ACT

SECTION 1. PURPOSE

This revenue procedure provides taxpayers with information about the Electronic Federal Tax Payment System

(EFTPS). EFTPS is an electronic remittance processing system for making federal tax deposits (FTDs) and federal tax

payments (FTPs). EFTPS is the successor electronic funds transfer (EFT) system

to TAXLINK described in Rev. Proc.

94–48, 1994–2 C.B. 694.

SECTION 2. BACKGROUND

.01 Section 6302(c) of the Internal

Revenue Code provides that the Secretary

of the Treasury (Secretary) may authorize

Federal Reserve banks, and incorporated

banks and other financial institutions that

are depositories or financial agents of the

United States, to receive any tax imposed

under the internal revenue laws, in such

m a n n e r, at such times, and under such

conditions as the Secretary may prescribe.

Section 6302(c) also provides that the

Secretary shall prescribe the manner,

times, and conditions under which the receipt of such tax by such banks and other

financial institutions is to be treated as a

payment of such tax to the Secretary.

.02 Section 6302(h) requires the Secretary to establish an EFT system to collect

the FTDs of certain taxpayers. TA X L I N K

and its successor, EFTPS, are the EFTs y stems developed by the Secretary to collect

federal taxes. The TAXLINK system will

terminate on July 15, 1997. All taxpayers

making FTDs or FTPs by EFT must use

EFTPS after July 15, 1997.

.03 Some taxpayers are required by

regulations issued under § 6302(h) to

make FTDs using an EFT system. See

§ 31.6302–1(h)(2)(i)(A) of the Employment Taxes and Collection of Income Tax

at Source Regulations. Taxpayers not required to make FTDs using an EFT system may choose to do so voluntarily.

Taxpayers also may choose to make FTPs

using EFTPS.

.04 All taxpayers participating in

EFTPS must comply with this revenue

procedure.

10

.05 The two primary payment options in

EFTPS are an Automated Clearing House

(ACH) debit entry and an ACH credit entry.

Taxpayers may also use the Electronic Ta x

Application (ETA) to accommodate their

business requirements and meet their FTD

and FTP obligations. These payment options are described in sections 7, 8, and 9 of

this revenue procedure.

.06 Taxpayers participating in EFTPS

must ensure that their funds are remitted

on a timely basis. See § 31.6302–1(h)(8)

for rules regarding when an FTD remitted

by EFT is deemed made. In the case of

FTPs remitted by EFT, see § 31.6302–1(h)(9) for rules regarding when the tax is

deemed paid.

.07 A taxpayer required by regulations

to make an FTD by EFT may not use

Form 8109, Federal Tax Deposit Coupon,

to make an FTD. If the taxpayer is unable

to make a timely FTD using an ACH debit

entry or an ACH credit entry, the taxpayer

may use ETA to make a timely FTD. If a

taxpayer is a voluntary participant in

EFTPS (i.e., a participant not required by

regulations to make an FTD by EFT) and

is unable, for any reason, to make an FTD

using EFTPS or chooses not to use EFTPS

to make an FTD, the taxpayer may make a

timely FTD by using Form 8109.

.08 If an FTD is late, the taxpayer is

subject to the penalty for failure to timely

deposit unless the taxpayer establishes

reasonable cause for that failure. See

Rev. Rul. 94–46, 1994–2 C.B. 278.

.09 EFTPS does not change the computation of tax liability, interest or penalties,

or FTD or FTP due dates.

SECTION 3. DEFINITIONS

.01The definitions provided in this section will be used for EFTPS.

.02 A U TO M ATED CLEARING

HOUSE (ACH). “Automated Clearing

House” is a funds transfer system, governed by the ACH Rules (the Operating

Rules and the Operating Guidelines published by National Automated Clearing

House Association (NACHA)), that provides for the interbank clearing of electronic entries for participating financial

institutions.

.03 ACH CREDIT ENTRY. An “ACH

credit entry” is a transaction in which a financial institution, upon instructions from

a taxpayer, originates an FTD or FTP to

the appropriate Department of the Tr e a-

July 28, 1997

sury (Treasury) account through the ACH

system. See section 8 of this revenue procedure for a description of an ACH credit

entry.

.04 ACH DEBIT E N T RY. An “ACH

debit entry” is a transaction in which one

of the Treasury Financial Agents, upon instructions from a taxpayer, instructs the

t a x p a y e r’s financial institution to withdraw funds from the taxpayer’s account

for an FTD or FTP and to route the FTD

or FTP to the appropriate Treasury account through the ACH system. See section 7 of this revenue procedure for a description of an ACH debit entry.

.05 CASH CONCENTRATION OR

DISBURSEMENT+ TAX PAY M E N T

A D D E N D ARECORD (CCD+ TXP). T h e

“CCD+ TXP” is NACHA’s tax payment

convention that will be used to facilitate

the transmission of the tax payment information associated with an ACH credit

entry to the appropriate Financial A g e n t .

This convention consists of the CCD+

electronic funds transfer transaction and an

addenda record for tax payments identified

by the three characters, “TXP”. The A C H

T X Paddenda record includes the Ta x p a y e r

Identification Number (TIN) (i.e., E mployer Identification Number (EIN), IRS

Individual Taxpayer Identification Number

(ITIN), or Social Security Number (SSN)),

the tax type code, the tax period end date,

and the FTD or FTPamount.

.06 ELECTRONIC FUNDS TRANSFER (EFT). An “EFT” is any transfer of

funds, other than a transaction originated

by check, draft, or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument,

computer, or magnetic tape so as to order,

instruct, or authorize a financial institution or other financial intermediary to

debit or credit an account.

.07 ELECTRONIC TAX A P P L I C ATION (ETA). “ETA” (also referred to as

“Same Day Payment”) is a subsystem of

EFTPS that receives, processes, and

transmits an FTD or an FTP and the related tax payment information for taxpayers that make same day payments through

Fedwire value transfers, Fedwire

non–value transactions, and Direct A ccess transactions. See section 9 of this

revenue procedure for information on the

ETAprocess. For more information about

E TA payments, taxpayers should contact

their financial institutions.

1997–30 I.R.B.

.08 EMPLOYER IDENTIFICAT I O N

NUMBER (EIN). An “EIN” is a unique

nine digit taxpayer identifying number issued by the Internal Revenue Service to

business taxpayers for the purpose of reporting tax related information.

.09 FEDERAL R E S E RVE BANK

(FRB). The “FRB” is the U.S. Governm e n t ’s fiscal agent. The FRB also

processes ACH transactions to a commercial financial institution account or to a

Treasury account.

.10 FRB HEAD OFFICE LOCAL

ZONE TIME. “FRB Head Office Local

Zone Time” is the local zone time of the

FRB head office through which a financial

institution, or its authorized correspondent

bank, sends a same–day payment.

. 11 FINANCIAL A G E N T. For purposes of EFTPS, a “Financial Agent” (also

referred to as a “Treasury Financial

Agent”) is a financial institution that is

designated as an agent of Tr e a s u r y. T h e

Secretary has designated NationsBank and

First National Bank of Chicago (First

Chicago) to be the Financial Agents for

EFTPS. A Financial Agent processes

EFTPS enrollments, receives FTD and

F T Pinformation, originates ACH debit entries upon instructions from taxpayers, and

provides customer service assistance for

EFTPS enrollment and payment information.

.12 IRS INDIVIDUAL TA X PAY E R

I D E N T I F I C ATION NUMBER (ITIN).

An “ITIN” is a taxpayer identifying number issued by the Service to an alien individual who is ineligible to receive an SSN

for the purpose of reporting tax related information.

.13

PRENOTIFICATION A C H

C R E D I T. “Prenotification ACH credit” is

a process whereby a taxpayer’s financial

institution originates a zero dollar entry to

the appropriate Treasury Routing Tr a n s i t

Number (RTN) to verify the Tr e a s u r y

RTN, the Tr e a s u r y ’s account number, and

the taxpayer’s TIN. See section 8.02 of

this revenue procedure.

.14 PRENOTIFICATION A C H

DEBIT. “Prenotification ACH debit” is a

process whereby the appropriate Financial Agent originates a zero dollar entry to

the taxpayer’s financial institution to verify the RTN of the taxpayer’s financial institution, the taxpayer’s account number,

and the account type. See section 4.03 of

this revenue procedure.

11

.15 TA X PAYER IDENTIFICAT I O N

NUMBER (TIN). A “TIN” is a taxpayer

identifying number assigned to a taxpayer for

the purpose of reporting tax related information. ATIN includes an EIN, ITIN, or SSN.

SECTION 4. ENROLLMENT

.01 An EFTPS applicant should submit

its completed Form 9779, EFTPS Business

Enrollment Form, or Form 9783, EFTPS

Individual Enrollment Form, to the EFTPS

Enrollment Processing Center at the address provided in the applicable form instructions at least ten weeks in advance of

the first FTD or FTP due date for which it

intends to use EFTPS. As part of completing the enrollment form, the taxpayer may

choose to use the ACH debit entry and/or

ACH credit entry payment option(s). See

section 7 of this revenue procedure for information on the ACH debit entry payment

option, and section 8 for information on

the ACH credit entry payment option.

.02 A taxpayer may request an enrollment form by calling a Financial Agent at

one of the numbers listed in section 12.01

of this revenue procedure or the IRS Distribution Center at (800) TA X – F O R M

((800) 829–3676). A taxpayer should request an enrollment form at least four

weeks in advance of the time the form

needs to be submitted.

.03 The Financial Agent will verify the

accuracy of the enrollment information

and enter the verified enrollment information in its enrollment record database. As

part of the verification process for those

taxpayers who choose the ACH debit

entry, the Financial Agent will originate a

prenotification ACH debit.

.04 When the enrollment process is

completed, the Financial Agent will notify

the taxpayer that it is enrolled in EFTPS by

sending the taxpayer a Form 9787, Business Confirmation/Update Form, or Form

9789, Individual Confirmation/Update

Form and an EFTPS Payment Instruction

Booklet that will contain information on

ACH credit and debit transactions, and information on ETA under the heading

“Same Day Payments.” APersonal Identification Number (PIN) will be mailed to

the taxpayer separately from the enrollment confirmation package.

.05 If a taxpayer attempts to make an

FTD or FTPthrough EFTPS before the taxpayer receives Form 9787 or Form 9789,

the FTD or FTP generally will be rejected

July 28, 1997

and the taxpayer may be subject to a

penalty for a late FTD or FTP. Further, a

taxpayer cannot make an FTD or FTPu s i n g

an ACH debit transaction without a PIN.

SECTION 5. ASSIGNMENTTO A

FINANCIALAGENT

Each Financial Agent has responsibility

for certain geographic locations as listed

below. A taxpayer’s assignment to a Financial Agent is based on the location of

the principal financial institution that will

be electronically transmitting FTDs

and/or FTPs for the taxpayer.

NationsBank

First Chicago

(800) 555-4477

(800) 945-8400

Alabama

Alaska

American Samoa

California (except

Los Angeles,

Arizona

Orange, San

Arkansas

Bernardino, RiverCalifornia (Los

side, San Diego, and

Angeles, Orange,

Imperial counties)

San Bernardino,

Colorado

Riverside, San

Connecticut

Diego, and Impe- Hawaii

rial counties only) Idaho

Commonwealth of Illinois

the Northern

Indiana

Mariana Islands

Iowa

Commonwealth of Kansas

Puerto Rico

Maine

Delaware

Massachusetts

District of Columbia Michigan

Florida

Minnesota

Georgia

Missouri

Guam

Montana

Kentucky

Nebraska

Louisiana

New Hampshire

Maryland

New Jersey

Mississippi

New Yo r k

Nevada

North Dakota

New Mexico

Oregon

North Carolina

Rhode Island

Ohio

South Dakota

Oklahoma

Utah

Pennsylvania

Vermont

South Carolina

Washington

Tennessee

Wisconsin

Texas

Wyoming

Vi rgin Islands

Foreign countries

Virginia

West Vi rg i n i a

SECTION 6. TIMELY INITIATION OF

FTD OR FTP

.01 A taxpayer must ensure that the

FTD or FTP is timely made. Publication

1997–30 I.R.B.

509, Tax Calendars, lists the due dates for

FTDs and FTPs.

.02 Ataxpayer choosing the ACH debit

entry payment option may access the

EFTPS Voice Response System 24 hours

a day, seven days a week, or use the PC

Tax Payment software application. Howe v e r, the taxpayer must initiate its A C H

debit entry payment before 8:00 p.m.

Eastern Time of the last business day

prior to the FTD or FTP due date.

.03 A taxpayer choosing the A C H

credit entry payment option must determine whether its financial institution offers the ACH credit entry payment option

and when the taxpayer must initiate an

ACH credit entry that will settle on or before the FTD or FTP due date.

SECTION 7. ACH DEBIT ENTRY

.01 To initiate a timely ACH debit

entry, a taxpayer must contact the Financial Agent by 8:00 p.m. Eastern time of

the last business day prior to the FTD or

FTP due date. A business taxpayer may

arrange an ACH debit entry up to 30 calendar days in advance of the due date. An

individual taxpayer may arrange an ACH

debit entry up to 105 calendar days in advance of the due date.

.02 In order to initiate an ACH debit

entry, a taxpayer must furnish the Financial Agent with the taxpayer’s TIN and

PIN. The Service does not have access to

the taxpayer’s PIN and, therefore, cannot

initiate an ACH debit entry from the taxpayer’s account.

.03 After a taxpayer initiates an ACH

debit entry, the Financial Agent will validate the payment information and issue an

acknowledgment number to the taxpayer.

The acknowledgment number verifies

when the necessary payment information

was received by a Financial Agent but

does not constitute proof of payment. See

section 10 of this revenue procedure regarding proof of payment.

.04 Pursuant to the taxpayer’s instructions, the Financial Agent, on the date

designated by the taxpayer, will instruct

the taxpayer’s financial institution to originate the transfer of funds from the taxp a y e r’s account to the appropriate Tr e asury account. The Financial Agent also

will transmit the related payment data,

supplied by the taxpayer, to the Service

for posting to the taxpayer’s account(s).

12

.05 The Service will deem an A C H

debit entry to have been made at the time

of the debit (i . e ., when the amount is

withdrawn from the taxpayer’s account

and not returned or reversed).

.06 When a timely ACH debit entry

cannot be made, a taxpayer may instruct

the Financial Agent to complete the transaction at the next opportunity to submit an

ACH debit entry. The taxpayer may also

use the ACH credit entry payment option

or ETA. See section 8 of this revenue

procedure regarding the use of an A C H

credit entry and section 9 regarding the

use of ETA. A taxpayer that is not required to use EFT for FTDs may use the

paper FTD coupon system. To avoid

penalties, the FTD or FTP must be received by an appropriate means on or before the FTD or FTP due date.

.07 The ACH Rules will govern A C H

debit entry returns and reversals.

SECTION 8. ACH CREDIT ENTRY

.01 If a taxpayer chooses the A C H

credit entry payment option to make an

FTD or FTP, the taxpayer may use any financial institution capable of originating

an ACH credit entry.

.02 For each TIN used by a taxpayer in

making an FTD or FTP by an ACH credit

entry, the taxpayer should request that its

financial institution originate a prenotification ACH credit. See section 3.13 of

this revenue procedure. The taxpayer’s

financial institution should not originate

an ACH credit entry until the financial institution has successfully completed the

prenotification process. A prenotification

ACH credit will verify the taxpayer information in the T X P addenda record,

thereby minimizing the possibility that an

ACH credit entry will be rejected.

.03 If the prenotification ACH credit is

rejected, the financial institution should

not originate an ACH credit entry for the

taxpayer until the financial institution has

successfully completed the prenotification process.

.04 To initiate a timely ACH credit

e n t r y, a taxpayer must take into account

its financial institution’s deadline for originating an ACH credit entry.

.05 If the taxpayer timely and accurately requests an ACH credit entry, the

taxpayer’s financial institution is responsible for the timely origination of the

ACH credit entry with the appropriate

July 28, 1997

Treasury account number and the correct

format.

.06 When a timely ACH credit entry

cannot be made, a taxpayer may instruct

the financial institution to complete the

transaction at the next opportunity to submit an ACH credit entry or use ETA. The

taxpayer may also initiate an ACH debit

entry if enrolled for that payment option.

See section 7 of this revenue procedure

regarding the use of an ACH debit entry

and section 9 regarding the use of ETA .

A taxpayer that is not required to use EFT

for FTDs may use the paper FTD coupon

system. To avoid penalties, the FTD or

FTP must be received by an appropriate

means on or before the FTD or FTP due

date.

.07 The Financial Agent will receive

and process the ACH credit entry information. The Financial Agent will compare the transaction’s remittance detail in

the CCD+ T X P addenda with the taxp a y e r’s enrollment record data. If they

match, the Financial Agent will send the

FTD or FTP information to the Service

for posting to the taxpayer’s account(s).

.08 If the Financial Agent cannot identify the taxpayer, the ACH credit entry

will be returned to the originating financial institution.

.09 Failure to provide correct, complete, and properly formatted information

may cause an ACH credit entry to be returned. In the event of a return, a taxpayer may instruct the financial institution to submit a corrected ACH credit

entry at the next opportunity or use ETA.

The taxpayer may also initiate an A C H

debit entry if enrolled for that payment

option. A taxpayer that is not required to

use EFT may also use the paper FTD

coupon system.

.10 An ACH credit entry that is not returned or reversed will be deemed made

at the time that the funds are paid into the

appropriate Treasury account.

. 11 The ACH Rules will govern A C H

credit entry returns and reversals.

.02 After the EFTPS enrollment

process is completed, the Financial Agent

will send the taxpayer an EFTPS Payment

Instruction Booklet that includes additional ETA information under the heading

“Same Day Payments.”

.03 The Service generally will deem an

ETA payment to have been made on the

date the payment is received by the FRB.

Taxpayers should contact their financial

institutions to determine their deadline for

initiating ETA payments for a particular

day. ETA payments received by the FRB

after the deadline set forth in the Treasury

Financial Manual, Volume IV (IV TFM),

will be recorded as received the following

business day. Currently, the deadline in

IV TFM is 2:00 p.m. FRB Head Off i c e

Local Zone Time. If a payment is not accepted, the payment must be re-originated

using ETA or any other permissible payment method.

SECTION 9. ELECTRONIC TAX

APPLICATION (ETA)

SECTION 11. REFUNDS

.01 Taxpayers may use ETA(as defined

in section 3.07) to make a timely FTD or

F T P. Taxpayers should contact their financial institution to determine if the financial institution is capable of making an

ETApayment.

1997–30 I.R.B.

SECTION 10. PROOF OF PAYMENT

.01 For an ACH debit or credit entry, a

statement prepared by the taxpayer’s financial institution showing a transfer (that

is, a decrease to the taxpayer’s account

balance) will be accepted as proof of payment if the statement:

(1) shows the amount and the date of

the transfer; and

(2) identifies the U.S. Government as

the payee.

.02 For an ETApayment, taxpayers may

request that their financial institution obtain

a statement from the FRB that executed the

t r a n s f e r. This statement will be accepted as

proof of payment if the statement:

(1) shows the amount and the date of

the transfer; and

(2) identifies the U.S. Government as

the payee.

.03 For purposes of this section, statements prepared by a financial institution

include statements prepared by a third

party that is contractually obligated to prepare statements for the financial institution.

No refunds of FTDs or FTPs will be

made through EFTPS. However, a refund

request may be made using existing tax

refund procedures. If a taxpayer’s error

results in a significant hardship, the taxpayer may contact the Service at (800)

829-1040 for assistance.

13

SECTION 12. ENROLLMENT FORMS

AND ADDITIONAL INFORMATION

ABOUT EFTPS

.01 Taxpayers may obtain enrollment

forms and additional information by calling EFTPS Customer Service at (800)

945-8400 (First Chicago) or (800) 5554477 (NationsBank). Taxpayers may also

request enrollment forms by calling the

IRS Distribution Center at (800) TA X FORM ((800) 829-3676).

.02 Financial institutions that would

like additional information about EFTPS

may write to:

Financial Services Division

Financial Management Service

401 14th Street, SW, 3rd Floor

Washington, DC 20227

or may call (202) 874–6580 (not a

toll–free number).

SECTION 13. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 94–48 is obsoleted for FTDs

or FTPs made after July 15, 1997.

SECTION 14. EFFECTIVE DATE

This revenue procedure is effective on

July 11,1997.

SECTION 15. PAPERWORK

REDUCTION ACT

The collections of information contained in this revenue procedure have been

reviewed and approved by the Office of

Management and Budget in accordance

with the Paperwork Reduction Act (44

U.S.C. 3507) under control number

1545–1546.

An agency may not conduct or sponsor,

and a person is not required to respond to,

a collection of information unless the collection of information displays a valid

control number.

The collections of information in this

revenue procedure are in section 10 of this

revenue procedure. This information is required to implement EFTPS, and verify

that taxpayers have met their obligations to

pay their taxes and make FTDs by EFT.

This information will be used to credit taxp a y e r s ’accounts for FTDs and FTPs made

through EFTPS. The collections of information in section 10 of this revenue procedure are mandatory. The likely respondents are individuals, state or local

governments, farms, business or other

July 28, 1997

for–profit institutions, federal agencies or

employees, nonprofit institutions, and

small businesses or organizations.

In 1999, the estimated total annual reporting and recordkeeping burden will be

690,000 hours.

The estimated annual burden per respondent and recordkeeper will vary from

15 minutes to 45 minutes, depending on

individual circumstances, with an estimated average of 30 minutes. The estimated number of respondents and recordkeepers is 1,380,000.

The estimated annual frequency of responses is on occasion.

Books or records relating to a collection of information must be retained as

long as their contents may become material in the administration of any internal

revenue law. Generally tax returns and

tax return information are confidential, as

required by 26 U.S.C. 6103.

NOTE:

Following is a list of related instructions

and forms for filing Information Returns

Magnetically/Electronically:

1997 Instructions for Forms 1099,

1098, 5498, and W–2G

Form 4419 — Application for Filing

Information Returns Magnetically/

Electronically

Form 4804 — Transmittal of Information Returns Reported Magnetically/Electronically

Form 4802 — Transmittal of Information Returns Reported Magnetically/Electronically (Continuation)

Form 8508 — Request for Wa i v e r

From Filing Information Returns on

Magnetic Media (Forms W – 2 ,

W–2G, 1042–S, 1099 Series, 5498,

and 8027)

Form 8809 - Request for Extension

of Time To File Information Returns

(For Forms W–2, W–2G, 1042–S,

1098, 1099, and 5498)

Notice 210 — Preparation Instructions for Media Label

Rev. Proc. 97–34

Use this revenue procedure to prepare

Tax Year 1 9 9 7 information returns for

submission to Internal Revenue Service

(IRS) using any of the following:

1997–30 I.R.B.

— Magnetic Tape

— Tape Cartridge

— 8mm, 4mm, and Quarter Inch Cartridges

— 5 1/4-inch Diskette

— 3 1/2-inch Diskette

— Electronic Filing

— (Bisynchronous)

— (Asynchronous)

Caution to filers:

Format changes to accommodate Ye a r

2000 will occur for TY98 in calendar year

1999.

Treasury has mandated that all electronic year dates exchanged with non-IRS

o rganizations, both government and private, both input and output, shall adhere

to the following:

—All Gregorian date formats will be

in the format ‘YYYYMMDD’.

— All other year date formats (e.g.,

Julian, Tax Period, Cycle Dates)

will expand representations from

2-digit year to 4-digit year: ‘YYYY’.

In compliance with Year 2000 changes,

the current bisynchronous electronic filing communications package will be

changed in the future.

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. Purpose

Section 2. Nature of Changes - Current

Year (Tax Year 1997)

Section 3. Where to File and How to

Contact the IRS, Martinsburg

Computing Center

Section 4. Filing Requirements

Section 5. Form 8508, Request for

Waiver from Filing Information Returns on Magnetic

Media

Section 6. Vendor List

Section 7. Form 4419, Application for

Filing Information Returns

Magnetically/Electronically

Section 8. Test Files

Section 9. Filing of Information Re-

14

Section 10.

Section 11.

Section 12.

Section 13.

Section 14.

Section 15.

Section 16.

Section 17.

Section 18.

Section 19.

turns Magnetically/Electronically and Retention Requirements

Due Dates

Extensions of Time

Processing of Information

Returns Ma g n e t i c a l l y /

Electronically

Corrected Returns

Taxpayer Identification

Number (TIN)

Effect on Paper Returns and

Statements to Recipients

Combined Federal/State Filing Program

Definition of Terms

State Abbreviations

Major Problems Encountered

Part B. Magnetic Media

Specifications

Section 1. General

Section 2. Tape Specifications

Section 3. Tape Cartridge Specifications

Section 4. 8mm, 4mm, and Quarter

Inch Cartridge Specifications

Section 5. 5 1/4-inch and 3 1/2-inch

Diskette Specifications

Section 6. P a y e r / Transmitter “A”

Record — General Field

Descriptions

Section 7. P a y e r / Transmitter “A”

Record — Record Layout

Section 8. Payee “B” Record — General

Field Descriptions and

Record Layouts

Section 9. End of Payer “C” Record —

General Field Descriptions

and Record Layout

Section 10. State Totals “K” Record —

General Field Descriptions

and Record Layout

Section 11. End of Transmission “F”

Record — General Field

Descriptions and Record

Layout

Part C. Bisynchronous (Mainframe)

Electronic Filing

Specifications

Section 1. General

Section 2. Electronic Filing Approval

Procedure

July 28, 1997

Section 3. Test Files

Section 4. Electronic Submissions

Section 5. Transmittal Requirements

Section 6. IBM 3780 Bisynchronous

Communication Specifications

Section 7. Bisynchronous Electronic

Filing Record Specifications

Part D. Asynchronous (IRP–BBS)

Electronic Filing

Specifications

Section 1. General

Section 2. Electronic Filing Approval

Procedure

Section 3. Test Files

Section 4. Electronic Submissions

Section 5. Transmittal Requirements

Section 6. Information Reporting Program Bulletin Board System

(IRP-BBS) Specifications

Section 7. IRP-BBS First Logon Procedures

Part E. Magnetic/Electronic

Specification for

Extensions of Time

Section 1. General

Section 2. Magnetic Tape, IBM 3480/

3490, AS400 Compatible

Tape Cartridge, AS400 8mm

Tape Cartridge, 5 1/4- and

3 1/2 -inch Diskette, and

Electronic Specifications

Section 3. Record Layout

Part F. Miscellaneous Information

Section 1. Addresses for Martinsburg

Computing Center

Section 2. Telephone Numbers for

Contacting IRS/MCC

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 25402

1997–30 I.R.B.

(p) Form 5498–MSA, Medical Savings Account Information.

.01 The purpose of this revenue proce(q) Form W–2G, Certain Gambling

dure is to provide the specifications for filWinnings.

ing Forms 1098, 1099 series, 5498,

.02 Specifications for filing Forms W5498–MSA, and W–2G electronically or

2

on

magnetic media are available from

on magnetic media, which includes 1/2the

Social

Security Administration (SSA)

inch magnetic tape; IBM 3480, 3490 or

o

n

l

y.

Filers

can call 1-800-SSA-1213 to

AS400 compatible tape cartridges (includobtain

the

phone

number of the SSA

ing 8mm); or 5 1/4- and 3 1/2-inch

Magnetic

Media

Coordinator

for their

diskettes with IRS. IRS/MCC has disarea.

continued processing 8-inch diskettes.

.03 The Internal Revenue Service,

This revenue procedure must be used for

M

a r t i n s b u rg Computing Center

the preparation of Tax Year 1997 informa(IRS/MCC)

has the responsibility for protion returns and information returns for

cessing

Forms

1098, 1099 series, 5498,

years prior to 1997 that are required to be

5498–MSA,

and

W–2G filed magnetically

filed. This revenue procedure must be

or

electronically.

IRS/MCC does n o t

used to prepare current and prior year inprocess

Forms

W–2.

Paper and/or magformation returns filed between January 1,

netic

media

for

Forms

W–2 must be sent

1998, and December 31, 1998. Specificato

SSA.

IRS/MCC

does, however,

tions for filing the following forms are

process

waiver

requests

(Form 8508), excontained in this revenue procedure.

tension

of

time

to

file

requests (Form

(a) Form 1098, Mortgage Interest

8809)

for

Forms

W–2

and

requests for exStatement.

tension

of

time

to

file

the employee

(b) Form 1099–A, Acquisition or

copies

of

W–2G.

Abandonment of Secured Prop.04 Generally, the box numbers on the

erty.

paper

forms correspond with the amount

(c) Form 1099–B, Proceeds From

codes

used to file magnetically/electroniBroker and Barter Exchange

cally;

however,

if discrepancies occur, the

Transactions.

instructions

in

this revenue procedure

(d) Form 1099–C, Cancellation of

govern.

Debt.

.05 This revenue procedure also pro(e) Form 1099–DIV, Dividends and

vides

the requirements and specifications

Distributions.

for

magnetic

media or electronic filing

(f) Form 1099–G, Certain Governunder

the

Combined

Federal/State Filing

ment Payments.

Program.

(g) Form 1099–INT, Interest Income.

.06 The following revenue procedures

(h) Form 1099–LTC, Long-Term

C a re and Accelerated Death and publications provide more detailed filing procedures for certain other informaBenefits.

(i) Form 1099–MISC, Miscella- tion returns.

(a) 1997 “Instructions for Forms

neous Income.

1099, 1098, 5498, and W – 2 G ”

(j) Form 1099–MSA, Distributions

provides specific instructions on

F rom Medical Savings A c completing and submitting inforcounts.

mation

returns to IRS.

(k) Form 1099–OID, Original Issue

(b) R e v. Proc. 84–33, 1984–1 C.B.

Discount.

502, regarding the optional

(l) Form 1099–PATR, Taxable Dismethod for agents to report and

tributions Received From Coopdeposit

backup withholding.

eratives.

(

c

)

Publication

1179, Rules and

(m) Form 1099–R, Distributions

Specifications

for Private PrintFrom Pensions, Annuities, Reing

of

Substitute

Forms 1096,

tirement or Profit-Sharing Plans,

1098, 1099 Series, 5498, and

IRAs, Insurance Contracts, etc.

W–2G.

(n) Form 1099–S, Proceeds From

Real Estate Transactions.

(d) Publication 1239, Specifications

for Filing Form 8027, Em(o) Form 5498, IRA, SEP, or

p l o y e r’s Annual Information ReSIMPLE Retirement Plan Information.

turn of Tip Income and A l l ocated

Sec. 1. Purpose

15

July 28, 1997

Tips, on Magnetic Tape and 5

1/4- or 3 1/2-inch Diskettes.

(e) Publication 1187, Specifications

for Filing Form 1042–S, Foreign Person’s U.S. Source Income Subject to Wi t h h o l d i n g ,

Electronically or on Magnetic

Tape, and 5 1/4- or 3 1/2-inch

Diskettes.

(f) Publication 1245, Specifications

for Filing Form W-4, Emp l o y e e ’s Withholding A l l o w a n c e

Certificate, on Magnetic Ta p e ,

and 5 1/4- or 3 1/2-inch Diskette.

(g) R e v. Proc. 97–25, specifications

set forth for the magnetic or electronic filing of 1997 Form 8851,

Summary of Medical Savings

Accounts, Magnetically/Electronically.

.07 This revenue procedure supersedes

Rev. Proc. 96–36 published as Publication

1220 (Rev. 7–96), Specifications for Filing Forms 1098, 1099 series, 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 1997)

.01 In this publication, all pertinent

changes for Tax Year 1997 have been emphasized by using italics. This has been

done to assist 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 96 to 97) unless reporting prior year

data.

(2) In Part B, Sec. 6, the Type of Return

Codes, Field Position 22 of the Payer “A”

Record, have been expanded to include

new forms 1099–LTC, 1099–MSA, and

5498–MSA. The Type of Return Codes

are T for Form 1099–LTC, M for

1099–MSA, and K for Form 5498–MSA.

(3) In Part B, Sec. 6, for Form 1099–C,

Amount Code 4 (Penalties, fines, or administrative costs included in A m o u n t

Code 2) has been deleted from Field Positions 23–31 of the Payer “A” Record.

(4) In Part B, Sec. 6, for the new Form

1997–30 I.R.B.

1 0 9 9 – LTC (Type of Return Code T ) ,

Amount Codes 1 (Gross long-term care

benefits paid) and 2 (Accelerated death

benefits paid) have been added to Field

Positions 23–31 of the Payer “A” Record.

(5) In Part B, Sec. 6, for the new Form

1 0 9 9 – M S A ( Type of Return Code M),

Amount Codes 1 (Gross distribution) and

2 (Earnings on excess contributions) have

been added to Field Positions 23–31 of

the Payer “A” Record.

(6) In Part B, Sec. 6, for Form 5498, Tw o

Amount Codes have been added, A m o u n t

Code 6 (SEP contributions) and A m o u n t

Code 7 (SIMPLE contributions) in Field

Positions 23–31 of the Payer “A” Record.

(7) In Part B, Sec. 6, for the new Form

5 4 9 8 – M S A ( Type of Return Code K),

Amount Codes 1 (Employee MSA contributions made in 1997 and 1998 for 1997),

2 (Total MSA contributions made in

1997), and 3 (Total MSA contributions

made in 1998 for 1997), 4 (MSA rollover

contributions not included in A m o u n t

Code 1, 2, or 3) and 5 (Fair market value

of account) have been added to Field Positions 23–31 of the Payer “A” Record.

(8) In Part B, Sec. 6, the Payer City,

State, and Zip Code field in Positions

171–210 of the Payer “A” Record have

been broken down into three separate

fields.

(9) In Part B, Sec. 6, for the convenience of the filer, an optional field has

been added for the Payer’s Phone Number

and Extension in Field Positions 371–385

of the Payer “A” Record.

b. Payee “B” Record Changes:

(1) For all forms, Payment Year, Field

Positions 2–3 must be incremented by one

(from 96 to 97) unless reporting prior year

data.

(2) In Part B, Sec. 8, for the Form

1099–MSA, Distribution Codes 1 (Normal distribution), 2 (Excess contributions), 3 (Disability), 4 (Death), and 5

(Prohibited transaction) have been added

to Field Positions 4 and 5 of the Payee

“B” Record.

(3) In Part B, Sec. 8, for the Form

1099–R, Distribution Codes L ( L o a n s

treated as deemed distributions under section 72(p)) and S (Early distribution from

a SIMPLE IRA in first 2 years, no known

exception) have been added to Field Positions 4 and 5 of the Payee “B” Record.

(4) In Part B, Sec. 8, for the Form

1099–R, the IRA/SEP Indicator in Field

16

Position 44 of the Payee “B” Record has

been expanded from IRA/SEP t o

IRA/SEP/SIMPLE. This field will be

used exclusively for the Form 1099–R.

(5) In Part B, Sec. 8, for the Form 5498,

IRA, SEP, and SIMPLE Indicators have

been added in Field Positions 141–143.

(6) In Part B, Sec. 8(1), Form 1099MSA and Form 5498–MSA have been

added to the standard Record Layout Positions 322–420.

(7) In Part B, Sec. 8(5), the Record Layout Positions 322–420 of the Payee “B”

Record are given for Form 1099–LTC to

include the following fields:

(a) A Type of Payment Indicator has

been added to Field Position 322

of the Payee “B” Record with indicators of 1 (Per diem) and 2

(Reimbursed amount).

(b) The Social Security Number of

the Insured has been added to

Field Positions 323–331 of the

Payee “B” Record.

(c) The Name of the Insured has

been added to Field Positions

332–371 of the Payee “B”

Record.

(d) The Address of the Insured has

been added to Field Positions

3 7 2 – 4 11 of the Payee “B”

Record.

(e) A Status of Illness Indicator has

been added for Field Position 412

of the Payee “B” Record with indicators of 1 (Chronically ill) and

2 (Terminally ill).

(f) A Date of Doctor’s Certification

has been added in Field Positions

413–418 of the Payee “B”

Record.

.03 Other Programming Changes

(a) In Part E, Sec. 3, in the record layout for the Magnetic/Electronic Specifications for Extensions of Time, the Document Indicators in Field Position 175

have been expanded to include Forms

1099–LTC, 1099–MSA, and 5498–MSA.

.04 Editorial Changes—General

(a) A note has been added advising filers that date fields will be expanded in Ta x

Year 1998 in preparation for Year 2000.

(b) The title of the Form 5498 has been

changed from Individual Retirement

Arrangement Information to IRA, SEP, or

SIMPLE Retirement Plan Information.

The new title appears in the list of forms

July 28, 1997

in Part A, Sec. 1.01 and throughout the

publication.

(c) Three new forms have been added

for TY97 processing: Form 1099–LT C ,

L o n g - Term Care and Accelerated Death

Benefits, Form 1099–MSA, Distributions

From Medical Savings Accounts, and

Form 5498–MSA, Medical Savings A ccount Information. The new forms are included in the list of forms in Part A, Sec.

1.1 and throughout the publication. Filers

are advised throughout the publication that

the new forms cannot be filed under the

Combined Federal/State Filing Program.

(d) AZIP code change has occurred for

the Martinsburg Computing Center. For

all Martinsburg Computing Center addresses containing a post office box, the

ZIPcode has been changed from 25401 to

25402. The changes will appear in Part

A, Sec. 3.01, Part C, Sec. 2.02(c) and (e),

Part D, Sec. 5.04, and Part F, Sec. 1. The

ZIP code for the street address (Route 9

and Needy Road) of the Martinsburg

Computing Center remains 25401.

(e) In Part A, Sec. 4.01, under Filing

Requirements, filers are encouraged to file

magnetically/electronically even though

the number of returns being filed is less

than the filing requirement of 250 or more.

(f) In Part A, Sec. 6.02, filers are advised

that the most current version of the Ve n d o r

List (Pub. 1582) will not be printed. It will

be available for reading or downloading

from the Information Reporting ProgramBulletin Board System (IRP-BBS).

(g) In Part A, Sec. 7.10, information

has been added to advise filers that multiple Transmitter Control Codes (TCCs)

will only be issued to a payer with multiple TINs, one TCC per TIN.

(h) In Part A, Sec. 9.10, filers are advised to create a self-adhesive label with

the required information to attach to each

tape, cartridge, or diskette.

(i) In Part A, Sec. 9.11, filers are advised to attach a label that states “IRB,

Box __of__” to the outside of the shipping container.

(j) In Part A, Sec. 10, filers are advised

that, since the due dates for Tax Year 1997

fall on weekends, information returns, recipient copies, and participant copies will

be treated as timely if filed or furnished

on the next business day after the particular due date.

(k) In Part A, Sec. 10.04, filers are advised that the timely mailing rule now applies to designated private delivery services.

1997–30 I.R.B.

(l) In Part A, Sec. 16, in Table 2. Dollar

Criteria for State Reporting, the dollar criteria for the state of Idaho has been corrected.

(m) In part A, Sec. 17, Definition of

Terms, ITIN (Individual Taxpayer Identification Number) has been added. ITIN

has also been added to Part B, Sec. 6,

Type of TIN, Field Position 14 of the

Payee “B” Record.

(n) In Part B, Sec. 6, for the Form

1099-PATR, the titles of Amount Codes 7

and 8 in Field Positions 23–31 of the

Payer “A” Record have been changed.

The title of Amount Code 7 has been

changed from Energy investment credit to

Investment credit. The title of A m o u n t

Code 8 has been changed from Jobs credit

to Work opportunity credit.

(o) In Part B, Sec. 6, for Form 5498,

Amount Code 2 has been changed from

Rollover IRA contributions to IRA, SEP,

or SIMPLE rollover contributions in Field

Positions 23-31 of the Payer “A” Record.

(p) In Part B, Sec. 8, for Document Specific/Distribution Codes, Field Positions

4–5 of the Payee “B” Record, information

has been added to clarify that this field is

only required for 1099–MISC if Crop Insurance Proceeds are being reported.

.05 Editorial Changes—Magnetic

Media Specifications

(a) In Part B, Sec. 4.01(a)(7), filers are

advised to place the end of transmission

“F” Record at the end of the last cartridge

only, for files with multiple cartridges.

(b) In Part B, Sec. 4.02(d), filers are advised that for 8mm tape cartridge, the

S AVE OBJECT COMMAND is not acceptable.

(c) In Part B, Sec. 4.07, filers are now

advised that 4mm cassettes are an acceptable form of media. Specifications are

provided.

(d) In Part B, Sec. 4.08, filers are now

advised that Quarter Inch Cartridges

(QIC) are an acceptable form of media.

Specifications are provided.

(e) In Part B, Sec. 05.01(b), for 5 1/4inch diskettes created on a System 36 or

AS400, specific save commands are provided as well as EBCDIC specifications.

(f) In Part B, Sec. 6, for Form 1099–G,

Field Positions 23–31 of the Payer “A”

Record, Amount Code 4, for Federal income tax withheld, has been expanded to

include requested withholding on unemployment compensation, Commodity

17

Credit Corporation loans, or certain crop

disaster payments.

Sec. 3. Where to File and How

to Contact the IRS, Martinsburg

Computing Center

.01 All information returns filed magnetically or electronically are processed at

IRS/MCC. Files containing information

returns, requests for IRS magnetic media

and electronic filing information, undue

hardship waivers, and requests for extension of time to file returns or to furnish

the statements to recipients are to be sent

to the following addresses:

✉

If by Postal Service:

IRS-Martinsburg Computing Center

Information Reporting Program

P. O. Box 1359, MS-360

Martinsburg, WV 25402-1359

or if by private delivery service:

IRS-Martinsburg Computing Center

Information Reporting Program

Route 9 and Needy Road, MS-360

Martinsburg, WV 25401

☞ Note: The ZIPcode has changed

from 25401-1359 to 25402-1359 for the

IRS P.O. Box addresses for Martinsburg, WV.

.02 Send a magnetically filed extension

of time request to one of the following addresses:

✉

If by Postal Service:

I R S - M a r t i n s b u rg Computing Center

Information Reporting Program

Attn: Extension of Time Coordinator

P. O. Box 879, MS-360

Kearneysville, W V 25430

If by private delivery service:

IRS-Martinsburg Computing Center

Information Reporting Program

Attn: Extension of Time Coordinator

Route 9 and Needy Road, MS-360

Martinsburg, WV 25401

.03 Telephone inquiries for the Information Reporting Call Site may be made

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

time. The telephone numbers for mag-

July 28, 1997

netic media inquiries or electronic submissions are:

☎

304-263-8700 – Call Site – Part A, Sec. 3.9

304-264-7070 – IRP–BBS (Information

R e p o rting Program Bulletin Board System) P a rt 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 (Te l e c o m m u n i c ation Device forthe Deaf)

304-264-5602 – Fax Machine

( These are not toll-free telephone numbers.)

TO OBTAIN FORMS, CALL:

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

.04 The 1997 “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

related to magnetic media/electronic filing should be requested by calling the IRS

toll-free number 1 - 8 0 0 - TA X - F O R M

(1-800-829-3676).

.06 Questions pertaining to magnetic

media filing of Forms W–2 must be directed to the Social Security Administration (SSA). Filers can call 1-800-SSA1213 to obtain the phone number of the

S S A 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. A penalty

notice contains an IRS representative’s name

and/or phone number for contact purposes;

o r, the payer may be instructed to respond in

writing to the address provided. IRS/MCC

does not issue penalty notices and does not

have the authority to abate penalties. For

penalty information, refer to the Penalty

Section of the 1997 “Instructions for Forms

1099, 1098, 5498, and W – 2 G . ”

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

1997–30 I.R.B.

including Form W–2 filed with a return,

by submitting Form 4506, Request for

Copy or Transcript of Tax Form, to IRS.

This form may be obtained by calling

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

.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–2G, W–3, 1042S, and W4 ’s). The IRS/MCC Call Site answers tax

law and paper filing related questions about

W–2s as well as handling inquiries dealing

with backup withholding due to missing

and incorrect taxpayer identification numbers. The Call Site is located at IRS/MCC

and operates in conjunction with the Information Reporting Program. The Call Site

provides service to the payer community

(financial institutions, employers, and other

transmitters of information returns). Recipients of information returns (payees) should

continue to contact 1-800-829-1040 or

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

The Call Site accepts calls from all

areas of the country. The number to call is

304-263-8700 or Telecommunications Device for the Deaf (TDD) 304-267-3367.

These are toll calls. Hours of operation

for the Call Site are Monday through Frid a y, 8:30 a.m. to 4:30 p.m. Eastern Ti m e .

The Call Site is in operation throughout

the year to handle the questions of payers,

transmitters, and employers. Due to the

high demand for assistance at the end of

January and February, it is advisable to

call as soon as possible to avoid these

peak filing seasons.

Sec. 4. Filing Requirements

.01 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 m o re re q u i rement applies

separately for each type of return and

also to each type of corrected re t u r n .

.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 accordi n g l y.

.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 elect r o n i c a l l y. Bisynchronous (mainframe)

electronic filing, which can be found in

Part C of this publication, or A s y n c h r onous (Information Reporting ProgramBulletin 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

SSAbulletin 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

• Available for public use and can be

reached by dialing 304-264-7070

• IRP-BBS is accessible 24 hours a day, 7

days a week. Routine maintenance is

performed

daily, at approximately 7:00

*Even though as many as 249 in a.m.

Eastern

Time.

formation returns may be submitted

on paper to the Internal Revenue • Questions, comments, or suggestions

can be directed to the Systems Operator

Service, IRS encourages filers to

transmit information returns mag - (SYSOP) through IRP-BBS.

netically or electronically.

.05 The following requirements apply

18

July 28, 1997

separately to both originals and corrections filed magnetically/electronically:

1098

250 o rm o re of any of these

1099–A

forms require magnetic

1099–B

media or electronic filing

1099–C

with IRS. These are stand

1099–DIV alone documents and are not

1099–G

to be aggregated for purposes

1099–INT of determining the 250

1099–LTC threshold. For example, if

1099–MISC you must file 100 Forms

1099–MSA 1099–B and 300 Forms

1099–OID 1 0 9 9 – I N T, Forms 1099–B

1099–PATR need not be filed magneti1099–R

cally or electronically since

1099–S

they do not meet the thres5498

hold of 250. However,

5498–MSA Forms 1099–INTmust be

W–2G

filed magnetically or

electronically since they

meet the threshold of 250.

.06 The above requirements do not

apply if the payer establishes hardship

(see Part A, Sec. 5).

Sec. 5. Form 8508, Request

for Waiver from Filing

Information Returns on

Magnetic Media

.01 If a payer is required to file on

magnetic media but fails to do so (or fails

to file electronically, in lieu of magnetic

media filing) and does not have an approved waiver on record, the payer will

be subject to a penalty of $50 per return in

excess of 250. (For penalty information,

refer to the Penalty section of the 1997

“Instructions for Forms 1099, 1098, 5498,

and W–2G.”)

.02 If payers are required to file original or corrected returns on magnetic

media, but such filing would create a

hardship, they may request a waiver from

these filing requirements by submitting

Form 8508, Request for Waiver From Filing Information Returns on Magnetic

Media, to IRS/MCC.

.03 Even though a payer may submit as

many as 249 corrections on paper, IRS

encourages magnetically or electronically

submitted corrections. Once the 250

threshold has been met, filers are required

to submit any returns of 250 or more magnetically or electronically. However, if a

waiver for original documents is approved, any corrections for the same type

1997–30 I.R.B.

of returns will be covered under this

waiver.

.04 Generally, only the payer may sign

the Form 8508. Atransmitter 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 Atransmitter 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.

.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

6 0 11(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 w h e re the paper returns are filed.

.13 An approved waiver from filing

information returns on magnetic media

does not provide exemption from all filing. The payer must timely file information returns on acceptable paper forms

with the appropriate service center.

.14 Desert Storm/Operation Joint

Guard (OJG) [See Note] (Bosnia Region) Contributions — If a payer is required to file a Form 5498 magneti c a l l y / e l e c t r o n i c a l l y, the payer may

request an automatic waiver to file

Forms 5498 on paper for participants of

Desert Storm or Operation Joint G u a rd.

The payer should clearly mark Desert

Storm or Operation Joint G u a rd on the

waiver request form.

19

☞ Note: Military personnel under Operation Joint Guard (OJG) will be

treated the same as military personnel

under Operation Joint Endeavor (OJE)

for purposes of Publication L. 104–117

and Rev. Proc. 96–34.

Sec. 6. Vendor List

.01 IRS/MCC prepares a list of vendors who support magnetic media or electronic filing. The Vendor List (Pub. 1582)

contains the names of service bureaus that

will produce files on the prescribed types

of magnetic media or via electronic filing.

It also contains the names of vendors who

provide software packages for payers who

wish to produce magnetic media or electronic files on their own computer systems. This list is compiled as a courtesy

and in no way implies IRS/MCC approval

or endorsement.

☞ Note: If filers meet the filing req u i rements and engage a service bureau to prepare media on their behalf,

the filers should be careful not to rep o rt duplicate data, which may cause

penalty notices to be generated.

.02 The Vendor List may be updated in

print every other year. The most recently

printed copy will be available by contact ing IRS/MCC at (304) 263-8700 or by

way of a letter (see Part A, Sec. 3.) The

most current Vendor List is available for

downloading from the Information Re p o rting Program-Bulletin Board System

(refer to Part D).

.03 A v e n d o r, 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

ZIPcode)

(c) Telephone number (include area

code)

(d) Contact person

(e) Type(s) of service provided (e.g.,

service bureau and/or software)

(f) Type(s) of media offered (e . g . ,

magnetic tape or tape cartridge, 5

1/4- or 3 1/2-inch diskettes, or

electronic filing)

(g) Type of return

July 28, 1997

.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. Asingle 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 (Form 1098, 1099 series, 5498, and W–2G) is to be filed, the

transmitter does not need to submit a new Form 4419.

EXCEPTIONS

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

FORM

TITLE

EXPLANATION

1042–S

Foreign Person’s U.S. Source Income

Subject to Withholding

Payments subject to withholding under Chapter 3 of the Code,

including interest, dividends, royalties, pensions, and annuities,

gambling winnings and compensation for personal services.

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.

W–4

(See Note)

E m p l o y e e ’s Withholding Allowance

C e r t i f icate

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.

.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. AForm 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 - 8 0 0 - TAX-FORM (1-800-8293676).

.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 Annually, 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.

.05 If any of the information (name, TIN or address) on the Form 4419 changes, please notify IRS/MCC in writing so that the

IRS/MCC database can be updated. However, a change in the method by which information returns are being submitted is not information which needs to by updated (i.e., tape to disk, disk to BBS). The transmitter should include the TCC in all correspondence.

.06 Form 4419 can be submitted any time during the year; however, it must be submitted to IRS/MCC at least 30 days before the

due date of the return(s) for current year processing. For documents to be filed electronically using IBM 3780 bisynchronous

protocols, Form 4419 must be submitted at least 45 days prior to the due date of the returns (See Part C, Sec. 2). This will

allow IRS/MCC the minimum amount of time necessary to process and respond to applications. In the event that computer equipment or software is not compatible with IRS/MCC, a waiver may be requested to file returns on paper documents.

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

payers. Include a list of all payers and TINs with the Form 4419.

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

these numbers may be reassigned.

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

1997–30 I.R.B.

20

July 28, 1997

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 submitting Form 4419.

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

TCCs will only be issued to payers with multiple TIN. Only one TCC will be issued per TIN.

.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. Asingle Form 4419

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

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

Sec. 8. Test Files

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

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

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

each type of record:

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

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

(c) End of Payer “C” 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 “T” in Field Position 32 of 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, 8mm, 4mm, and

quarter inch cartridge, 5 1/4- and 3 1/2-inch diskette, the transmitter must include the signed Form 4804 in the same package with

the corresponding magnetic media. Mark the “TEST” box in block 1 on the form. Also, mark “TEST” on the external media label.

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

who can be contacted to discuss its acceptability.

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

documentation identifying the errors, will be returned. Resubmission of test files must be received by IRS/MCC no later than December 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 a computer-generated substitute, must accompany all magnetic

media shipments. For electronic transmissions, the Form 4804 and Form 4802, if applicable, must be sent the same day as the electronic transmission. Form 4802, Transmittal of Information Returns Reported Magnetically/Electronically (Continuation), is a continuation of Form 4804 and should only be used if the filer is reporting more than five types of returns and/or more than five payers.

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

.02 IRS/MCC allows for the use of computer-generated substitutes for Form 4804/4802 (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 computer-generated forms, be sure to mark very clearly which tax year is being reported. This will

eliminate a phone communication from IRS/MCC to question the tax year.

.03 Atransmitter 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

1997–30 I.R.B.

21

July 28, 1997

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 computer-generated substitute with their shipment.

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

.05 Current and prior year data may be submitted in the same shipment; however, each tax year must be on separate media, and a

separate Form 4804 must be prepared to clearly indicate each tax year.

.06 Filers who have prepared their information returns in advance of the due date are encouraged to submit this information to

IRS/MCC no earlier than January 1 of the year the return is due.

.07 Do not report duplicate information. If a filer submits returns magnetically/electronically, identical paper documents

must not be filed. This may result in erroneous penalty notices.

.08 Form 4804 may be signed by the payer or the transmitter, service bureau, paying agent, or disbursing agent (all hereafter referred to as agent), on behalf of the payer. 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 A self-adhesive external media label, created by the filer, must be affixed to each tape and diskette. (IRS no longer provides

self-adhesive labels for this purpose.) For instructions on how to prepare an external media label, refer to Notice 210 in the forms

section. If diskettes are used, and the operating system is not MS-DOS compatible, the operating system and hardware information

must be provided. Failure to provide this information may result in the diskettes being returned to the filer.

.11 On the outside of the shipping container, affix or attach a label which reads IRB Box ___of___ reflecting the number of containers in the shipment. (Filers can create a label with this information or cut out one of the labels on the special label page provided

in this publication. IRS no longer provides self-adhesive labels for this purpose.) If there is only one container, mark the outside as

Box 1 of 1. For multiple containers, include the sequence (for example, Box 1 of 3, 2 of 3, 3 of 3).

.12 When submitting files include the following:

(a) A signed Form 4804;

(b) Form 4802, if applicable;

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

(d) IRB _____ of ______ outside label.

☞ Note: See Parts C and D forElectronic Submission Requirements.

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

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

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

.14 IRS/MCC will not pay for or accept “Cash-on-Delivery” or “Charge to IRS” shipments of tax information that an individual

or organization is legally required to submit.

.15 Payers should retain a copy of the information returns filed with IRS or have the ability to reconstruct the data for at least 3

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

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

Sec. 10. Due Dates

As a result of due dates for Tax Year 1997 falling on weekends in 1998, the information returns, the recipient copies, and the participant copies will be treated as timely if filed or furnished on or before the following dates:

Forms 1098, 1099 and W-2G

Recipient Copy – February 2, 1998

IRS Copy – March 2, 1998

Forms 5498 and 5498-MSA

Participant Copy – June 1, 1998

IRS Copy – June 1, 1998

(5498 Only for fair market value – February 2, 1998)

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

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

calendar year (but not later than April 15).

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

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

1997–30 I.R.B.

22

July 28, 1997

.03 Information returns filed magnetically/electronically for Forms 1098, 1099, and W–2G must be submitted to IRS/MCC postmarked on or before March 2, 1998.

.04 Returns postmarked by the United States Postal Service (USPS) on or before March 2, 1998, and delivered by United States

mail to the IRS/MCC after the due date, are treated as timely under the “timely mailing as timely filing” rule. A similar rule applies

to items delivered by private delivery services (PDSs) designated by the IRS. A PDS must be designated by the IRS before it will

qualify for the timely mailing rule. Designation is determined with respect to each type of delivery service offered by a PDS (e.g.,

next day delivery, two day delivery, etc.). Notice 97–26, 1997–17 I.R.B. 6, provides the first list of designated PDSs and the types of

delivery services designated. Designation is effective until the IRS issues a revised list of designated PDSs. Notice 97–26 also provides rules for determining the date that is treated as the postmark date. For items delivered by a non-designated PDS, the actual

date of receipt by IRS/MCC will be used as the filing date. For items delivered by a designated PDS, but through a type of service

not designated in Notice 97–26, the actual date of receipt by IRS/MCC will be used as the filing date. The timely mailing rule also

applies to furnishing statements to recipients and participants and filing Forms 5498 and 5498–MSA.

.05 Statements to recipients must be furnished on or before February 2, 1998 for TY97. Form 5498 statements to the participants

must be furnished on or before February 2, 1998 for TY97 for the fair market value of the account and by June 1, 1998 for TY97 for

contributions made to IRAs for the prior calendar year.

.06 Forms 5498 and 5498–MSA filed magnetically or electronically must be filed with IRS/MCC on or before June 1, 1998 for TY97.

Form 5498 and 5498–MSA are filed for contributions to be applied to 1997 that are made January 1, 1997, through April 15, 1998,

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

.07 Use this revenue procedure to prepare information returns filed magnetically or electronically beginning January 1, 1998, and

received by IRS/MCC no later than December 31, 1998.

Sec. 11. Extensions of Time

.01 An extension of time to file may be requested for Forms 1099, 1098, 5498, 5498–MSA, W–2G, W–2, 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 (50 or less) may be done by submitting Form 8809 and attaching a list of

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

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

(See Note). Requests for an extension of time for 10 to 50 payers are encouraged to be filed magnetically or electronically. (See

Part E, Sec. 3, for the record format.) The request may be filed on tape, tape cartridge, 5 1/4- or 3 1/2-inch diskette, or electronically

through the IRP-BBS or mainframe.

☞ Note: If a filer does not have an IRS/MCC assigned Tr a n s m i t t e rC o n t rol Code (TCC), a Form 4419, Application forF i l i n g

Information Returns Magnetically/Electro n i c a l l y, must be submitted to obtain a TCC. This number must be used to submit

an extension request magnetically/electro n i c a l l y.

.05 Amagnetically filed request for an extension of time should be sent using the following addresses:

✉

If by Postal Service:

IRS-Martinsburg Computing Center

Information Reporting Program

Attn: Extension of Time Coordinator

P. O. Box 879, MS-360

Kearneysville, WV 25430

If by private delivery service:

IRS-Martinsburg Computing Center

Information Reporting Program

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 submitted before the end of the initial extension.

1997–30 I.R.B.

23

July 28, 1997

Line 7 on the form should be checked to indicate that an additional extension is being requested. Asecond 30-day extension will be

approved only in cases of extreme hardship or catastrophic event. 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 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 (1-800-829-3676).

.15 Request an extension of time to furnish the statements to recipients of Forms 1098, 1099, 5498, W–2G, W–2, and 1042–S by

submitting a letter to IRS/MCC containing the following information:

(a) Payer name

(b) TIN

(c) Address

(d) Type of return

(e) Specify that the extension request is to provide statements to recipients.

(f) Reason for delay

(g) Signature of payer or person duly authorized

Requests for an extension of time to furnish the statements for Forms 1098, 1099, 5498, W–2G, W–2, and 1042–S to recipients are not

automatically approved; however, if approved, generally an extension will allow a maximum of 30 additional days from the due date to

furnish the statements to the recipients. The request must be postmarked by the date on which the statements are due to the recipients.

Sec. 12. Processing of Information Returns Magnetically/Electronically

.01 All data received at IRS/MCC for processing will be given the same protection as individual income tax returns (Form 1040).

IRS/MCC will process the data and determine if the records are formatted and coded according to this revenue procedure.

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

9267). When media is returned, it is because IRS/MCC encountered errors (not limited to format) and was unable to process the

media, therefore, requiring a replacement. Open all packages immediately.

.03 Files must be corrected and returned with the Media Tracking Slip (Form 9267) to IRS/MCC within 45 days from the date of

the letter IRS/MCC included with the returned files. Apenalty 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 re p l a c ement 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 1997 “Instructions for Forms 1099, 1098, 5498, and W – 2 G . ” )

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

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

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

• A replacement is an information return file that IRS/MCC has returned to the transmitter due to errors encountered during processing. After necessary changes have been made, the file must be returned for processing along with the Media Tracking Slip

(Form 9267) which was included in the shipment from IRS/MCC.

• Filers should neversend anything to IRS/MCC marked “Replacement” unless IRS/ MCC returned media to them.

.06 IRS/MCC will not return media after successful processing. Therefore, if the transmitter wants proof that IRS/MCC received

a shipment, the transmitter should select a service with tracking capabilities or one that will provide proof of delivery.

.07 IRS/MCC will work with filers as much as possible to assist with processing problems.

☞ 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 orher 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

1997–30 I.R.B.

24

July 28, 1997

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 CP2100ANotices) 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

X

A

M

P

L

E

If a payer has 100 Forms 1099-Ato be corrected, they

can be filed on paper since they fall under the 250

threshold. However, if the payer has 300 Forms

1099-B to be corrected, they must be filed magnetically or 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. If a waiver is approved for original documents, any corrections for the same type of return will

be covered under this waiver.

.02 Corrections should be filed as soon as possible. Corrections filed after August 1 may be subject to the maximum penalty of

$50 per return. Corrections filed prior to August 1 may be subject to a lesser penalty. (For information on penalties, refer to the

Penalty Section of the 1997 “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 considerthis 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 code these

documents as corrections. The file must be coded and submitted as originals.

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

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

(a) Name and address of payer

(b) Type of error (please explain clearly)

(c) Tax year

(d) Payer TIN

(e) TCC

(f) Type of Return

(g) Number of Payees

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

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

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

prior year corrections, use the record format for the current year and submit on separate media. However, use the actual year designation of the correction in Field Positions 2–3. 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 (if applicable), must be submitted with corrected files submitted magnetically or electronically.

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

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

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

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

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

1997–30 I.R.B.

25

July 28, 1997

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

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

Guidelines for Filing Corrected Returns Magnetically/Electronically

Error Made on the Original Return

How To File the Corrected Return

Two (2) separate transactions are required to make the following corrections properly. Follow the directions for both

Transactions 1 and 2. (See Note 1)

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

errors:

(a) No payee TIN (SSN or EIN)

(b) Incorrect payee TIN

(c) Incorrect payee name

(d) Wrong type of return indicator

Transaction 1: Identify incorrect returns

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

related to this file.

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.

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 re q u i red to make corrections for returns filed with a missing or i n c o r rect name and/or TIN.

These payers should change theirrecords in order to submit correct information in the future. Payers who cannot show re a s o nable 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 perreturn penalty forfiling returns with missing ori n c o r rect information to $30 or

$15 if filed within 30 days. (Forpenalty information, re f e r to the Penalty section of the 1997 “Instructions forForms 1099, 1098,

5498, and W–2G.”) Corrections filed afterAugust 1 will not reduce the penalty but will allow IRS to update the payee’s re c o r d s .

The regulations forIRC sections 6721–6724 are available in Publication 1586, Reasonable Cause Regulations and Require m e n t s

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

(c) Incorrect code in the document specific/distribution

code field in the “B” Record

(d) Incorrect payee address

1997–30 I.R.B.

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.

26

July 28, 1997

(e) Direct sales indicator

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.

☞ Note 2: If a filer is correcting the name and/orTIN 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’sTIN 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 Number (SSN), Individual Tax Identification Number (ITIN),

and Employer Identification Number (EIN), 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 on the first name line.

.04 Failure to provide the correct name and corresponding TIN could result in a penalty and/or backup withholding notice (sometimes referred to as a “B” Notice). (For penalty information, refer to the Penalty section of the 1997 “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-

In the First Payee Name Line of the

Payee “B” Record, enter the name of-

1. Individual

The individual

The individual

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

The actual owner of the account or,

if combined funds, the first individual

on the account

The individual whose SSN is entered

3. Custodian account of a minor (Uniform Gift, or Transfers, to Minors Act)

The minor

The minor

4. The usual revocable savings trust

account (grantor is also trustee)

The grantor-trustee

The grantor-trustee

5. Aso-called trust account that is not a

legal or valid trust under state law

The actual owner

The actual owner

6. Sole proprietorship

The owner (An SSN or EIN)

The owner, not the business name (the filer

may enter the business name on the second

name line).

For this type of account-

1997–30 I.R.B.

27

July 28, 1997

Chart 2. Guidelines for Employer Identification Numbers

In the Taxpayer Identification Number

Field of the Payee “B” Record, enter

the EIN of-

In the First Payee Name Line of the

Payee “B” Record, enter the name of-

1. Avalid trust, estate, or pension trust

The legal entity 1

The legal trust, estate, or pension trust1

2. Corporate

The corporation

The corporation

3. Association, club, religious, charitable, The org a n i z a t i o n

educational, or other tax-exempt org a n i z a tion

The organization

4. Partnership account

held in the name of the business

The partnership

The partnership

5. Abroker or registered nominee/

middleman

The broker or nominee/middleman

The broker or nominee/middleman

6. Account with Department of A g r i c u l ture in the name of a public entity

(such as a state or local government,

school district, or prison), that receives

agriculture program payments

The public entity

The public entity

7. Sole proprietorship

The business (An EIN or SSN)

The owner, not the business name (the filer

may enter the business name on the second

name line).

For this type of account-

1

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

used in the account title.

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

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

Do not send Copy Aof the paperforms 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 recipients as outlined in the 1997 “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 From Broker and Barter Exchange Transactions

Form 1099–C — Cancellation of Debt

Form 1099–LTC — Long-Term Care and Accelerated Death Benefits

Form 1099–MSA — Distributions From Medical Savings Accounts

Form 1099–S — Proceeds From Real Estate Transactions

Form 5498–MSA — Medical Savings Account Information

Form W–2G — Certain Gambling Winnings

1997–30 I.R.B.

28

July 28, 1997

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

procedure.

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

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

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

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

file must be returned to IRS/MCC on or before December 31.

.07 Aseparate Form 6847 is required for each payer. Atransmitter may not combine payers on one Form 6847 even if acting as

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

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

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

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

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

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

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

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

2). State filing 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.

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

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

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

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

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

of the entire file).

Table 1. Participating States And Their Codes

State

Code

State

Code

State

Code

Alabama

Arizona

Arkansas

California

Delaware

District of Columbia

Georgia

Hawaii

Idaho

Indiana

01

04

05

06

10

11

13

15

16

18

Iowa

Kansas

Maine

Massachusetts

Minnesota

Mississippi

Missouri

Montana

New Jersey

New Mexico

19

20

23

25

27

28

29

30

34

35

North Carolina

North Dakota

Oregon

South Carolina

Tennessee

Wisconsin

37

38

41

45

47

55

Table 2. Dollar Criteria For State Reporting

STATE

1099–

DIV

1099–G

1099–

INT

1099–

MISC

1099–

OID

1099–

PATR

1099–R

5498

Alabama

Arkansas

District of Columbiab

$1500

100

600

$ NR

2500

600

$1500

100

600

$1500

2500

600

$1500

2500

600

$1500

2500

600

$1500

2500

600

NR

1997–30 I.R.B.

29

a

NR

July 28, 1997

STATE

1099–

DIV

1099–G

1099–

INT

1099–

MISC

1099–

OID

1099–

PATR

1099–R

5498

Hawaii

Idaho

Iowa

Minnesota

Mississippi

Missouri

Montana

New Jersey

North Carolina

Tennessee

Wisconsin

10

NR

100

10

600

NR

10

1000

100

25

NR

a

NR

1000

10

600

NR

10

1000

100

NR

NR

10

NR

1000

10

600

NR

10

1000

100

25

NR

600

600

1000

600

600

1200c

600

1000

600

NR

600

10

NR

1000

10

600

NR

10

1000

100

NR

NR

10

NR

1000

10

600

NR

10

1000

100

NR

NR

600

a

1000

600

600

NR

600

1000

100

NR

600

a

a

NR

a

NR

NR

a

NR

a

NR

NR

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

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

NR = No filing requirement

Footnotes:

a. All amounts are to be reported.

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

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

Sec. 17. Definition of Terms

Element

Description

Asynchronous Protocols

This type of data transmission is most often used by microcomputers, PCs and some minicomputers. A s y n c h r o n o u s

transmissions transfer data at arbitrary time intervals using

the start-stop method. Each character transmitted has its own

start bit and stop bit.

b/

Denotes a blank position. Enter blank(s) when this symbol is

used (do not enter the letter “b”). This appears in numerous

areas throughout the record descriptions.

Bisynchronous Protocols

For purposes of this publication, these are electronic transmissions made using IBM 3780 protocols. These transmissions must be in EBCDIC character code and use the Bell

208B (4800bps), AT&T 2296A(9600bps) or Hayes OPTIMA

288 V.FC Smartmodem (14400bps) modems. Standard IBM

3780 space compression is acceptable.

Correction

A correction is an information return submitted by the transmitter to correct an information return that was previously

submitted to and processed by IRS/MCC, but contained erroneous information.

☞ Note: A correction should not be confused with a replacement. Only media returned to the filer by IRS/MCC due to

processing problems should be marked replacement.

CUSIP Number

A number developed by the Committee on Uniform Security

Identification Procedures to serve as a common denominator

in communications among users for security transactions and

security information.

Employer Identification Number (EIN)

Anine-digit number assigned by IRS for federal tax reporting

purposes.

Electronic Filing

Submission of information returns using switched telecommunications network circuits. These transmissions use

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July 28, 1997

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

The actual year in which the information returns are being

submitted to IRS.

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.

ATIN may be incorrect for several reasons:

(a) The payee provided a wrong number or name (e.g., the

payee is listed as the only owner of an account but provided someone else’s TIN).

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

incorrectly).

(c) The payee’s status changed (e.g., a payee name change

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

enter the change in their records).

A nine digit number issued by IRS to individuals who are re quired to have a U.S. taxpayer identification number but are

not eligible to obtain a Social Security Number (SSN).

The vehicle for submitting required information about another person to IRS. Information returns are filed by financial

institutions and by others who make certain types of payments as part of their trade or business. The information required to be reported on an information return includes interest, dividends, pensions, nonemployee compensation for

personal services, stock transactions, sales of real estate,

mortgage interest, and other types of information. For this

revenue procedure, an information return is a Form 1098,

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

1 0 9 9 – LT C, 1099–MISC, 1 0 9 9 – M S A, 1099–OID,

1099–PATR, 1099–R, 1099–S, 5498, 5498–MSA 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; 8mm, 4mm, and QIC (Quarter

Inch Cartridges) cartridges or 5 1/4- and 3 1/2-inch diskette.

Form 9267 accompanies media that IRS/MCC has returned to

the filer for replacement due to incorrect format or errors encountered when trying to process the media. This must be

returned with the replacement file.

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

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

(b) includes one or more alpha characters (a character or

symbol other than an Arabic number) as one of the nine

digits, OR

(c) payee TIN has less than nine digits

File

Filer

Filing Year

Golden Parachute Payment

Incorrect Taxpayer Identification Number (Incorrect TIN)

Individual Taxpayer Identification Number (ITIN)

Information Return

Magnetic Media

Media Tracking Slip

Missing Taxpayer Identification Number (Missing TIN)

PS 58 Costs

1997–30 I.R.B.

The current cost of life insurance under a qualified plan taxable under section 72(m) and section 1.72–16(b) of the In-

31

July 28, 1997

come Tax Regulations. (See Part B, Sec. 7, Payee “B”

Record, Document Specific/Distribution Code, Category of

Distribution, Code 9.)

Payee

Person or organization receiving payments from the payer, or

for whom an information return must be filed. The payee includes a borrower (Form 1099–A), a debtor (1099–C), a poli cyholder or insured (Form 1099–LTC), an IRA, SEP, or SIMPLE plan 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.

Payer

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 issuer of an IRA, SEP, or SIMPLE, or a lender who acquires an

interest in secured property or who has reason to know that

the property has been abandoned. The payer will be held responsible for the completeness, accuracy, and timely submission of magnetic media files.

Replacement

Areplacement is an information return file that IRS/MCC has

returned to the transmitter due to errors encountered during

processing.

☞ Note: Filers should never submit media to IRS/MCC marked “Replacement” unless IRS/MCC returned media to the

filers. When sending “Replacement” media, be sure to include the Media Tracking Slip (Form 9267) which will accompany

media returned by IRS/MCC. Media that has been incorrectly marked as Replacement may result in duplicate filing.

Service Bureau

Person or organization with whom the payer has a contract to

prepare and/or submit information return files to IRS/MCC.

Aparent company submitting data for a subsidiary is not considered a service bureau.

Social Security Number (SSN)

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

wage and tax reporting purposes.

Special Character

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

SSA

Social Security Administration.

Taxpayer Identification Number (TIN)

Refers to either an Employer Identification Number (EIN),

Social Security Number (SSN) or Individual Taxpayer Identi fication Number (ITIN).

Tax year

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

to a payee.

Transfer Agent

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

contracted or authorized by the payer to perform the services

of paying and reporting backup withholding (Form 945).

Transmitter

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

agent of the payer.

Transmitter Control Code (TCC)

A five character alpha/numeric number assigned by

IRS/MCC to the transmitter prior to actual filing magnetically or electronically. This number is inserted in the “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.

Vendor

Vendors include service bureaus that produce information return files on the prescribed types of magnetic media or via

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July 28, 1997

electronic filing for payers. Vendors also include companies

who provide software for payers who wish to produce their

own media or electronic files.

Sec. 18. State Abbreviations

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

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

State

Code

State

Alabama

AL Kentucky

Alaska

AK Louisiana

American Samoa

AS

Maine

Arizona

AZ Marshall Islands

Arkansas

AR Maryland

California

CA Massachusetts

Colorado

CO Michigan

Connecticut

CT Minnesota

Delaware

DE Mississippi

District of Columbia

DC Missouri

Federated States

Montana

of Micronesia

FM Nebraska

Florida

FL

Nevada

Georgia

GA New Hampshire

Guam

GU New Jersey

Hawaii

HI

New Mexico

Idaho

ID

New York

Illinois

IL

North Carolina

Indiana

IN

North Dakota

Iowa

IA

Northern Mariana Islands

Kansas

KS

*This abbreviation applies to the United States Virgin Islands

Code State

Code

KY

LA

ME

MH

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

ND

MP

OH

OK

OR

PA

PR

RI

SC

SD

TN

TX

UT

VT

VA

VI

WA

WV

WI

WY

Ohio

Oklahoma

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Virgin Islands*

Washington

West Virginia

Wisconsin

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 U.S. 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 Position

161 of the “B” Record.

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

EXAMPLE:

Payee Name

PVTWillard J. Doe

Mailing Address

Company F, PSC Box 100

167 Infantry REGT

Payee City

APO (or FPO)

Payee State

AE, AA, or AP*

Payee ZIP Code

098010100

*AE is the designation for ZIPs beginning with 090-098, AAfor ZIP 340, and APfor 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 or who have purchased preprogrammed software packages (see Note). 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.

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July 28, 1997

☞ 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.

The Major Problems Encountered lists some of the most frequently encountered problems with magnetic/electronic files submitted to IRS/MCC. These problems may result in media being returned for replacement.

1. 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

247bbbbbb

—

(Pos. 23–31)

(‘b’denotes a blank)

“B” RECORD

0000867599 —

(Pos. 61–70)

(Payment Amount 2)

0000709097

—

(Payment Amount 4)

0000044985 —

(Pos. 111–120)

(Payment Amount 7)

(Pos. 81–90)

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 nine numeric characters (no alphas or special characters) in

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

payer name line.

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 payer and payee records 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. SSAhas 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 SSAoffice 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–G, 1099–MISC, 1099–R, and W–2G, Federal withholding amounts

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

9. Incorrect format forTINs in the Payee “B” Record

A check of “B” Records should be made to ensure the Taxpayer Identification Numbers (TINs) are formatted correctly. T h e r e

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

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

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