# Bulletin No. 1996–39

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- **Document type:** Agency decision

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Bulletin No. 1996–39
September 23, 1996

HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be relied
upon as authoritative interpretations.

INCOME TAX
Rev. Rul. 96–45, page 5.
Low-income housing credit; satisfactory bond; ‘‘bond
factor’’ amounts for the period July through September 1996. This ruling announces the monthly bond
factor amounts to be used by taxpayers who dispose of
qualified low-income buildings or interests therein during
the period July through September 1996.
Rev. Rul. 96–46, page 5.
LIFO; price indexes; department stores. The July 1996
Bureau of Labor Statistics price indexes are accepted
for use by department stores employing the retail
inventory and last-in, first-out inventory methods for
valuing inventories for tax years ended on, or with
reference to, July 31, 1996.
Rev. Proc. 96–47, page 10.
Regulated investment companies; preferential dividends. Conditions are described under which distributions made to shareholders of a regulated investment
company may vary and, nevertheless, be considered as
dividends for purposes of computing the dividends paid
deduction.

EMPLOYEE PLANS
Notice 96–45, page 7.
Guidelines are set forth for determining for September
1996, the weighted average interest rate and the
resulting permissible range of interest rates used to
calculate current liability for purposes of the full funding
limitation of section 412(c)(7) of the Code as amended
by the Omnibus Budget Reconciliation Act of 1987 and
by the Uruguay Round Agreements Act (GATT).

EXEMPT ORGANIZATIONS
Notice 96–46, page 7.
Taxes on excess benefit transactions. This notice
describes new Code section 4958 excise taxes on
Finding Lists begin on page 47.
Announcements of Disbarments and Suspensions begin on page 44.

excess benefits transactions engaged in between certain tax-exempt organizations and their disqualified persons. It also specifies the tax return form to be used in
paying these taxes and prescribes the time for their
payment.
Notice 96–47, page 8.
Exemption from tax on corporations, certain trusts,
etc. This notice describes the amendment to Code
section 501(c)(4) to expressly prohibit inurement of any
part of the net earnings of an entity otherwise described
in that section to the benefit of any private shareholder
or individual.
Notice 96–48, page 8.
Publicity of information required from certain taxexempt organizations and certain trusts. This notice
describes disclosure requirements for, and increases of
certain penalties on, tax-exempt organizations.
Announcement 96–96, page 41.
A list is given of organizations now classified as private
foundations.
Announcement 96–99, page 42.
A list is provided of organizations that no longer qualify
as organizations to which contributions are deductible
under section 170 of the Code.

ADMINISTRATIVE
Rev. Proc. 96–48, page 10.
Substitute printed, computer-prepared, and computergenerated tax forms and schedules. Requirements are
set forth for privately designed and printed federal tax
return forms and the conditions under which the Service
will accept computer-prepared and computer-generated
tax forms and schedules. Rev. Procs. 95–16 and 95–46
are superseded.
(Continued on page 4)

HIGHLIGHTS
OF THIS ISSUE—Continued
ADMINISTRATIVE—Continued

Announcement 96–98, page 42.
INTL–4–95, 1996–36 I.R.B. 8, relating to the allocation
of loss realized on the disposition of stock, is corrected.

Announcement 96–97, page 41.
INTL–0003–95, 1996–6 I.R.B. 29, relating to the source
of income from sales of natural resources or other
inventory produced in the United States and sold in a
foreign country, is corrected.

4

Mission of the Service
The purpose of the Internal Revenue Service is to
collect the proper amount of tax revenue at the least
cost; serve the public by continually improving the

quality of our products and services; and perform in a
manner warranting the highest degree of public
confidence in our integrity, efficiency and fairness.

Statement of Principles
of Internal Revenue
Tax Administration
The Service also has the responsibility of applying
and administering the law in a reasonable,
practical manner. Issues should only be raised by
examining of ficers 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 cour tesy 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.

court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are
cautioned against reaching the same conclusions in
other cases unless the facts and circumstances are
substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on
provisions of the Internal Revenue Code of 1986.

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,

The first Bulletin for each month includes an index for
the matters published during the preceding month.
These monthly indexes are cumulated on a quarterly and
semiannual basis, and are published in the first Bulletin
of the succeeding quarterly and semi-annual period,
respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents U.S. Government Printing Office, Washington, D.C. 20402.

3

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986
Section 42.—Low-Income Housing
Credit
Low-income housing credit; satisfactory bond; ‘‘bond factor’’ amounts
for the period July through September 1996. This ruling announces the
monthly bond factor amounts to be used
by taxpayers who dispose of qualified
low-income buildings or interests therein
during the period July through September 1996.

Rev. Rul. 96–45
In Rev. Rul. 90–60, 1990–2 C.B. 3,
the Internal Revenue Service provided
guidance to taxpayers concerning the
general methodology used by the Treasury Department in computing the bond
factor amounts used in calculating the
amount of bond considered satisfactory
by the Secretary under § 42(j)(6) of the
Internal Revenue Code. It further announced that the Secretary would pub-

lish in the Internal Revenue Bulletin a
table of ‘‘bond factor’’ amounts for
dispositions occurring during each calendar month.
This revenue ruling provides in Table
1 the bond factor amounts for calculating the amount of bond considered
satisfactory under § 42(j)(6) for dispositions of qualified low-income buildings
or interests therein during the period
July through September 1996.

Table 1
Rev. Rul. 96–45
Monthly Bond Factor Amounts for Dispositions Expressed
As a Percentage of Total Credits
Calendar Year Building Placed in Service
or, if Section 42(f)(1) Election Was Made, the Succeeding Calendar Year
Month of
Disposition

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

Jul ’96
Aug ’96
Sep ’96

81.06
80.84
80.61

83.47
83.24
83.01

86.09
85.85
85.62

89.16
88.92
88.68

92.78
92.52
92.28

96.94
96.67
96.41

101.25
100.96
100.68

105.33
105.04
104.76

109.16
108.90
108.66

112.52
112.52
112.52

For a list of bond factor amounts
applicable to dispositions occurring during other calendar years, see the following revenue rulings: Rev. Rul. 90–60,
1990–2 C.B. 3, for dispositions occurring during calendar years 1987, 1988,
and 1989; Rev. Rul. 90–88, 1990–2 C.B.
7, for dispositions occurring during calendar year 1990; Rev. Rul. 91–67,
1991–2 C.B. 13, for dispositions occurring during calendar year 1991; Rev.
Rul. 92–101, 1992–2 C.B. 9, for dispositions occurring during calendar year
1992; Rev. Rul 93–83, 1993–2 C.B. 6,
for dispositions occurring during calendar year 1993; Rev. Rul. 94–71, 1994–2
C.B. 4, for dispositions occurring during
calendar year 1994; Rev. Rul. 95–83,
1995–2 C.B. 8, for dispositions occurring during calendar year 1995; Rev.
Rul. 96–16, 1996–11 I.R.B. 4, for dispositions occurring during the period January through March 1996; and Rev. Rul.
96–33, 1996–27 I.R.B. 4, for dispositions occurring during the period April
through June 1996.

DRAFTING INFORMATION

Rev. Rul. 96–46

The principal author of this revenue
ruling is Jack Malgeri of the Office of
Assistant Chief Counsel (Passthroughs
and Special Industries). For further information regarding this revenue ruling,
contact Mr. Malgeri at (202) 622–3040
(not a toll-free call).

The following Department Store Inventory Price Indexes for July 1996
were issued by the Bureau of Labor
Statistics on August 13, 1996. The indexes are accepted by the Internal Revenue Service, under § 1.472–1(k) of the
Income Tax Regulations and Rev. Proc.
86–46, 1986–2 C.B. 739, for appropriate
application to inventories of department
stores employing the retail inventory
and last-in, first-out inventory methods
for tax years ended on, or with reference
to, July 31, 1996.
The Department Store Inventory Price
Indexes are prepared on a national basis
and include (a) 23 major groups of
departments, (b) three special combinations of the major groups - soft goods,
durable goods, and miscellaneous goods,
and (c) a store total, which covers all
departments, including some not listed
separately, except for the following:
candy, foods, liquor, tobacco, and contract departments.

Section 472.—Last-in, First-out
Inventories
26 CFR 1.472–1: Last-in, first-out inventories.

LIFO; price indexes; department
stores. The July 1996 Bureau of Labor
Statistics price indexes are accepted for
use by department stores employing the
retail inventory and last-in, first-out inventory methods for valuing inventories
for tax years ended on, or with reference
to, July 31, 1996.

5

BUREAU OF LABOR STATISTICS, DEPARTMENT STORE
INVENTORY PRICE INDEXES BY DEPARTMENT GROUPS
(January 1941 = 100, unless otherwise noted)

Groups

July
1995

July
1996

Percent
Change from
July 1995 to
July 19961

1. Piece Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Domestics and Draperies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Women’s and Children’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Men’s Shoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Infants’ Wear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Women’s Underwear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Women’s Hosiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Women’s and Girls’ Accessories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Women’s Outerwear and Girls’ Wear. . . . . . . . . . . . . . . . . . . . . . . . .
10. Men’s Clothing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Men’s Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Boys’ Clothing and Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Jewelry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Notions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. Toilet Articles and Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Furniture and Bedding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Floor Coverings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Housewares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Major Appliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. Radio and Television. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21. Recreation and Education2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. Home Improvements2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23. Auto Accessories2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

515.5
656.6
617.5
914.5
596.5
526.0
283.3
546.7
398.1
593.3
550.5
474.7
999.0
838.7
861.1
657.8
563.7
777.6
245.2
82.0
113.9
122.4
106.7

539.2
635.6
643.9
888.2
609.3
536.9
289.3
544.7
380.6
610.3
573.0
475.9
1016.0
779.4
880.9
671.6
577.5
811.9
245.8
79.2
112.7
126.8
107.0

4.6
23.2
4.3
22.9
2.1
2.1
2.1
20.4
24.4
2.9
4.1
0.3
1.7
27.1
2.3
2.1
2.4
4.4
0.2
23.4
21.1
3.6
0.3

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

580.5

582.4

0.3

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

462.4

470.3

1.7

Groups 21–23: Misc. Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

113.8

113.5

20.3

Store Total3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

541.2

544.2

0.6

2

1

Absence of a minus sign before percentage change in this column signifies price increase.
Indexes on a January 1986=100 base.
3
The store total index covers all departments, including some not listed separately, except for the following: candy, foods,
liquor, tobacco, and contract departments.
2

DRAFTING INFORMATION
The principal author of this revenue
ruling is Stan Michaels of the Office of
Assistant Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue ruling, contact
Mr. Michaels on (202) 622–4970 (not a
toll-free call).
Section 561.—Definition of
Deduction for Dividends Paid
26 CFR 1.561–1: Deduction for dividends paid.
If a regulated investment company makes distributions to shareholders that vary as a result of the
allocation of certain expenses, may the company
include those distributions in the amount of its
deduction for dividends paid? See Rev. Proc.
96–47, page 10.

Section 562.—Rules Applicable in
Determining Dividends Eligible for
Dividends Paid Deduction
26 CFR 1.562–2: Preferential dividends.
If a regulated investment company makes distributions to shareholders that vary as a result of the
allocation of certain expenses, may the company
include those distributions in the amount of its
deduction for dividends paid? See Rev. Proc.
96–47, page 10.

Section 852.—Taxation of
Regulated Investment Companies
and Their Shareholders
26 CFR 1.852–1: Taxation of regulated investment
companies.

6

If a regulated investment company makes distributions to shareholders that vary as a result of the
allocation of certain expenses, may the company
include those distributions in the amount of its
deduction for dividends paid? See Rev. Proc.
96–47, page 10.

26 CFR 1.852–3: Investment company taxable
income.
If a regulated investment company makes distributions to shareholders that vary as a result of the
allocation of certain expenses, may the company
deduct the distributions for purposes of computing
the company’s investment company taxable income? See Rev. Proc. 96–47, page 10.

Part III. Administrative, Procedural, and Miscellaneous
Weighted Average Interest Rate
Update
Notice 96–45
Notice 88–73 provides guidelines for
determining the weighted average interest rate and the resulting permissible

range of interest rates used to calculate
current liability for the purpose of the
full funding limitation of § 412(c)(7) of
the Internal Revenue Code as amended
by the Omnibus Budget Reconciliation
Act of 1987 and as further amended by
the Uruguay Round Agreements Act,

Month

Year

Weighted
Average

September

1996

6.91

DRAFTING INFORMATION
The principal author of this notice is
Donna Prestia of the Employee Plans
Division. For further information regarding this notice, call (202) 622–6076
between 2:30 and 4:00 p.m. Eastern
time (not a toll-free number). Ms.
Prestia’s number is (202) 622–7377
(also not a toll-free number).
Excise Taxes on Excess Benefit
Transactions Engaged in by Certain
Tax-Exempt Organizations
Notice 96–46
This notice summarizes certain aspects of Taxpayer Bill of Rights 2
related to excise taxes on excess benefit
transactions involving organizations described in § 501(c)(3) (except private
foundations) and § 501(c)(4). Taxpayer
Bill of Rights 2, Pub. L. No. 104–168,
110 Stat. 1452, (TBOR2) was enacted
July 30, 1996. This notice also provides
guidance with respect to the filing of
returns for these excise taxes, and solicits comments to be considered in drafting future guidance. See Notice 96–47,
page 8, this Bulletin, for aspects of
TBOR2 related to the express prohibition of private inurement for § 501(c)(4) organizations, and Notice 96–48,
page 9 , this Bulletin, for disclosure
requirements for, and increases in certain penalties on, exempt organizations
generally.
I. In General
Section 1311(a) of TBOR2 creates
new § 4958, which imposes excise
taxes on excess benefit transactions. An
excess benefit transaction subject to
tax under § 4958 is any transaction in
which an economic benefit is provided

90% to 108%
Permissible
Range

90% to 110%
Permissible
Range

6.22 to 7.46

6.22 to 7.60

by an organization described in
§ 501(c)(3) (except for a private foundation) or § 501(c)(4) directly or indirectly to, or for the use of, any disqualified person if the value of the economic
benefit provided exceeds the value of
the consideration (including the performance of services) received for providing the benefit. A disqualified person is
any person who was, at any time during
the 5-year period ending on the date of
the excess benefit transaction, in a position to exercise substantial influence
over the affairs of the organization.
Disqualified persons also include family
members and certain entities in which at
least 35 percent of the control or beneficial interests are held by persons described in the preceding sentence. An
organization manager is an officer,
director, trustee, or any individual having powers or responsibilities similar to
those of an officer, director, or trustee.
Section 4958 imposes three taxes. The
first tax is equal to 25 percent of the
excess benefit amount, and is to be paid
by any disqualified person who engages
in an excess benefit transaction
(§ 4958(a)(1)). The second tax is equal
to 200 percent of the excess benefit
amount, and is to be paid by any
disqualified person if the excess benefit
transaction is not corrected within the
taxable period (§ 4958(b)). The third
tax is equal to 10 percent of the excess
benefit amount, and is to be paid by any
organization manager who knowingly
participates in an excess benefit transaction (§ 4958(a)(2)). With respect to any
one excess benefit transaction, the maximum amount of this third tax may not
exceed $10,000.
II. Effective Date for Excise Taxes
The new § 4958 excise taxes apply to
excess benefit transactions occurring on

7

Pub. L. 103–465 (GATT).
The average yield on the 30-year
Treasury Constant Maturities for August
1996 is 6.84 percent.
The following rates were determined
for the plan years beginning in the
month shown below.

or after September 14, 1995. They do
not apply, however, to any benefit arising from a transaction pursuant to any
written contract that was binding on
September 13, 1995, and continued in
force through the time of the transaction.
III. Returns for Payment of Excise
Taxes
Charities and other persons liable for
certain Chapter 41 or Chapter 42 excise
taxes must file returns on Form 4720 to
calculate and report the taxes due. The
Treasury Department will issue regulations providing that disqualified persons
and organization managers (or their 35
percent controlled entities) liable for
§ 4958 excise taxes on excess benefit
transactions are required to file an annual return on Form 4720. For excess
benefit transactions that occurred after
September 13, 1995, in a taxable year
ending before December 31, 1996, the
persons liable for payment of the excise
taxes must use the 1995 Form 4720 to
calculate and report those taxes. The
Service will revise Form 4720 for taxable years ending on or after December
31, 1996.
The Treasury Department will also
issue regulations which will provide that
returns on Form 4720 for taxable years
ending after September 13, 1995, and on
or before July 30, 1996 (the date of
TBOR2’s enactment), will be due on
December 15, 1996. Returns for taxable
years ending after July 30, 1996, will be
due on the 15th day of the fifth month
following the close of that taxable year.
The person filing should clearly mark
the top of the 1995 Form 4720 that it is
for payment of § 4958 excise taxes. Use
Part II–A, columns (a), (b), and (h) to
report information about the person(s)
liable and the amount of the tax; use

Schedule A columns (b), (c), (e), and (f)
(if a transaction with a disqualified
person, using the 25 percent tax rate), or
(b), (c), (e), and (g) (if a transaction
with an organization manager, using the
10 percent tax rate) to provide other
information requested about the transaction.

formation regarding this notice contact
Ms. Haney on (202) 622–4290 (not a
toll-free call).
Private Inurement Expressly
Prohibited for Section 501(c)(4)
Organizations
Notice 96–47

IV. Reporting Requirements for § 4958
Excise Taxes
Section 1312(a) of TBOR2 amends
§ 6033(b) to require § 501(c)(3) organizations to report the amounts of the
taxes paid under § 4958 with respect to
excess benefit transactions involving the
organization, as well as any other information the Secretary may require concerning those transactions. Section
6033(f) is also amended to impose the
same filing requirements on § 501(c)(4)
organizations. These amendments only
apply to returns for taxable years beginning after July 30, 1996. Accordingly,
affected organizations do not have to
include information on taxes paid under
§ 4958, or any other information that
may be required with respect to excess
benefit transactions, on their returns for
taxable years beginning before July 31,
1996.
V. Comments on Future Guidance Invited
The Service invites comments on the
amendments made by § § 1311(a) and
1312 of TBOR2 (new § 4958 and reporting requirements related to those
excise taxes). The Service will consider
these comments in drafting future guidance. In order to issue this guidance
promptly, the Service requests that written comments be submitted by December 12, 1996. Send submissions to:
CC:DOM:CORP:R (Notice 96–46),
Room 5226, Internal Revenue Service,
POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand-delivered between the hours of 8
a.m. and 5 p.m. to: CC:DOM:CORP:R
(Notice 96–46), Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit comments
electronically via the Internet directly to
the IRS internet site at http://www.irs.
ustreas.gov/prod/tax_regs/comments.
html.
The principal author of this notice is
Phyllis Haney of the Office of Associate
Chief Counsel (Employee Benefits and
Exempt Organizations). For further in-

This notice summarizes an important
aspect of Taxpayer Bill of Rights 2
related to the amendment to § 501(c)(4)
of the Internal Revenue Code. Taxpayer
Bill of Rights 2, Pub. L. No. 104–168,
110 Stat. 1452, (TBOR2) was enacted
July 30, 1996. See Notice 96–46, page
7, this Bulletin, for aspects of TBOR2
related to excise taxes on excess benefit
transactions engaged in by § 501(c)(4)
organizations and § 501(c)(3) organizations (except private foundations), and
Notice 96–48, page 9 , this Bulletin, for
disclosure requirements for, and increases in certain penalties on, exempt
organizations generally.
Private Inurement Expressly Prohibited
for § 501(c)(4) Organizations
TBOR2 amends § 501(c)(4) to expressly prohibit inurement of any part of
the net earnings of an entity otherwise
described in that section to the benefit
of any private shareholder or individual.
That amendment applies to inurement
occurring on or after September 14,
1995. The amendment does not apply,
however, to inurement occurring prior to
January 1, 1997, if that inurement results from a written contract that was
binding on September 13, 1995, and
continued in force through the time that
the inurement occurred.
Comments on Future Guidance Invited
The Service invites comments on the
amendments made by § 1311(b) of
TBOR2 (the amendment to § 501(c)(4)). The Service will consider these
comments in drafting future guidance. In
order to issue this guidance promptly,
the Service requests that written comments be submitted by December 12,
1996. Send submissions to: CC:DOM:
CORP:R (Notice 96–47), Room 5226,
Internal Revenue Service, POB 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be handdelivered between the hours of 8 a.m.
and 5 p.m. to: CC:DOM:CORP:R (Notice 96–47), Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alterna-

8

tively, taxpayers may submit comments
electronically via the Internet directly to
the IRS internet site at http://www.irs.
ustreas.gov/prod/tax_regs/comments.
html.
The principal author of this notice is
Phyllis Haney of the Office of Associate
Chief Counsel (Employee Benefits and
Exempt Organizations). For further information regarding this notice contact
Ms. Haney on (202) 622–4290 (not a
toll-free call).
Tax-Exempt Organization
Information Returns—Requirement
to Provide Copies to the Public and
Increases in Certain Penalties
Notice 96–48
This notice summarizes certain aspects of Taxpayer Bill of Rights 2
related to (1) inspection requirements
for exempt organizations and (2) increases in certain penalties on exempt
organizations. Taxpayer Bill of Rights 2,
Pub. L. No. 104–168, 110 Stat. 1452,
(TBOR2) was enacted July 30, 1996.
This notice also describes a provision
of the Small Business Job Protection
Act of 1996, Pub. L. No. 104–188, 110
Stat. 1755, enacted August 20, 1996,
that increases certain penalties on exempt organizations for failing to satisfy
inspection requirements.
This notice also solicits comments to
be considered in drafting future guidance. See Notice 96–46, page 7, this
Bulletin, for aspects of TBOR2 related
to excise taxes on excess benefit transactions engaged in by certain taxexempt organizations, and Notice 96–47,
page 8, this Bulletin, for aspects of
TBOR2 related to the express prohibition of private inurement for § 501(c)(4) organizations.
I. Inspection Requirements Related to
Annual Information Returns
Section 1313(a) of TBOR2 amends
§ 6104(e) with regard to the manner in
which an exempt organization, other
than a private foundation, must allow
inspection by the public of its annual
information returns and its application
for exemption. Section 6104(e), as
amended, provides that if a request is
made, in person or in writing, for a
copy of certain documents, an organization must provide the copies to the
requester without charge, other than a
reasonable fee for any reproduction and
mailing costs. The documents that may
be requested under § 6104(e) are (1)

one or more of an exempt organization’s
three most recent information returns,
and (2) the organization’s application
for recognition of exemption under
§ 501(a) (together with a copy of any
supporting papers and any document
issued by the Internal Revenue Service
in response). If the request is made in
person, the copies must be provided
immediately. If the request is made in
writing, the copies must be provided
within 30 days.
Pursuant to § 6104(e)(3), this new
requirement to provide copies without
charge (other than a reasonable fee for
any reproduction and mailing costs)
does not apply if, in accordance with
regulations promulgated by the Secretary, the organization has made the
requested documents widely available.
Additionally, the new § 6104(e) requirement does not apply if the Secretary
determines, upon application by the organization, that the request is part of a
harassment campaign and that compliance with the request is not in the
public interest.
The requirement to provide copies
without charge (other than a reasonable
fee for any reproduction and mailing
costs) does not take effect until 60 days
after the Secretary of the Treasury first
issues regulations under new § 6104(e)(3). Until that time, the prior law
governs the manner in which an exempt
organization, other than a private foundation, must allow inspection of its
annual information returns by the public.
Until regulations are issued, prior law
requires tax-exempt organizations to
show a requester copies of the organization’s three most recent annual information returns, and the organization’s application for exemption (together with a
copy of any supporting papers and any
document issued by the Internal Revenue Service in response), at the organization’s principal place of business (and
at other offices in certain instances).
Although prior law requires the organization to allow inspection of the returns
and requires the organization to allow
the requester to take notes while inspecting the returns, it does not require
the organization to provide a copy that
the requester can take from the organization’s office.
II. Increases in Certain Penalties
Failure to File Complete and Timely
Annual Information Returns
Section 1314(a) of TBOR2 amends
§ 6652(c)(1)(A) to increase the penal-

ties on exempt organizations for failure
to file complete and timely annual information returns. Section 6652(c)(1)(A)
provides that a failure to timely file an
annual information return, failure to include any of the information required to
be shown on the return, or failure to
show the correct information, results in
a penalty to be paid by the organization
of $20 per day (increased from $10 per
day) for each day during which the
failure occurs. The maximum penalty
under § 6652(c)(1)(A) with respect to
any one return shall not exceed the
lesser of $10,000 (increased from
$5,000) or 5 percent of the gross receipts of the organization for the year.
Failure to Allow Inspection of Annual
Returns and Exemption Applications
Section 1704(s) of the Small Business
Job Protection Act, Pub. L. No. 104–
188, 110 Stat. 1755 (SBJPA), enacted
August 20, 1996, amends § § 6652(c)(1)(C) and (D) to increase the penalties
for failure to allow inspection of any
return or application under § 6104(d) or
§ 6104(e). Under the amended § 6652(c)(1)(C), any person failing to allow
inspection of annual returns must pay
$20 per day (increased from $10 per
day) for each day during which such
failure continues, not to exceed $10,000
(increased from $5,000). Under the
amended § 6652(c)(1)(D), any person
failing to allow inspection of an organization’s application for exemption must
pay $20 per day (increased from $10
per day) for each day such failure
continues.
Willful Failure to Allow Inspection
Section 1313(b) of TBOR2 amends
§ 6685 to increase the penalty for a
willful failure to allow inspection of any
return or application for exemption under § § 6104(d) or (e) from $1,000 to
$5,000. The amendment to § 6685 does
not take effect until 60 days after the
Secretary of the Treasury first issues
regulations under new § 6104(e)(3).
Special Penalty for Large Tax-Exempt
Organizations
Section 1314(b) of TBOR2 creates a
new special penalty for large organizations under § 6652(c)(1)(A). Under this
provision, a failure to timely file an
annual information return, failure to include any of the information required to
be shown on the return, or failure to
show the correct information by an
exempt organization with gross receipts
exceeding $1,000,000 for any year re-

9

sults in a penalty to be paid by the
organization of $100 per day for each
day during which the failure occurs. The
maximum penalty under § 6652(c)(1)
for an organization with gross receipts
exceeding $1,000,000 shall not exceed
$50,000.
The amended penalties in § 6652(c)(1) apply to returns for taxable years
ending on or after July 30, 1996.
III. Comments on Future Guidance Invited
The Service invites comments on the
amendments to the Internal Revenue
Code made by § § 1313 and 1314 of
TBOR2 and § 1704(s) of SBJPA (inspection requirements and penalty increases). The Service will consider these
comments in drafting future guidance. In
particular, comments are requested concerning ways in which an organization
can make the relevant documents widely
available, and, therefore, qualify for exemption from the general requirements
of § 6104(e)(3). The Service is interested in providing suitable or helpful
alternatives for qualifying for the exemption. These could include, but are
not limited to, electronic dissemination
through the internet or other electronic
databases, depositing copies at public libraries, or providing copies to thirdparty organizations that will make the
documents available to the public for a
reasonable fee. The Service is also interested in comments with respect to how
these methods could satisfy requests
made in person or in writing. The Service intends to expeditiously issue guidance on the § 6104(e)(3) exception, and
therefore requests that written comments
be submitted by November 12, 1996.
Send submissions to: CC:DOM:CORP:R
(Notice 96–48), Room 5226, Internal
Revenue Service, POB 7604, Ben
Franklin Station, Washington, DC
20044. Submissions may be handdelivered between the hours of 8 a.m.
and 5 p.m. to: CC:DOM:CORP:R (Notice 96–48), Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit comments
electronically via the internet by submitting comments directly to the IRS
Internet
site
at
http://
www.irs.ustreas.gov/prod/tax_regs/
comments.html.
The principal author of this notice is
Phyllis Haney of the Office of Associate
Chief Counsel (Employee Benefits and
Exempt Organizations). For further in-

formation regarding this notice contact
Ms. Haney on (202) 622–4290 (not a
toll-free call).
26 CFR 601.201: Rulings and determination letters.
(Also Part I, §§ 561, 562, 852; 1.561–1, 1.562–2,
1.852–1, 1.852–3)

Rev. Proc. 96–47
SECTION 1. PURPOSE
This revenue procedure describes conditions under which distributions made
to shareholders of a regulated investment company (RIC) may vary and
nevertheless be deductible as dividends
under § 562 of the Internal Revenue
Code.
SECTION 2. BACKGROUND
.01 Section 852(b)(2)(D) allows a
RIC a deduction for dividends paid (as
defined in § 561 with certain modifications). Section 561 defines the deduction
for dividends paid and applies the rules
of § 562 to determine which dividends
are eligible for the deduction for dividends paid. Section 562(c) provides that
the amount of any distribution is not
considered a dividend for purposes of
computing the dividends paid deduction
under § 561 unless the distribution is
pro rata, does not prefer any share of
stock of a class over any other share of
stock of that same class, and does not
prefer one class of stock over another
class except to the extent that one class
is entitled (without reference to waivers
of their rights by shareholders) to the
preference.
.02 Many RICs have issued groups of
shares that represent interests in the
same portfolio of securities but have
different arrangements for shareholder
services or the distribution of shares or
both. Because the fees for these arrangements and services may vary, shareholders with equivalent investments in the
same fund may receive different distributions. To permit open-end management investment companies to issue
these groups of shares, the Securities
and Exchange Commission (SEC) has
adopted Rule 18f–3, 17 C.F.R.
270.18f–3, under the Investment Company Act of 1940, 15 U.S.C. 80a–1 to
–64 (1940 Act).
SECTION 3. SCOPE
This revenue procedure applies to a
corporation that meets all of the following requirements:

.01 The corporation is described in
§ 851(a) and § 851(b)(1).
.02 Groups of shares of the corporation have different arrangements for
shareholder services or the distribution
of shares or both (Qualified Groups).
Expenses related to these arrangements
are allocated to the Qualified Group of
shares on behalf of which the expenses
were incurred. The requirements in this
subsection are to be interpreted in a
manner consistent with the SEC’s interpretation of analogous requirements in
the rules under the 1940 Act. Thus, to
determine whether groups of shares
have different arrangements for shareholder services or the distribution of
shares, see Rule 18f–3(a)(1)(i), 17 CFR
270.18f–3(a)(1)(i), and Exemptions for
Open End Management Investment
Companies Issuing Multiple Classes of
Shares, Investment Company Act Release No. 20,915, 60 Fed. Reg. 11,876
at 11,878 (Mar. 2, 1995).
.03 Advisory fees and other expenses
related to the management of the corporation’s assets (including custodial fees
and tax-return preparation fees) are allocated to all shares by net asset value,
regardless of Qualified Group.
.04 Expenses other than those described in section 3.02 and 3.03 (for
example, transfer agency fees) that are
incurred on behalf of one or more
Qualified Groups in a different amount
or at a different rate from the amount or
rate at which the expense is incurred on
behalf of one or more other Qualified
Groups are allocated either by net asset
value, regardless of Qualified Group, or
on the basis of the amount incurred on
behalf of each Qualified Group.
.05 The rights and obligations of the
shareholders of each Qualified Group
are fixed in the corporation’s organizing
documents. Except as otherwise provided in this revenue procedure, each
Qualified Group is entitled to distributions calculated under those documents
in the same manner and at the same
time as all other Qualified Groups. For
purposes of this calculation, expenses
are allocated under those documents to
each Qualified Group at the same time
as to all other Qualified Groups.
.06 Each Qualified Group separately
meets the requirements of § 67(c)(2)(B)
(defining the required characteristics of
shares of a publicly offered RIC).
SECTION 4. PROCEDURE
If variations in distributions to shareholders of different Qualified Groups

10

exist solely as a result of the allocation
of expenses in accordance with the
applicable provisions of section 3 of this
revenue procedure, those variations do
not prevent the distributions from being
dividends under § 562.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
September 6, 1996.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Arnold Golub of the Office
of Assistant Chief Counsel (Financial
Institutions and Products). For further
information regarding this revenue procedure, contact Mr. Golub at (202) 622–
3950 (not a toll-free call).
26 CFR 601.602: Tax forms and instructions.

Rev. Proc. 96–48
CONTENTS
PART A. GENERAL
SECTION 1. PURPOSE
SECTION 2. SCOPE
SECTION 3. NATURE OF
CHANGES
SECTION 4. DEFINITIONS
SECTION 5. GENERAL REQUIREMENTS FOR APPROVAL
SECTION 6. HIGHLIGHTS OF
PERMITTED CHANGES AND
REQUIREMENTS
SECTION 7. APPROVAL
SECTION 8. OFFICE OF MANAGEMENT AND BUDGET
(OMB) REQUIREMENTS FOR
ALL SUBSTITUTE FORMS
SECTION 9. GENERAL GUIDELINES
SECTION 10. PHYSICAL ASPECTS
AND REQUIREMENTS: PAPER
SECTION 11. PHYSICAL ASPECTS
AND REQUIREMENTS: PRINTING
SECTION 12. PHYSICAL ASPECTS
AND REQUIREMENTS: MARGINS
SECTION 13. EXAMPLES OF APPROVED FORMATS
SECTION 14. SPECIFICATIONS
FOR FILING SUBSTITUTE
FORMS
SECTION 15. GUIDANCE FROM
OTHER REVENUE PROCEDURES
SECTION 16. ORDERING PUBLICATIONS

SECTION 17. ORDERING REPRODUCTION PROOFS
SECTION 18. READER LIST PROGRAM
SECTION 19. INTERNAL REVENUE INFORMATION SYSTEMS
BULLETIN BOARD AND THE
INTERNET
SECTION 20. FEDERAL TAX
FORMS ON CD–ROM
SECTION 21. AGREEMENT
PART B. SPECIFIC
SECTION 1. GENERAL
SECTION 2. CONDITIONS - TAX
RETURNS (FORMS 1040, 1040A,
1120, ETC.)
SECTION 3. CHANGES PERMITTED TO GRAPHICS (FORMS
1040A AND 1040)
SECTION 4. CHANGES PERMITTED TO FORM 1040A GRAPHICS
SECTION 5. OTHER CHANGES
PROHIBITED
SECTION 6. CHANGES PERMITTED TO THE FORM 1040
GRAPHICS
SECTION 7. OTHER CHANGES
PROHIBITED
SECTION 8. ACCEPTABLE FORMATS FOR COMPUTERGENERATED FORMS AND
SCHEDULES
SECTION 9. COMPUTERGENERATED FORMS NOT
SHOWN AS EXHIBITS IN THIS
REVENUE PROCEDURE
SECTION 10. INSTRUCTIONS
FOR FORMATTING
COMPUTER-GENERATED SUBSTITUTES
SECTION 11. ADDITIONAL INSTRUCTIONS FOR ALL FORMS
SECTION 12. FILING SUBSTITUTE FORMS WITH THE SERVICE
SECTION 13. SPECIAL FORM
1040EZ OPTICAL CHARACTER
RECOGNITION (OCR) REQUIREMENTS
SECTION 14. COMPUTER GENERATED ALTERNATIVE RETURNS, 1040PC FORMAT RETURN
SECTION 15. SPECIAL FORM 941
REQUIREMENTS - OCR SPECIFICATIONS
SECTION 16. SPECIAL FORM 941
REQUIREMENTS - BLACK AND
WHITE SPECIFICATIONS
SECTION 17. PAPER SUBSTITUTES FOR FORM 1042–S

SECTION 18. SPECIFICATIONS
FOR FILING SUBSTITUTE
SCHEDULES K–1
SECTION 19. PROCEDURES FOR
PRINTING INTERNAL REVENUE SERVICE ENVELOPES
SECTION 20. SPECIFICATIONS
FOR OCR SCANNABLE APPLICATION FORMS FOR EMPLOYEE PLANS
SECTION 21. PROCEDURE FOR
SUBSTITUTE FORM 5471 AND
FORM 5472
SECTION 22. FORMS FOR ELECTRONICALLY FILED RETURNS
SECTION 23. FTD MAGNETIC
TAPE PAYMENTS
SECTION 24. EFFECT ON OTHER
DOCUMENTS
PART C. EXHIBITS
EXHIBIT A–1. SCHEDULE A (Preferred)
EXHIBIT A–2. SCHEDULE A (Acceptable)
EXHIBIT B–1. SCHEDULE B (Preferred)
EXHIBIT B–2. SCHEDULE B (Acceptable)
EXHIBIT CG–A. SCHEDULE A
(Computer generated)
EXHIBIT CG–B. SCHEDULE B
(Computer generated)
EXHIBIT BW–1. FORM 941 - Acceptable black and white substitute
EXHIBIT BW–2. SCHEDULE B,
Form 941 - Acceptable black and
white substitute
EXHIBIT L–1. LIST OF FORMS
REFERRED TO IN REVENUE
PROCEDURE
EXHIBIT L–2. PAYMENT
VOUCHER SPECIFICATIONS
Rev. Proc. 96–48
PART A. GENERAL
SEC. 1. PURPOSE
The purpose of this revenue procedure is to provide the general requirements and conditions for the development, printing, and approval of all
substitute tax forms to be acceptable for
filing in lieu of official IRS produced
and distributed forms. All IRS tax forms
of the types identified in Section 2.03,
whether or not specifically mentioned
herein by title or form number, are covered by this general revenue procedure.
Certain unique, specialized forms require the use of other additional revenue
procedures to supplement this publica-

11

tion (see Part A, Sections 15 and 16 for
a list of revenue procedures). Persons
wanting to submit substitute Forms W–2
should first read Publication 1141, General Rules and Specifications for Private
Printing of Substitute Forms W–2 and
W–3.
SEC. 2. SCOPE
.01 The Service accepts quality substitute tax forms that are consistent with
the official forms they represent, and
that do not have an adverse impact on
our processing. The IRS Substitute
Forms Program administers the formal
acceptance and processing of these
forms nationwide. While this program
deals primarily with paper documents, it
also interfaces with other processing and
filing media such as magnetic tape,
optical character recognition, electronic
filing, etc., within a totally integrated
tax administration system.
.02 Only those substitute forms that
comply fully with the requirements set
forth herein are acceptable.
.03 The following forms are covered
by this revenue procedure:
1 Tax returns and their related forms
and schedules.
2 Applications for permission to file
returns electronically and forms submitted as required documentation for
electronically-filed returns.
3 Powers of Attorney.
4 Estimated tax payment vouchers.
5 Forms and schedules relating to
partnerships, exempt organizations, and
employee plans.
.04 The following forms are not covered:
1 Federal Tax Deposit (FTD) coupons.
2 Requests for information or documentation initiated by the Service.
3 Forms used internally by the Service.
4 State tax forms.
5 Forms developed by other agencies
(except for Form TD F 90–22.1, Report
of Foreign Bank and Financial Accounts).
.05 Exhibit L–1 lists the form numbers mentioned in this document and
their titles.
.06 This revenue procedure is updated as required to reflect pertinent tax
year form changes and to meet processing and/or legislative requirements.
SEC. 3. NATURE OF CHANGES
.01 Instructions for barcoding Forms
1040A and related schedules and attach-

ments, which appeared in Revenue Procedure 95–46, have not been added to
this procedure. While barcodes will appear on the official forms, they are not
required on substitute returns.
.02 Statement of Intention for Form
1040 processing deleted.
.03 Payment vouchers for Forms
1040, 941, 940, 940–EZ, 943, 945, and
2290 are required for tax year 1996
forms.
.04 Minor revisions have been made
to the addresses for the Substitute W–2
Coordinator and the Employee Plans
OCR Forms Coordinator.
.05 References to OMB expiration
dates have been deleted. These dates are
being phased out as forms are revised.
.06 Revision to preparer’s information instructions. Preparer’s data will
now be preprinted on Page 2 of Form
1040EZ.
.07 Definition of conditional approval
modified. Forms will not be accepted
for conditional approval (i.e. based on
drafts) after the final version has been
published.
.08 Requirement to have forms which
are filed quarterly approved each quarter
has been deleted. Quarterly forms must
be approved during the year if the form
has been revised.
.09 Assignment of Forms Approval
Number changed to assignment of
Source Codes.
.10 Non-tax material (e.g., logos, firm
names) may not be printed anywhere
along the top margin.
.11 Paragraph referencing separate
approval numbers for electronically filed
returns deleted.
.12 Printing specifications now require that fill-in data (i.e. taxpayer entries) be no smaller than eight points in
height.
.13 Form 3975, Tax Practitioner Annual Mailing List Application Update,
may only be used to order Package X.
Other publications may be ordered by
phone.
.14 The reproduction proof and
reader list programs are being discontinued as of October 1, 1996. Additional
information has been added regarding
the IRIS Bulletin Board, the Internet,
and tax forms on CD–ROM.
.15 Graphics changes revised for
Form 1040, Page 2.
.16 Additional information has been
added to the specifications for substitute
envelopes.
.17 The section on Form 945 requirements for scanning has been deleted.

.18 Reference added to Form 5471,
Schedule J; reference deleted for Form
5471, Schedule P.
.19 The exhibit which lists the forms
referenced in this document has been
updated.
.20 An exhibit showing the specifications for payment voucher scanlines has
been added.
.21 Various editorial changes.
SEC. 4. DEFINITIONS
.01 Substitute Form. A tax form (or
related schedule) that differs in any way
from the official version and is intended
to replace the entire form that is printed
and distributed by the Service. This term
also covers those approved substitute
forms exhibited in this revenue procedure.
.02 Printed (or Preprinted) Form. A
form produced using conventional printing processes. Also, a printed form
which has been reproduced by photocopying or similar processes.
.03 Preprinted Pin-Fed Form. A
printed form that has marginal perforations for use with automated and highspeed printing equipment.
.04 Computer-Prepared Substitute
Form. A preprinted form in which the
taxpayer’s tax entry information has
been inserted by a computer, computerprinter or other computer type equipment, such as word-processing equipment.
.05 Computer-Generated Substitute
Tax Return or Form. A tax return or
form that is entirely designed and
printed by the use of a computer printer,
such as a laser printer, etc., on plain
white paper. This return or form must
conform to the physical layout of the
corresponding Service form although the
typeface may differ. The text should
match the text on the officially-printed
form as closely as possible; condensed
text and abbreviations will be considered on a case-by-case basis. Exception:
All jurats (perjury statements) must be
reproduced verbatim.
.06 Manually-prepared form. A
preprinted reproduced form in which the
taxpayer’s tax entry information is entered by an individual using a pen,
pencil, typewriter, or other nonautomated equipment.
.07 Computer-Generated Answer
Sheet Format Tax Return. A tax return
that contains the taxpayer’s significant
line entries only, and is formatted three
columns per page with tax form head-

12

ings, a summary, and jurat. This return
is printed on plain white paper using a
computer printer.
.08 Graphics. Those parts of a printed
tax form that are not tax amount entries
nor called-for information. Generally,
these are line numbers, captions, shadings, instructions, special indicators,
borders, rules, and strokes created by
typesetting, photographics, photocomposition, etc.
.09 Acceptable Reproduced Form. A
legible photocopy of an original form.
.10 Supporting Statement (Supplemental Schedule). A document providing
detailed information to support an entry
for a line(s) on an official or approved
substitute form and filed with (attached
to) a tax return. (A supporting statement
is not a tax form and does not take the
place of an official form, unless specifically permitted elsewhere in this procedure.)
.11 Specific Forms Terms. The following terms are used throughout this
revenue procedure in reference to all
substitute forms, with the exception of
the 1040PC ‘‘answer sheet format’’ tax
return.
1 Format. The overall physical arrangement and general layout of a substitute form.
2 Sequence. The same numeric and
logical placement order of data, as reflected on the official form version.
Sequence is an integral part of the total
format requirement.
3 Line Reference (Code). The line
numbers, letters or alpha-numerics used
to identify each captioned line on the
official forms; and printed to the immediate left of each caption or data entry
field.
4 Item caption. The textual portion of
each line on the form, identifying the
specific data elements required.
5 Data Entry Field. All areas designated on a form for the insertion of
data, such as dollar amounts, quantities,
responses, check-boxes, etc.
SEC. 5. GENERAL REQUIREMENTS
FOR APPROVAL
.01 If you plan to change or modify
any tax returns or forms per Section
7.01 below, you can, without further
approval, generate your own substitutes
of the tax forms. See Agreement in
Section 21.
.02 If your changes are more extensive, you must get official approval
before using substitute forms. These
changes include the use of typefaces and

sizes other than those found on the
offical form and the condensing of line
item descriptions to save space.
.03 Schedules
(a) Schedules are considered to be an
integral part of a complete tax return
when assigned consecutive page numbers and printed contiguously with page
one of the return. Form 706, United
States Estate (and Generation-Skipping
Transfer) Tax Return, is an example of
this situation, where Schedules A
through S have pages numbered as part
of the basic return. For a Form 706 to
be approved, the entire form including
Schedules A through S must be submitted.
(b) However, Schedules 1, 2, and 3
of Form 1040A are examples of schedules that can be separately computergenerated. Although IRS-printed as a
continuation of Form 1040A, none of
these schedules have page numbers that
require them to be filed with Form
1040A, and may, therefore, be separated
from Form 1040A and submitted as
computer-generated substitute schedules.
.04 The Service is continuing a program to identify and contact tax return
preparers, forms developers, and software publishers who use or distribute
unapproved forms that do not conform
to this revenue procedure, and thus
impede processing of the returns.
SEC. 6. HIGHLIGHTS OF
PERMITTED CHANGES AND
REQUIREMENTS
.01 METHODS OF REPRODUCING
INTERNAL REVENUE SERVICE
PRINTED TAX FORMS TO MAKE
SUCH REPRODUCTIONS SUITABLE
FOR USE AS SUBSTITUTE TAX
FORMS WITHOUT PRIOR APPROVAL.
1 You can photocopy most tax forms
and use them instead of the official
ones. The entire substitute form, including entries, must be legible. However,
some Service forms should never be
reproduced as photocopies, or submitted
on carbon copies, for use as substitute
forms. These forms are input through
OCR scanning equipment and substitutes must meet the specifications found
in Part B of this revenue procedure or
the appropriate revenue procedure referred to in Part A, Section 16.
(a) Forms W–2, W–2G, W–2AS,
W–2GU, W–3, 1096, 1098, 1099–A,
1099–B, 1099–C, 1099–DIV, 1099–G,
1099–INT, 1099–MISC, 1099–OID,
1099–PATR, 1099–R, 1099–S, 5498,

8109, and 8109–B are the major forms
that fall in this excluded category.
(b) Most of these forms have provisions for assessment of penalties for
submitting non-OCR scannable substitute versions. For further information,
see Publication 1179, Specifications for
Paper Document Reporting and Paper
Substitutes for Forms 1096, 1098, 1099
Series, 5498, and W–2G (revised annually).
(c) All payment vouchers (Forms
940–V, 940–EZ(V), 941–V, 943–V,
945–V, 1040–V, and 2290–V) must be
reproduced. Substitute vouchers must be
the same size as the officially printed
vouchers. Vouchers that are prepared for
printing on a laser printer may include a
scanline. See Exhibit L–2 for scanline
specifications.
2 You can reproduce any current tax
form as cut sheets, snapsets, and
marginally-punched, pin-fed forms so
long as you use an official Service
version as the master copy. Official
versions are supplied by the Service,
such as those in the taxpayer’s tax
package, those printed in revenue procedures, and over-the-counter forms available at IRS and other governmental
public offices or buildings. Forms are
also available on CD–ROM, and online
via the IRS bulletin board and the
Internet (see Sections 19 and 20).
3 If you reproduce either Form 1040,
1040A or 1040EZ as described in the
preceding paragraph, you can adjust the
graphics on specified areas to allow for
computer-printed or word processor fillin. Only the areas listed in Part B of this
revenue procedure may be adjusted
without specific prior approval.
4 You can reproduce a ‘‘signature
form’’ as a valid substitute form. Many
tax forms (including returns) have a
taxpayer signature requirement as part
of the form layout. The jurat/perjury
statement/signature line areas must be
retained and worded exactly as on the
official form. The requirement for a
signature by itself does not prohibit a
tax form from being properly computergenerated.
5 You can computer-generate Answer
Sheet Format Tax Returns on plain bond
paper using IRS-accepted software for
the 1040PC format for return types
1040EZ, 1040, 1040A, and attachments,
forms, and schedules.
.02 THINGS YOU CANNOT DO TO
INTERNAL REVENUE SERVICE
PRINTED TAX FORMS TO MAKE
THEM SUITABLE FOR USE AS SUBSTITUTE TAX FORMS.

13

1 You cannot, without prior Service
approval, change any Internal Revenue
Service tax forms or use your own
(non-approved) versions, unless specifically permitted by this revenue procedure.
2 You cannot adjust any of the graphics on Forms 1040, 1040A and 1040EZ
(except in those areas specified in Part
B of this revenue procedure) without
prior approval from the Service.
3 You cannot use your own preprinted label on tax returns filed with
the Service, unless you fully comply
with the exception criteria specified in
Part A, Section 14.02.
SEC. 7. APPROVAL
.01 Basic Requirements. Preparers
who desire to file substitute privately
designed and printed tax forms and/or
computer-generated and computerprepared tax forms must develop such
substitutes using these guidelines. These
substitutes, unless excepted by revenue
procedure, must be approved by the
Service before being filed. A software
developer who wants to market, distribute, or use for its own clientele, a tax
preparation package featuring the
1040PC tax return format, must first file
an application to participate in the program. Only after successfully fulfilling
test requirements will a developer’s software package be accepted by the Service to produce 1040PC tax returns.
.02 Requests for Approval
1 The Service cannot grant final approval of your substitute form until the
official form has been published. However, the Service usually releases advance proof copies of selected major tax
forms that are subject to further changes
and OMB approval before their release
in final format for printing and distribution to the public. We encourage submission of proposed substitutes of these
advance proof forms, and will grant
conditional approval based solely on
these early proofs. These advance proofs
are subject to significant change before
forms are finalized. If these advance
proofs are used as the basis for your
substitute forms, you will be responsible
for subsequently updating your final
forms to agree with the final official
version before use. These revisions need
not be submitted for further approval.
Conditional approval will not be granted
after the final version of an official form
is published.
2 Submission of substitute forms
must be based on the appropriate rev-

enue procedures. There is a list in Part
A, Section 15. Any alteration of forms
must be within the limits acceptable to
the Service. It is possible that, from one
filing period to another, a change in law
or a change in internal need (processing,
audit, compliance, etc.) may change the
allowable limits for the alteration of the
official form.
3 When specific approval of any substitute form (other than those specified
in 7.02.4 and 7.02.5 below, or forms for
which different instructions are published in other revenue procedures) is
desired, a sample of the proposed substitute should be forwarded for consideration by letter to the Internal Revenue
Service, Attention: Substitute Forms
Program Coordinator, T:FP:S, Room
2712, 1111 Constitution Ave. NW,
Washington, DC 20224. To expedite
multiple forms approval, we prefer that
your proposed forms be submitted in
separate sets by return. For example,
Forms 1040 and their normally related
schedules or attachments should be submitted separately from Forms 1120,
1065, 5500 Series, etc., if at all possible.
Schedules and forms (e.g., Forms 3468,
4136, etc.) that can be used with more
than one type of return (e.g., 1040,
1041, 1120, etc.) should be submitted
only once for approval, regardless of the
number of different tax returns with
which they may be ultimately associated. In addition, all pages of a multipage form or return should be submitted
in the same package.
4 The following forms should not be
submitted to IRS (or the Social Security
Administration, if applicable) for specific approval: W–2, W–3, 1096, 1098,
1099 Series, 5498, and W–2G. If you
are uncertain of any specification set
forth in the appropriate revenue procedures and want that specification clarified, you may submit a letter citing the
specification in question, your interpretation of that specification, and an example of the form to the following
addresses:
Forms W–2 and W–3:
Internal Revenue Service
Attn: Substitute Form W–2 Coordinator,
CP:CO:SC:A
1111 Constitution Avenue, NW,
Room 7238
Washington, DC 20224
Forms 1096, 1098, 1099 Series, 5498,
and W–2G:
Internal Revenue Service
Attn: IRP Coordinator, T:S:P:S
(Salubria Building)

1111 Constitution Avenue, NW
Washington, DC 20224
5 For Form 1040PC approval, see
Part B, Section 14. For approval of
OCR scannable application forms for
Employee Plans, see Part B, Section 21.
6 As no Service office except the
ones specified in this procedure are
authorized to approve substitute forms,
unnecessary delay may result if forms
are sent elsewhere for approval. All
forms submitted to any other office
must be forwarded to the appropriate
office for formal control, review, and
official approval. No IRS office is authorized to allow deviations from this
revenue procedure.
7 The Service does not review or
approve the logic of specific software
programs, nor confirm the calculations
entered on forms output from these
programs that are submitted for approval. The accuracy of the program
itself remains the responsibility of the
software package developer, distributor,
or user. The Substitute Forms Program
is primarily concerned with the prefiling quality review of the final forms
output, produced by whatever means,
that are expected to be processed by
IRS field offices. For the above reasons,
it is suggested that you submit forms
without including any ‘‘taxpayer’’ information such as names, addresses, monetary amounts, etc.
.03 When to Send Proposed Substitutes. Proposed substitutes which are
required to be submitted per this Revenue Procedure should be sent to the
address listed in .02 above, as much in
advance of the filing period for the form
as possible. This is to allow adequate
time for analysis and response.
.04 Accompanying Statement. When
the sample substitute is submitted, there
should be an accompanying statement
that lists the form number of each
substitute requested and detail those
items that deviate from the official form
in position, arrangement, appearance,
line numbers, additions, deletions, etc.
Included with each of the items should
be a detailed reason or justification for
the change and an approximation of the
number of forms expected to be filed.
.05 Approval/Non-Approval Letter.
The Service will send either a formal
letter of approval/non-approval or, when
provided by the originator, a checksheet
for the forms included in the package,
provided no lengthy explanations are
required. Approval letters may contain
qualifications for use of the substitutes.

14

Non-approval letters may specify the
changes required for approval, but also
may require resubmission for approval.
Telephone contact is used when possible.
.06 Duration of Approval
1 Most signature tax returns and
many of their schedules and related
forms have the tax (liability) year
printed in the upper right hand corner.
Approvals for these forms are usually
good for one calendar year (January
through December of the year of filing)
or, in the case of corporation tax forms
(with the exception noted below), for
the remainder of the quarters in the
calendar year. Quarterly tax forms in the
94X series require approval for any
quarter in which the form has been
revised.
2 If the preprinted year is the only
change made to a form described in 1
above, the form for the upcoming year
is not subject to review. Otherwise each
new filing season requires a new approval. Limited continued use of a
change approved for one tax year may
be allowed for the same form in the
following tax year. See .07 below for
the limitations and for other requirements. Examples of such changes are
the use of abbreviated words, revised
form spacing, compressed text lines,
shortened captions, etc., which do not
change the consistency of lines or text
on the official forms.
3 Other forms may have expiration
dates displayed in the upper right hand
corner. Approval of these forms is usually valid through the expiration date.
Occasionally, these forms or their instructions will be revised before the
expiration date. If substantial change is
made to the form, new substitutes must
be submitted for approval. If the expiration date changes due to revisions to the
instructions, minor editorial changes to
the form or to extend the date without
revision to the form, it is not subject to
review.
.07 Limited Continued Use of an Approved Change
1 If you received written approval of
a previous tax year substitute form governed by this revenue procedure and
continue to use the approved change on
your current tax year substitute form,
you may revise your form to include
this change and, without additional written approval, use it as a current tax year
substitute form, provided you comply
with the requirements in this revenue
procedure. See exception in 3 below.

2 If you received written approval for
a specific change on a specific form last
year, such as deleting the vertical lines
used to separate dollars and cents on
some forms and schedules e.g., Schedules A & B of Form 1040, you may
again make the same change on the
same form this year if the item changed
is present on this year’s official form.
Thus, the change allowed in last year’s
approved substitute Schedule A, for example, can be continued in your new
substitute for this year. The new substitute does not have to be sent to the IRS
and written approval is not required.
However, the new substitute must conform to the official current year IRS
form in other respects: date, Office of
Management and Budget (OMB) approval number, attachment sequence
number, Paperwork Reduction Act Notice Statement, arrangement, item caption, line number, line reference, data
sequence, etc. It must also comply with
this revenue procedure—which may
have eliminated, added to, or otherwise
changed the guideline(s) which affected
the change approved last year. Additionally, you will be bound by the ‘‘Agreement’’ in Section 21.
3 Exception: Those written approvals
which state that the approved change or
form would not be allowed in any other
tax year, or for a temporary, limited, or
interim approval pending resolution of a
failure to meet one or more Serviceprescribed requirements.
4 This authorization for continued
use of an approved change is limited to
the continuation of design logic from an
immediately prior tax year substitute
form to a current tax year substitute
form.
.08 Requested Copies. Generally, you
must send us one copy of each form
being submitted for approval. However
if you are producing forms for different
computer systems (e.g., IBM (or compatible) vs. MacIntosh) or different
types of printers (laser vs. dot matrix),
and these forms differ significantly in
appearance, submit one copy for each
type of system or printer.
.09 Responsibility. Following the receipt of initial approval for a substitute
forms package, or of a software output
program to print substitute forms, it is
the responsibility of the originator (designer or distributor) to provide each
subsequent client firm or individual with
the pertinent Service forms requirements
which must be met for continuing acceptability. Examples of this responsibility include the use of prescribed print

paper, font size, legibility, state tax data
deletion, the legal requirements of the
Paperwork Reduction Act Notice for
informing all users of substitute forms
of the official use and collection requirements stated in the instructions for
the official IRS forms, completion of
documents, etc.
.10 Source code (formerly) Forms
Approval Number. The Substitute Forms
Program Coordinator Office, T:FP:S,
will assign a unique source code to each
firm that submits substitute paper forms
for approval. This will be a permanently
assigned control number that should be
used on every form created by a particular firm.
1 This number should be printed at
the bottom left margin area on the first
page of every approved substitute paper
form.
2 The source code for paper returns
consists of three alpha characters.
3 This number should not be used on
optically scanned (OCR) forms, except
for certain specified Forms 1040–ES.
SEC. 8. OFFICE OF MANAGEMENT
AND BUDGET (OMB)
REQUIREMENTS FOR ALL
SUBSTITUTE FORMS
.01 Legal Requirements of the Paperwork Reduction Act of 1995 (‘‘Act’’).
Public Law 104–13 requires that: (1)
OMB approve all Service tax forms that
are subject to the Act; (2) each IRS
form contains (in the upper right corner)
the OMB number, if any; and, 3) each
IRS form (or its instructions) states why
IRS is the information, how it will be
used, and whether or not the information
is required to be furnished. This information must be provided to every user
of any official or substitute tax forms.
.02 Application of Act to Substitute
Forms.
1 OMB Number Is Required. All substitute forms must contain in the upper
right corner (see marginal Printing, Part
A, Sec. 13.02.1(c)) the OMB number
that is on the official form.
2 Format Required - OMB No.
XXXX–XXXX (Preferred) or OMB #
XXXX–XXXX.
3 Required Explanation to Users of
Substitute Forms. You must also inform
the users of your substitute forms of the
Service use and collection requirements
stated in the instructions for the official
Service form.
(a) If you provide your users or customers with the official IRS instructions,
page 1 of each form must retain either

15

the Paperwork Reduction Act Notice, or
a reference to it as on the official forms
(usually in the lower left corner of the
forms).
(b) If the Service instructions are not
provided to users of your forms, the
exact text of the Paperwork Reduction
Act Notice must be furnished on the
form or separately. This notice reads, in
part, ‘‘We ask for this information to
carry out the Internal Revenue laws of
the United States. You are required to
give us the information. We need it to
insure that you are complying with these
laws and to allow us to figure and
collect the right amount of tax. . . .’’ You
must also include a copy of the alternative statement provided to users of your
forms with the forms you submit for
approval.
.03 Obtaining OMB Number and Notice. The OMB number and Paperwork
Reduction Act Notice may be obtained
from the official printed form (or its
instructions), any format produced by
the Service (e.g. CD or BBS download)
or directly from the Service.
SEC. 9. GENERAL GUIDELINES
.01 The Official Form is the Standard. Because a substitute form is a
variation from the official form, you
should know the requirements of the
official form for the year of use before
you modify it to meet your needs. The
Service provides several means of obtaining the most frequently used tax
forms. These include the sale of a
CD–ROM, and access to an electronic
forms bulletin board (See Part A, Section 17–19).
.02 Design. Each form must follow
the design of the official form as to
format arrangement, item caption, line
numbers, line references, and sequence.
.03 State Tax Information Prohibited.
State tax information must not appear
(be visible) on the federal tax return or
associated form or schedule which is
filed with the Internal Revenue Service,
except where amounts are claimed on or
required by the federal return, e.g., line
5, Schedule A (Form 1040). (See Part A,
Sec. 14.03 Block Out Methods.)
.04 Federal and State Columns. When
a form is designed with both federal and
state columns, the federal column must
be to the left of the state column and
adjacent to the line caption. Again, state
tax information must not be on a federal
tax form.
.05 Vertical Alignment of Amount
Fields.

1 When a form is to be computerprepared, you may remove the vertical
line in the amount field that separates
dollars from cents. When a form is to be
computer-generated, vertically align the
amount entry fields where possible. You
must also use one of the ten-character
amount formats shown in Part B, Sec.
3.04.
2 If the possibility exists that a form
may be manually prepared, the federal
column must have a vertical line or
some type of indicator in the amount
field to separate dollars from cents if the
official form has a vertical line. The
cents column must be at least 2⁄10 inch
wide.
.06 Attachment Sequence Number.
Please note that most individual income
tax forms have an ‘‘attachment sequence
number’’ located just below the year
designation in the upper right corner of
the form. The Service uses this number
to indicate the order in which forms are
to be attached to the tax return so they
may be processed in that order. On
computer-prepared forms it must be
printed in no less than 12-point boldface type and centered below the form’s
year designation. On computer-generated
forms, place the sequence number following the year designation for the tax
form and separate with an asterisk. It is
not necessary to duplicate the ‘‘Attachment Sequence Number’’ wording, except for the actual number. (See Forms
Exhibits at end of this Revenue Procedure.)
.07 Attachment Sequence Numbers
Required. The attachment sequence
number is required on most IRS forms.
Please note that some of the numbers
necessarily change each year. The specific sequence numbers used on official
IRS forms must be duplicated on the
representative substitute form. If a sequence number is not provided on the
official form, it is not required on a
substitute of that form either.
.08 Paid Preparer’s Information and
Signature Area. On Forms 1040EZ,
1040A, 1040, and 1120, etc., the ‘‘Paid
Preparer’s Use Only’’ area may not be
rearranged or relocated. You may, however, add three extra lines to the paid
preparer’s address area without prior
approval. This applies to other tax forms
as well. Please note that the preparer’s
area on Form 1040EZ is on the bottom
of Page 2. Substitute Forms 1040EZ
with the preparer area on Page 1 or in a
different location on Page 2 will not be
accepted.

.09 Assembly of Forms. If developing software or forms for use by others,
please inform your customers/clients
that the order in which the forms are
arranged may affect the processing of
the package. A return must be arranged
in this order: (1) the tax return, (2)
Form 1040: schedules and forms in
sequence number order; all others
(Forms 1120, 1120S, 1065, 1041, etc.):
lettered schedules (Schedule D, etc.) in
alphabetical order and numbered forms
in numerical order (Forms 2220, 4626,
etc.), (3) supporting statements in the
same sequence as the forms they support, and (4) additional information required or voluntarily submitted. In this
way, they are received in the order in
which they must be processed. If you do
not send them to us in this order, the
Service has to delay the return package
to disassemble them and place them in
this order before processing is continued.
SEC. 10. PHYSICAL ASPECTS AND
REQUIREMENTS: PAPER
.01 Paper Content. The paper must
be:
1 Chemical wood writing paper that
is equal to or better than the quality
used for the official form;
2 at least 18 pound (179 x 229, 500
sheets) or
3 at least 50 pound offset book (259
x 389, 500 sheets).
.02 Paper Prohibited. Carbon-bonded
paper is prohibited from use for all
substitute forms filed with the Service.
.03 Paper with Chemical Transfer
Properties - Limited Use. Chemical
transfer paper for all substitute forms
may be used only when the following
specifications are met.
1 Each ply within the chemical transfer set of forms must be labeled.
2 Only the top ply (ply one and
white in color), the one which contains
chemical on the back only (coated
back), may be filed with the Service.
For example, a set containing three plies
would be constructed as follows: ply
one (coated back), ‘‘Federal Return, File
with IRS’’; ply two (coated front and
back), ‘‘Taxpayer’s copy’’, and ply three
(coated front), ‘‘Preparer’s copy.’’
3 The file designation, ‘‘Federal Return, File with IRS,’’ for ply one must
be printed in the bottom right margin
(just below the last line of the form) in
12-point, bold-face type. It is not mandatory, but recommended, that the file

16

designation, ‘‘Federal Return, File with
IRS,’’ be printed in a contrasting ink for
visual emphasis.
4 Carbon Paper. We prefer that you
do not attach any carbon paper to any
return you file with the Service.
.04 Paper and Ink Color. We prefer
that the color and opacity of paper
substantially duplicates that of the original form. This means that your substitute must be printed in black ink and
may be on white or on the color paper
the Service form is printed on. (See Part
B for exceptions regarding scannable
documents). Forms 1040A and 1040
substitute reproductions may be in black
ink without the colored shading. The
only exception to this rule is Form
1041–ES, which should always be
printed with a very light gray shading in
the color screened area. This is necessary to assist us in expeditiously separating this form from the very similar
Form 1040–ES.
.05 Page Size. Substitute or reproduced forms and computer prepared/
generated substitutes may be the same
size as the official form (89 x 119, in
most cases) or they may be the standard
commercial size (81⁄29 x 119) exclusive
of pin-feed holes. The thickness of the
stock cannot be less than .003 inch.
SEC. 11. PHYSICAL ASPECTS AND
REQUIREMENTS: PRINTING
.01 Printing Medium. The private
printing of all substitute tax forms must
be by conventional printing processes,
photocopying, computer-graphics, or
similar reproduction processes.
.02 Legibility.
1 All forms must have a high standard of legibility, both as to printing and
reproduction and as to fill-in matter.
Entries of taxpayer data may be no
smaller than eight points.
2 The Service reserves the right to
reject those with poor legibility. The ink
and printing method used must ensure
that no part of a form (including text,
graphics, data entries, etc.) develops
‘‘smears’’ or similar quality deterioration, including any subsequent copies or
reproductions made from an approved
master substitute form, either during
preparation or during Service processing.
.03 Type Font. Many federal tax
forms are printed using ‘‘Helvetica’’ as
the basic type font. We request that you
use this type font when composing
substitute forms.

.04 Print Spacing. Substitute forms
should be printed using a 6 lines/inch
vertical print option. They should also
be printed horizontally in 10 pitch pica
(i.e., 10 print characters per inch) or 12
pitch elite (i.e., 12 print positions per
inch).
.05 Image Size. The image size of
printed substitute forms should be as
close as possible to that of the official
form. You may omit any text on both
computer-prepared and computergenerated forms that is solely instructional.
.06 Title Area Changes. To allow a
large top margin for marginal printing
and more lines per page (see Sec. 13
below), the title line(s) for all substitute
forms (not including the form’s year
designation and sequence number, when
present), may be photographically reduced by 40 percent or reset as one line
of type. When reset as one line, the type
size may be no smaller than 14-point.
You may omit ‘‘Department of the Treasury, Internal Revenue Service’’ and all
reference to instructions in the form’s
title area.
.07 Remove Government Printing Office Symbol. When privately printing
substitute tax forms, the Government
Printing Office symbol and/or jacket
number must be removed. In the same
place, using the same type size, print the
Employer Identification Number (EIN),
the Social Security Number (SSN) of
the printer or designer, or the IRS
assigned source code. (We prefer this
last number be printed in the lower left
area of the first page of each form.)
Also remove the IRS Catalog Number,
if one is present in the bottom center
margin, and the Recycle Symbol, if the
substitute is not produced on recycled
paper.
.08 Printing On One Side of Paper.
While it is preferred that both sides of
the paper be used for substitute and
reproduced forms, resulting in the same
page arrangement as that of the official
form or schedule, the Service will not
object if only one side of the paper is
used.
.09 Photocopy Equipment. The Service does not undertake to approve or
disapprove the specific equipment or
process used in reproducing official
forms. Photocopies of forms must be
entirely legible and satisfy the conditions stated in this and other revenue
procedures.
.10 Reproductions. Reproductions of
official forms and substitute forms
which do not meet the requirements of

this revenue procedure may not be filed
instead of the official forms. Illegible
photocopies are subject to being returned to the filer for resubmission of
legible copies.
.11 Removal of Instructions. You may
remove all references to instructions. No
prior approval is needed. One exception
is that the statement, ‘‘For Paperwork
Reduction Act Notice, See Instructions’’,
must be retained or a similar statement
provided on each form.
SEC. 12. PHYSICAL ASPECTS AND
REQUIREMENTS: MARGINS
.01 Margin Size.
1 The format of a reproduced tax
return when printed on the page must
have margins on all sides at least as
large as the margins on the official
form. This allows room for Service
employees to make the necessary entries
on the form during processing.
2 A one-half to one-quarter inch margin must be maintained across the top,
bottom, and both sides (exclusive of any
pin-fed holes) of all computer-generated
substitutes. The margin area is also used
by Service employees to make necessary
entries on the form during processing.
3 The marginal, perforated strips containing the pin-fed holes must be removed from all forms prior to filing
with the Service.
.02 Marginal Printing.
1 Non-Tax Material Allowed in Limited Areas.
(a) Printing is never allowed in the
top margin of the tax return form (i.e.,
Forms 1040, 1040A, 1040EZ, 1120,
940, 941, 5500 Series, etc.). The Service
uses this area to imprint a Document
Locator Number and a DPS Unique
Submission Identifier for each return.
(b) With the exception of the actual
tax return forms (i.e., Forms 1040,
1040A, 1040EZ, 1120, 940, 941, etc.),
you may print in the left vertical margin
and in the left half of the bottom
margin, except for the substitute forms
source code, which must be placed in
the lower left area of Page 1.
2 Prior Approval Not Required. Prior
approval is not required for the marginal
printing allowed in 1 above when
printed on an official form, on a photocopy of an official form, or on an
(unchanged) IRS reproduction proof.
3 Prior Approval Required. The marginal printing allowance in 1 above is
also the guide for the preparation of
acceptable substitute forms. There is no

17

exception to the requirement that no
printing is allowed in the top margin of
the tax return form.
SEC. 13. EXAMPLES OF
APPROVED FORMATS
.01 Examples. Two sets of exhibits
(Exhibits A–1, B–1, A–2 and B–2) are
at the end of this revenue procedure.
These are examples of how the guidelines in this revenue procedure may be
used in some specific cases. Vertical
spacing is six (6) lines to the inch.
These examples are from a prior year
and are not to be used as substitute
forms.
.02 No State Tax Information. No
state tax information can appear on
these forms when filed with the Form
1040. The state column may be present
but the state tax information must not be
visible when filed with the Service. We
prefer that the entire state column be
completely blocked out.
.03 BLOCK OUT METHODS. A
suggested method to block out state tax
information is: (1) place the substitute
form in a clear plastic folder, (2) on the
folder, place a strip of opaque material
the exact width and length of the column you wish to block out, then (3)
photocopy the substitute form while still
in the folder. The result will be a form
with only the federal tax information
visible. Another method is to take a
black marking pen and, using either
vertical or horizontal strokes, cross out
the state figures. Carbon interleaved sets
may be used where the amounts entered
in the state column are filled in with
black carbon overprint. This copy may
be filed with the return.
.04 Examples of acceptable computer-generated formats are also shown in
the Exhibits section of this revenue
procedure. The exhibits are for Schedules A and B. Vertical spacing is six (6)
lines to the inch. You may also refer to
them as examples of how the guidelines
in this revenue procedure may be used
in specific cases.
1 A combination of upper and lower
case print fonts is acceptable in producing the computer-generated forms included in this procedure.
2 This same logic for computergenerated forms can be applied to any
Service form that is normally reproducible as a substitute form, with the exception of tax return forms as discussed
elsewhere.

SEC. 14. SPECIFICATIONS FOR
FILING SUBSTITUTE FORMS
.01 Filing Substitute Forms. To be
acceptable for filing, a substitute return
or form must print out in a format that
will allow the party submitting the return to follow the same instructions as
for filing official forms. These instructions are in the taxpayer’s tax package,
or in the related form instructions. The
form must be on the appropriate size
paper, be legible, and include a jurat
where one appears on the published
form.
1 Note to software publishers: The
Service has received returns produced
by software packages with approved
output where either the form heading
was altered or the lines were spaced
irregularly. This produces an illegible or
unrecognizable return or a return with
the wrong number of pages. We realize
that many of these problems are caused
by individual printer differences but
they may delay input of return data and,
in some cases, generate correspondence
to the taxpayer. Therefore, in the instructions to the purchasers of your
product, both individual and professional, please stress that their returns
will be processed more efficiently if
they are properly formatted. This includes:
(a) having the correct form numbers
and titles at the top of the return and
(b) submitting the same number of
pages as if the form were an official
IRS form, with the line items on the
proper pages.
.02 Use Preaddressed Internal Revenue Service Label. If you are a practitioner filling out a return for a client or
a software publisher who prints instruction manuals, stress the use of the
preaddressed label provided in the tax
package the Service sent to the taxpayer,
when available. The use of this label (or
its precisely duplicated label information) is extremely important for the
efficient, accurate, and economical processing of a taxpayer’s return. Labeled
returns indicate that a taxpayer is an
established filer and permits us to automatically accelerate processing of those
returns. This results in quicker refunds,
accurate names/addresses and postal deliveries, and less manual review by IRS
functions.
1 If you are producing a software
package that generates name and address data onto the tax return, do not
under any circumstances program either
the Service preprinted check digits or a

practitioner-derived Name Control to appear on any return prepared and filed
with the Service.
3 If programming to print forms, use
only the following label information
format for single filers:
000–00–0000
JOHN Q. PUBLIC
310 OAK DRIVE
HOMETOWN, STATE 94000
4 Use only the following information
for joint filers:
000–00–0000
000–00–0000
JOHN Q. PUBLIC
MARY I. PUBLIC
310 OAK DRIVE
HOMETOWN, STATE 94000
SEC. 15. GUIDANCE FROM OTHER
REVENUE PROCEDURES
.01 Guidance for the substitute tax
forms not covered in this revenue procedure and the revenue procedures which
govern their use, are as follows:
1 Revenue Procedure 94–79, IRS
Publication 1355, Requirements and
Conditions for the Reproduction, Private
Design, and Printing of Substitute Forms
1040–ES.
2 Revenue Procedures 96–24 and 96–
24a, IRS Publication 1141, General
Rules and Specifications for Private
Printing of Substitute Forms W–2 and
W–3.
3 Revenue Procedure 96–42, IRS
Publication 1179, Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096, 1098, 1099
Series, 5498, and W–2G.
4 Revenue Procedure 96–11, IRS
Publication 1187, Specifications for Filing Form 1042–S, Foreign Person’s U.S.
Source Income Subject to Withholding,
on Magnetic Tape.
5 Revenue Procedure 96–36, IRS
Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W–2G
Magnetically or Electronically.
6 Revenue Procedure 95–18, IRS
Publication 1223, Specifications for Private Printing of Substitute Forms W–2c
and W–3c.
SEC. 16. ORDERING
PUBLICATIONS
.01 In 1996, Form 3975, Tax Practitioner Annual Mailing List Application/
Update, which is available in Publication 1045, Information for Tax
Practitioners, may be only be used to
order Package X, Informational Copies
of Tax Forms and Instructions. The
revenue procedures listed below may be

18

ordered by calling 1–800–TAX–FORM
(1–800–829–3676). Identify the requested document by IRS publication
number. The following publications address the filing of substitute forms, as
well as documents on magnetic tape:
1 Pub. 1141, the revenue procedure
on specifications for private printing for
Forms W–2 and W–3.
2 Pub. 1167, the revenue procedure
on substitute printed, computer-prepared,
and computer-generated tax forms and
schedules.
3 Pub. 1179, the revenue procedure
on paper substitute information returns
(Forms 1096, 1098, 1099 series, 5498,
and W–2G).
4 Pub. 1192, Catalog of Reproducible
Forms and Instructions.
5 Pub. 1220, the revenue procedure
on electronic or magnetic tape and magnetic diskette reporting for information
returns (Forms 1098, 1099 series, 5498,
and W–2G).
6 Pub. 1223, the revenue procedure
on substitute Forms W–2c and W–3c.
7 Pub. 1239, Specifications for Filing
Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, on Magnetic Tape.
8 Pub. 1245, Magnetic Tape Reporting for Forms W–4.
9 Pub. 1345, Handbook for Electronic Filers of Individual Income Tax
Returns (Tax Year 1996). (This is an
annual publication; tax year is subject to
change.)
10 Pub. 1345–A, Handbook for Electronic Filers of Individual Income Tax
Returns (Tax Year 1996). This publication, printed in the late fall, supplements
Publication 1345.
11 Pub. 1355, the revenue procedure
on the requirements for substitute Form
1040–ES.
.02 If you are mailing your order, the
address to use is determined by your
location. If you are located in:
1 Alaska, Arizona, California, Colorado, Hawaii, Idaho, Kansas, Montana,
Nevada, New Mexico, Oklahoma, Oregon, Utah, Washington, Wyoming,
Guam, Northern Marianas, or American
Samoa, mail your request to:
Western Area Distribution Center
Rancho Cordova, CA 95743–0001
2 Alabama, Arkansas, Illinois, Indiana,
Iowa, Kentucky, Louisiana, Michigan,
Minnesota, Mississippi, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee, Texas, or Wisconsin,
mail your request to:

Central Area Distribution Center
P.O. Box 8903
Bloomington, IL 61702–8903
3 Connecticut, Delaware, District of
Columbia, Florida, Georgia, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York, North
Carolina, Pennsylvania, Rhode Island,
South Carolina, Vermont, Virginia, West
Virginia, as well as all foreign countries
and Puerto Rico, mail your request to:
Eastern Area Distribution Center
P.O. Box 85074
Richmond, VA 23261–5074
4 Taxpayers in the Virgin Islands
should mail their requests to:
V.I. Bureau of Internal Revenue
9601 Estate Thomas
Charlotte Amalie, St. Thomas, VI 00802
SEC. 17. ORDERING
REPRODUCTION PROOFS
The reproduction proof program will
be discontinued in October 1996. Forms
are available on the IRS BBS, the
Internet and on CD–ROM. See Sections
19 and 20.
SEC. 18. READER LIST PROGRAM
The reader list program will be discontinued in October 1996. Forms are
available on the IRS BBS, the Internet
and on CD–ROM. See Sections 19 and
20.
SEC. 19. INTERNAL REVENUE
INFORMATION SYSTEMS BULLETIN
BOARD AND THE INTERNET
.01 Copies of tax forms and some
publications may be downloaded as
print files from the Internet or from the
Internal Revenue Information Systems
(IRIS) Bulletin Board. Forms can be
downloaded in several file formats.
Those choosing to use the portable
document file format (.pdf files) for
viewing in Microsoft Windows or on a
Macintosh can also download a free
copy of the Adobe Acrobat Reader.
.02 Access the Internet via one of the
following: World Wide Web - http://
www.irs.ustreas.gov, FTP = ftp.irs.
ustreas.gov, or Telnet - iris.irs.ustreas.
gov. This service is free but time on the
Internet is subject to the fees charged by
your Internet provider.
.03 IRIS can be reached via FedWorld, an aggregation of federal BBS
maintained by the Department of Commerce. IRIS can be reached directly by
modem at (703) 321–8020; FedWorld’s
main number is (703) 321–3339. These
are toll calls.

SEC. 20. FEDERAL TAX FORMS ON
CD–ROM
.01 The IRS also offers access to
current and prior year tax forms and
instructions through its Federal Tax
Forms CD–ROM. The CD will be issued in two cumulative releases for the
1996 tax year.
.02 The CD will contain over 600
current year tax forms, instructions, and
Taxpayer Information Publications
(TIPs). Also included are prior year
forms and instructions from 1991 and
TIPs from 1994. All necessary software
to view the files must be installed from
the CD–ROM. Software for Microsoft
Windows 3.x and Macintosh System 7.5
and later is included on the disk. The
software will also run under Windows
95.
.03 All products are presented in
Adobe’s Portable Document Format
(PDF). A copy of the Adobe Acrobat
Reader is on the CD. In addition, the
TIPs will be provided in the Standard
Generalized Markup Language (SGML).
.04 For system requirements and to
order the 1996 Federal Tax Forms CD–
ROM (stock number 648–096–00004–
6), contact the Government Printing Office’s (GPO) Superintendent of
Documents:
1 by telephone - (202) 512–1800;
select option 1;
2 by fax - (202) 512–2250;
3 through GPO’s Federal Bulletin
Board - (202) 512–1387; after signon
type ‘‘/go irs’’;
4 through GPO’s World Wide Web
site at http://www.gpo.gov/su_docs;
5 by mail using the order form contained in IRS Publication 1045 (Information for Tax Practitioners); or
6 by mail to Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA
15250–7954.
.05 The cost of the CD is $25 and it
will be released in February 1997.
Please reference stock number 648–096–
00004–6. Those who order before December 2, 1996 will also receive the
Janaury early release CD containing tax
products issued to that point.
SEC. 21. AGREEMENT
Any person or company who uses
substitute forms and makes all or part of
the changes specified in this revenue
procedure, agrees to the following stipulation: The Service presumes the
changes are made in accordance with
these procedures and, as such, will be
noninterruptive to the processing of the

19

tax return. Should any of the changes
prove to be not exactly as described,
and as a result become disruptive to the
Service during processing of the tax
return, the person or company agrees to
accept the determination of the Service
as to whether or not the form may
continue to be used during the filing
season, and also agrees to work with the
Service in correcting noted deficiencies.
Notification of deficiencies may be
made by letter, phone contact, or both
and may include the return of unacceptable forms for resubmission of acceptable forms.
PART B. SPECIFIC
SEC. 1. GENERAL
The specifications contained in this
part of the revenue procedure define
specific, detailed requirements for certain forms and conditions. These specifications must be adhered to in producing
acceptable substitute forms as defined
herein.
SEC. 2. CONDITIONS-TAX
RETURNS (FORM 1040, 1040A,
1120, ETC.)
.01 Acceptable Forms.
1 Computer-Generated Versions. Computer-generated versions of a tax return form
(e.g., Form 1040, 1040A, 1120, etc., which
requires a signature and that establishes tax
liability) are permitted under the following
conditions:
(a) These substitute returns must be
printed on plain white paper.
(b) Substitute returns and forms must
conform to the physical layout of the
corresponding Service form although the
typeface may differ. The text should
match the text on the officiallypublished form as closely as possible;
condensed text and abbreviations will be
considered on a case-by-case basis. Exception: All jurats (perjury statements)
must be reproduced verbatim. No text
can be added, deleted, or changed in
meaning. It must be readily identifiable
as a valid tax return.
(c) Various computer-graphic print
media such as laser printing, dot matrix
addressable printing, etc., may be used
to produce the substitute forms.
(d) The substitute return must be the
same exact number of pages, and contain the same line text as the official
return.
(e) All computer-generated tax returns MUST be submitted for approval

prior to their original use. Should you
receive an approval letter for a return
and the following year’s return has no
changes except the preprinted year, the
latter return is not subject to approval.
Exception: If the approval letter specifies a one-time exception for your return, the next year’s return must be
approved.
2 Computer Generated Condensed
Format Versions. The accepted condensed print format version for individual returns is the 1040PC ‘‘answer
sheet format’’ tax return.
.02 Prohibited Forms.
1 Tax returns (e.g., Forms 1040, etc.)
CANNOT be computer-generated on
lined or color-barred paper, using the
basic non-graphic layouts acceptable for
all other (non-tax return) substitute
forms and schedules.
2 Tax returns that differ from the
official IRS forms in a manner that
makes them non-standard or unprocessable.
.03 Changes Permitted To The Forms
1040 and 1040A.
1 Certain changes (listed below) are
permitted to the graphics of the form
without prior approval, but these
changes apply only to preprinted forms
as described in .01 above.
2 Changes not requiring prior approval are good only for the annual
filing period, which is the current Tax
Year. Such changes are valid in subsequent years only if the official form
does not change.
3 Other Changes Not Listed. All
changes not listed here require prior
approval from the Service BEFORE the
form may be filed with the Service.
SEC. 3. CHANGES PERMITTED TO
GRAPHICS (FORMS 1040A AND
1040)
.01 Adjustments
You may make minor vertical and
horizontal spacing adjustments to allow
for computer or word-processing printing. This includes widening the amount
columns or tax entry areas so long as
the adjustments do not exceed other
provisions stated in revenue procedures.
No prior approval is needed for these
changes. However, the users of forms
with such changes are bound by the
‘‘Agreement’’ in Part A, Section 21.
.02 Name and Address Area.
1 The horizontal rules and instructions within the name and address area
may be removed and the entire area left
blank; no line or instruction can remain

in the area. However, the statement
regarding use of the IRS mail label
should be retained.
2 The heavy ruled border (when
present) that outlines the name and
address area must not be removed, relocated, expanded or contracted.
3 Required Format
(a) When the name and address area
is left blank, as provided in 1 above, the
following format must be used when
printing the taxpayer’s name and address. Otherwise, unless the taxpayer’s
preprinted label is affixed over the information entered in this area, the lines
must be filled-in as shown
1st name line (35 characters maximum)
2nd name line (35 characters maximum)
In-care-of name line (35 characters
maximum)
City, State (24 char. max.), one blank
char., & ZIP (five char.)
(b) When there is no in-care-of name
line, the name and address will consist
of only three lines (single filer) or four
lines (joint filer). Examples of the formats follow:
Example of name and address (joint
filer) with no in-care-of name line:
JOHN Z. JONES
MARY I. JONES
1234 ANYWHERE ST., APT 111
ANYTOWN, STATE 12321
Example of name and address (single
filer) with in-care-of name line:
JOHN Z. JONES
C/O THOMAS A. JONES
4311 SOMEWHERE AVE.
SAMETOWN, STATE 54345
.03 Social Security Number (SSN)
and Employer Identification Number
(EIN) Area.
1 The vertical lines separating the
format arrangement of the SSN/EIN
may be removed.
2 When the vertical lines are removed, the SSN and EIN formats must
be 000–00–0000 or 00–0000000, respectively.
.04 Cents Column.
1 You may remove the vertical rule
that separates the dollars from the cents.
2 All entries in the amount column
should have a decimal point following
the whole dollar amounts whether or not
the vertical line that separates the dollars from the cents is present.
3 You may omit printing the cents,
but all amounts entered on the form
must follow a consistent format. You are
strongly urged to round off the figures
to whole dollar amounts, following the

20

official return instructions. Where several amounts are summed together, the
total should be rounded off subsequent
to the addition (i.e, indivdual amounts
should not be rounded off for computation purposes).
4 When printing money amounts, you
must use one of the following tencharacter formats: (a) 0,000,000. (b)
000,000.00
5 When there is no entry for a line
leave the line blank.
.05 ‘‘Paid Preparer’s Use Only’’ Area.
1 On all forms, the paid preparer’s
information area may not be rearranged
or relocated.
2 You may add three lines and remove the horizontal rules in the
preparer’s address area.
SEC. 4. CHANGES PERMITTED TO
FORM 1040A GRAPHICS
No prior approval is needed for the
following changes (for use with
computer-prepared forms only):
.01 Line 4.
This line may be compressed horizontally (to allow for same line entry for
the name of the qualifying child) by
using the following caption: ‘‘Head of
household; child’s name’’ (name field).
.02 Other Lines.
Any line whose caption takes up two
or more vertical lines may be compressed to one line by using contractions, etc., and by removing instructional
references.
.03 Page 2 (Form 1040A).
All lines must be present and numbered in the order shown on the official
form. These lines may also be compressed as in .02 above.
.04 Color Screening.
It is not necessary to duplicate the
color-screening used on the official
form. A substitute Form 1040A may be
printed in black and white only, with no
color screening.
SEC. 5. OTHER CHANGES
PROHIBITED
No other changes to the Form 1040A
graphics are allowed without prior approval, except for the removal of instructions and references to instructions.
SEC. 6. CHANGES PERMITTED TO
THE FORM 1040 GRAPHICS
No prior approval is needed for the
following changes (for use with
computer-prepared forms only):

.01 Line 4.
This line may be compressed horizontally (to allow for a larger entry area for
the name of the qualifying child) by
using the following caption: ‘‘Head of
household; child’s name’’ (name field).
.02 Line 6c.
The vertical lines separating columns
(1) through (4) may be removed. The
captions may be shortened to allow a
one-line caption for each column.
.03 Other Lines.
Any other line whose caption takes
up two or more vertical lines may be
compressed to one line by using contractions, etc., and by removing instructional references.
.04 Line 21 - Other Income.
1 The fill-in portion of this line may
be expanded vertically to three lines.
2 The amount entry box must remain
a single entry.
.05 Line 38 - Tax
You may change the line caption to
read ‘‘Tax’’ and computer-print the
words ‘‘Total includes tax from’’ and
either ‘‘Forms(s) 8814’’, ‘‘Form 4970’’,
or ‘‘Form 4972’’.
.06 Line 42
You may change the caption to read:
‘‘Other credits from Form’’ and
computer-print only the form(s) that
apply.
.07 Color Screening.
It is not necessary to duplicate the
color-screening used on the official
form. A substitute Form 1040 may be
printed in black and white only, with no
color screening.
SEC. 7. OTHER CHANGES
PROHIBITED
No other changes to the Form 1040
graphics are permitted without prior approval except for the removal of instructions and references to instructions.
SEC. 8. ACCEPTABLE FORMATS
FOR COMPUTER-GENERATED
FORMS AND SCHEDULES
.01 Exhibits of acceptable computergenerated formats for the schedules usually attached to the Form 1040 are
shown in the Exhibits section of this
revenue procedure.
.02 Use of Acceptable Formats. If
your computer-generated forms appear
exactly like the exhibits, no prior authorization is needed.

SEC. 9. COMPUTER-GENERATED
FORMS NOT SHOWN AS EXHIBITS
IN THIS REVENUE PROCEDURE
.01 Those desiring to computergenerate forms not shown here may do
so, but they must design such forms
themselves by following the manner and
style of those in the Exhibits section of
this revenue procedure, and by taking
care to observe other requirements and
conditions stated here.
.02 Computer-generated forms so designed do not require prior approval
from the Service. However, the user of
such forms is bound by the ‘‘Agreement’’ in Part A, Sec. 21 above. The
Service encourages the submission of all
proposed forms for review and approval.
.03 If you wish, you may submit any
substitute form to the Service for approval consideration, if the proposed
form is covered in Part A, Section 2.03.
SEC. 10. INSTRUCTIONS FOR
FORMATTING
COMPUTER-GENERATED
SUBSTITUTES
.01 Format Arrangement
The format of each substitute schedule or form must follow the format of
the official schedule or form as to item
captions, line references, line numbers,
sequence, form arrangement and format,
etc. Basically try to make the form look
like the official one, with readability and
consistency being primary factors. You
may use periods and/or other similar
special characters to separate the various
parts and sections of the form. DO NOT
use alpha or numeric characters for
these purposes. With the exceptions in
.02 below, all line numbers and items
must be printed even though an amount
is not entered on the line.
.02 Line Numbers.
1 When a line on an official form is
designated by a number or a letter, that
designation (reference code) must be
used on a substitute form.
2 The reference code must be printed
to the left of the corresponding captioned line and also immediately preceding the data entry field even if there is
no reference code immediately preceding the data entry field on the official
form. If an entry field contains multiple
lines but shows the line references only
one time on the left and right side of the
form, do not use more than the same
number of line references on the substitute return.
3 In addition, the reference code that
is immediately before the data field

21

must either be followed by a period or
enclosed in parentheses. There also must
be at least two blank spaces between the
period or the right parenthesis and the
first digit of the data field. (See example
below.)
4 A decimal point (i.e., a period)
should be used for each money amount
regardless of whether the amount is
reported in dollars and cents or in whole
dollars, or whether or not the vertical
line that separates the dollars from the
cents is present. The decimal points
must be vertically aligned when possible.
Example:
5 STATE & LOCAL INC.
TAX. . . . . . . . . . . . . . . . . . .5. 495.00
6 REAL ESTATE
TAXES . . . . . . . . . . . . . . . .6.
7 PERSONAL PROPERTY
TAXES . . . . . . . . . . . . . . . .7. 198.00
or
5 STATE & LOCAL INC.
TAX. . . . . . . . . . . . . . . . . . (5) 495.00
6 REAL ESTATE
TAXES . . . . . . . . . . . . . . . (6)
7 PERSONAL PROPERTY
TAXES . . . . . . . . . . . . . . . (7) 198.00
.03 Multiple Page Forms.
When submitting multiple page
forms, send all pages of the form in the
same package.
SEC. 11. ADDITIONAL
INSTRUCTIONS FOR ALL FORMS
.01 Internal control numbers and
identifying symbols of the computer
preparer may be shown on the substitute, if the use of such numbers or
symbols is acceptable to the taxpayer
and the taxpayer’s representative. If
shown, such information must not be
printed in the top one-half inch clear
area of any form or schedule requiring a
signature. With the exception of the
actual tax return form (i.e., Forms 1040,
1120, 940, 941, 5500 Series, etc.), you
may print in the left vertical and bottom
left margins. The bottom left margin
you may use extends 31⁄2 inches from
the left edge of the form. (See Part A,
Sec. 12 for more information on this
subject.)
.02 Descriptions for captions, lines,
etc., appearing on the substitute forms
may be limited to one print line by
using abbreviations and contractions,
and by omitting articles, prepositions,
etc. However, sufficient key words must
be retained to permit ready identification
of the caption, line or item.

1 Explanatory detail and/or intermediate calculations for derivation of final
line totals, may be included on the
substitute. We prefer that such calculations be submitted in the form of a
supporting statement. If intermediate
calculations are included on the substitute, the line on which they appear may
not be numbered or lettered. Intermediate calculations may not be printed in
the right column. This column is reserved for official numbered and lettered
lines that correspond to the ones on the
official form. If a supporting statement
is submitted, intermediate calculations or
subtotals may be formatted at the
preparer’s option.
2 Text prescribed for the official
form, which is solely instructional in
nature, e.g., ‘‘Attach this schedule to
Form 1040,’’ ‘‘See instructions,’’ etc.,
may be omitted from the substitute
form.
3 Information for more than one
schedule or form may not be shown on
the same printout page. It is strongly
recommended that a substitute form not
exceed the same number of pages used
for the official form.
(a) Both sides of the paper may be
printed for multiple page official forms;
but it is unacceptable to intermix single
page schedules of forms, except for
Schedules A and B which are printed
back to back by the Service. For example, Schedule E can be printed on
both sides of the paper, because the
official form is multiple page, with page
two continued on the back. However,
for example, do not print Schedule E on
the front page and Schedule SE on the
back, or Schedule A on the front and
Form 8615 on the back, etc. Both pages
of a substitute form must match the
official form version it represents, except that the back page may be blank if
the Service form only contains the instructions thereon.
4 Identify all computer-prepared substitutes clearly; print the form designation one-half inch from the top margin
and one and one-half inches from the
left margin; print the title centered on
the first line of print; and print the
taxable year and, where applicable, the
sequence number on the same line onehalf to one inch from right margin.
Include the taxpayer’s name and SSN
on all forms and attachments. Also print
the OMB number as reflected on the
official form.
5 The state tax column may be
present, but the state tax information
must NOT be visible on the copy filed

with the Service. When a form is designed with both federal and state columns, the federal column must be to the
left of the state column and adjacent to
the line caption.
6 Negative (or loss) monetary amount
entries should be enclosed in brackets,
or signed minus, to assist in the accurate
computation and input of form data. On
many official forms the Service preprints brackets in selected negative data
fields, and these designations should be
retained or inserted on affected substitute forms.
SEC. 12. FILING SUBSTITUTE
FORMS WITH THE SERVICE
Instruct the taxpayer to follow the
same instructions as for filing official
forms, unless filing the forms as a tax
preparer. These instructions are in the
taxpayer’s tax package.
SEC. 13. SPECIAL FORM 1040EZ
OPTICAL CHARACTER
RECOGNITION/IMAGE CHARACTER
RECOGNITION (OCR/ICR)
REQUIREMENTS
.01 The Form 1040EZ is designed in
OCR/ICR format. IRS has the capability
to machine read this form by optical
character recognition/image character
recognition (OCR/ICR) equipment.
Form 1040EZ data may also be filed
electronically or on Form 1040PC.
.02 An acceptable substitute OCR/
ICR Form 1040EZ must generally be an
exact replica of the official OCR/ICR
reproduction proof with respect to layout, content and required OCR/ICR
characteristics.
.03 The specific paper requirements
which must be met for the development
of a substitute (privately printed) OCR/
ICR Form 1040EZ include the following:
1 olor and quality of paper—Paper
must be white, OCR/ICR grade bond,
with no fluorescent additives or water
marks, and with zero rag content.
2 Reflectivity of paper—Must be
80% or greater.
3 Opacity—The paper opacity ratio
must be 80% or more.
4 Paper Weight—Specified paper
weight is 20 lb. OCR/ICR bond
(.00359).
5 Dirt—Must not exceed 10 parts per
million.
6 Finish (smoothness)—Must be between 90 and 160 units (Sheffield).
7 Porosity—Paper should have a
Gurley reading between 15 and 95.

22

8 Gloss—Paper with shiny or lustrous appearance (glossy) should be
avoided.
9 Size—Form trim size must be 89 x
119.
.04 The specific ink requirements
which must be met for this form include
the following:
1 Print Color—The face of the form
prints in black and green, the back
prints in black only (70% screen).
2 Ink—Green ink used must be
highly reflective OCR/ICR type, such as
Flint J–27975, or an exact match. Black
ink used must be non-reflective.
3 Face Registration—Black to green
must be .029 (plus or minus) both
horizontally and vertically.
4 Face Screen—Forms contain a
green screened background equal to a
15% tone of 110-line screen. Follow
registration marks on repro-proof for
screen positioning. Handprinted boxes
are included on Page 1 of the reproduction proof and should be printed as a
50% value of the recommended OCR/
ICR green ink. Inks used for
handprinted boxes must reflect at least
90% of the background on which it is
printed as measured in the visible range.
5 Face Margins—Approximately 2⁄69
head from top trimmed edge to screen
(1⁄29 to black image). 1⁄69 outside from
trimmed edges to screen.
6 Back Margins—1⁄29 head, 5⁄169 foot,
and 5⁄169 sides.
7 Back Screen—Back copy should be
screened for 70% tone value.
.05 Typography
Type must be substantially identical
in both size and shape with corresponding type on the official form reproduction proof.
.06 To assure proper alignment and
position of hand-printed characters representing return lines 1 through 10 tax
data, they must be handprinted (entered)
into the preprinted amount field boxes
on the form. A #2 lead wooden pencil,
or blue, and/or black ink pen (ball point,
fountain, or felt-tipped) is recommended
as the writing tool which will consistently provide the required stroke width
and print contrast on entered characters.
.07 Reading of handprinted characters
requires adherence to the following
techniques.
1 Enter numeric amount digits carefully and clearly. Fill at least 2⁄3 of the
individual character box height, keeping
the character within the box with no
overlapping or touching characters. Specific required digit constraints are shown
below.

2 When entering ‘‘fours’’, keep the
top open.
3 When entering ‘‘ones’’, do not use
serifs.
4 When entering ‘‘twos’’, do not add
extra loops.
5 All character lines must be connected, with no gaps.
.08 All the general and detailed provisions of this Revenue Procedure apply
(in addition to this specific OCR/ICR
Section) for the development of substitute OCR/ICR Forms 1040EZ.
SEC. 14. COMPUTER GENERATED
ALTERNATIVE RETURNS, FORM
1040PC FORMAT RETURN
.01 The Internal Revenue Service is
offering a new approach for filing individual income tax returns. The 1040PC
Format Return is an alternative to the
conventional preprinted tax return. The
1040PC is an answer sheet return, generated on a personal computer, in threecolumn format that prints only tax data
that is input into the software. Tax
returns are filed by tax preparers and
taxpayers using commercially available
tax preparation software packages that
include the 1040PC Format Return print
option.
1 1040PC Format Returns are
computer-prepared, printed on plain
white paper, signed and mailed to the
designated processing center and are
processed like any other conventionally
filed return.
2 Preparers, or taxpayers, must purchase IRS accepted tax preparation software packages that include the 1040PC
print option. All that is necessary to
participate in 1040PC is a personal
computer, accepted software, a printer,
and plain white paper. 1040PC is attractive to tax preparers and taxpayers who
might not be interested or capable of
Electronic Filing.
3 The Direct Deposit option is available to taxpayers filing 1040PC returns.
Balance due returns may also be filed
using 1040PC. The payment may be
forwarded to the Service Center with a
separate payment voucher (Form 1040–
V).
4 All software used to generate the
1040PC Format Return must be tested
and accepted by the Internal Revenue
Service. Testing will validate

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Ab12976132e7e5666. Public record. Not legal advice.