SERVICE PROVIDES GUIDANCE FOR REPORTING AGENTS WHO SUBMIT FEDERAL TAX DEPOSIT INFORMATION ON MAGNETIC TAPE.

Rev. Proc. 89-48

SECTION 1. PURPOSE

01 The purpose of this revenue procedure is to outline the requirments and instructions for reporting agents who submit magnetic tape for their clients' federal tax deposit payments. These payments are described in the Employment Tax Regulations (26 CFR Part 31) under Section 6302 of the Internal Revenue Code. All federal tax deposit payments are required to be deposited through a qualified federal tax depositary, as defined in 31 CFR Part 203.

02 Under the provisions of this revenue procedure, qualifying agents may request permission to prepare magnetic tapes for federal tax deposits instead of using the preprinted forms provided by the Internal Revenue Service (IRS). Authorization will extend only to those agents who have a minimum of 200 clients and who satisfy all the requirements of this revenue procedure.

SEC. 2. BACKGROUND

01 The IRS furnishes federal tax deposit forms to those taxpayers who can reasonably be expected to make tax deposits. These forms are preprinted with essential identifying information for processing the payment data to the appropriate tax account. Many payroll and tax preparation businesses do not have the preprinted deposit forms for making the required tax deposits and, in most instances, this occurs because the agent has not requested that the client forward the deposit forms furnished by the IRS. Some deposits have been mailed directly to an Internal Revenue Service office when the forms were not available. This practice is not in conformity with Section 31.6302(c)-1(a)(2) of the Employment Tax Regulations.

02 Authorization for preparing Form FTD 501, Federal Tax Deposit, Withheld Income and FICA Taxes (FTDs), first appeared in Rev. Proc. 75-12, 1975-1 C.B. 653. The authority to prepare federal tax deposit magnetic tapes is not dependent on the authority to file related tax returns on magnetic tape.

SEC. 3. FTD PAYMENT INFORMATION SUBMITTED BY REPORTING AGENTS

01 All FTD payments prepared by an authorized agent must be submitted to the service center which has an established working relationship with the depositary that has allowed the reporting agent to sue its Treasury Tax and Loan (TT&L) account. Form 2284, Advice of Credit (AOC), must be prepared by the reporting agent and presented to the depositary on or before the deposit due date. See Exhibit 11. Cash, check, money order or other form of payment must accompany the AOC when presented to the depositary. The funds presented to the depositary must match the amount listed on the AOC(s). The depositary must transmit the AOC to the Federal Reserve for further processing. The AOC will be issued to the participating reporting agents and will contain an American Bankers Association Number along with a specific branch code number. The AOC issued to the reporting agent should be prepared and used when submitting Federal Tax Deposit information on magnetic tape. Part 3 of the AOC must be mailed to IRS with the magnetic tape. Magnetic tape submission for Federal Tax Deposit can be made for Forms 940, 941, 943, 720, CT-1, 990PF, 990T, 990C, 1042, 1120, and Form 941 (Schedule A) Backup Withholding. Although it is preferred that the magnetic tape be transmitted to the IRS the same day the AOC is presented to the depositary, the Service will allow up to 5 calendar days from the depositary receipt of the AOC to IRS receipt. See Section 9.02. A separate AOC must be used for each type tax.

02 Deposits for clients who have not been accepted and validated by the IRS for this program must be made to a depositary by means of the pre-printed forms provided by IRS. Payments mailed directly to an IRS office will be returned with instructions that the appropriate deposit forms be obtained from their client and that payments be submitted through a qualified federal tax depositary, as required. Taxpayers whose payments are returned to their reporting agent may be subject to appropriate penalty and interest charges. The reporting agents must not assume the responsibility for making tax deposits on behalf of a client for any deposit that may become due before the client is actually accepted and validated by the IRS.

03 Reporting agents experiencing systemic problems in producing a magnetic tape or providing accurate data on individual accounts must submit payment to a depositary by means of the preprinted forms provided by IRS. The taxpayer may be subject to appropriate penalty and interest charges if the deposit is not received timely.

SEC. 4. ITEMS REQUIRED FOR ACCEPTANCE INTO THE FTD MAGNETIC TAPE PROGRAM

01 Agents who wish to submit FTD information on magnetic tape must first file a "Letter of Application" with the Director of the Internal Revenue Service Center where the deposits will be processed. In most cases this will be the same service center that processes the related tax forms. The IRS will process each "Letter of Application" within thirty calendar days of receipt. See Section 10 for a list of service centers and their respective addresses. The "Letter of Application" should include a brief statement by the reporting agent stating that they are requesting permission, in accordance with this Revenue Procedure, to submit Federal Tax Deposit information on magnetic tape. A listing of each taxpayer who will have their FTDs prepared by the reporting agent must be attached to the "Letter of Application". The "Listing of Clients" must contain the following information:

1. The full name, address and employer identification number of the reporting agent making the application. If the reporting agent will prepare tapes at more than one branch or location, each location must be identified in the "Letter of Application".

2. The name, title and telephone number of a person the service center can contact regarding the application. In most cases, any problem with the "Letter of Application" can be resolved by telephone.

02 The reporting agent must have a written agreement with a depositary that the depositary will allow the agent to use its Treasury Tax and Loan (TT&L) Account. A copy of the agreement must accompany the application. See Exhibit 7 for a sample format of the letter from the depositary. The name, address, Federal Reserve Bank Code, bank identification number/check digit code and branch code of the federal tax depositary must be listed in the agreement letter.

03 Each "Letter of Application" must include a listing of the taxpayers who will have their FTDs prepared by the reporting agent. The "Listing of Clients" must contain the following information:

1. Each taxpayer's complete business name (as established with IRS), address (including zip code), and federal employer identification number (EIN).

2. For each client, the listing must specify the types of taxes (filing requirements) that will be prepared.

3. The listing must be double spaced to allow room for notations by the service center. The clients must be listed in EIN number sequence.

4. A duplicate listing must be submitted so that the Service can maintain a file of taxpayers accepted under this program. See Section 7 for updates to the initial listing of clients. See Exhibit 1 for an example of the format of listings.

04 A Reporting Authorization, Form 8655, must be submitted for each taxpayer on the listing. See Section 6 for information concerning the Reporting Authorization form. See Exhibit 2 for a copy of Form 8655.

05 Initial applications containing a listing of fewer than 200 clients will be denied.

SEC. 5. ACCEPTANCE OF APPLICATION

01 The IRS will process each "Letter of Application" within thirty days of receipt. If the application is accepted, IRS will issue an authorization letter reflecting a two digit identifying number assigned to the reporting agent. One copy of the "Listing of Clients" will be returned with the authorization letter. Each taxpayer on the "Listing of Clients" will be assigned a business name control currently on file with the IRS. If no name control had been established at the time of the submission of the "Listing of Clients", the IRS will assign a name control. If there was a discrepancy between the client's EIN and Business Name, the IRS will also provide the business name and name control as it is maintained on record with the IRS. Corrections will be indicated by a line through the information submitted and the corrected information written above. If, for any reason a particular taxpayer whose name is listed on the "Listing of Clients" is not accepted by the IRS under this program, the name of the taxpayer will be circled out and the reason for non-acceptance will be furnished.

02 The validated employer identification number, name control or service center code must not be changed except when notified to do so by the Internal Revenue Service.

03 The name control must appear in tape positions 14-17 on the FTD records. The IRS service center code will be provided to the agent for each taxpayer and must appear in tape positions 18-19 of the FTD record. See Exhibit 4 for the Federal Tax Deposit Record Layout.

04 Once the authorization letter is issued, test data can be submitted to the IRS. Listed is the information needed for the testing phase:

1. A tape of test data using validated information. The tape must be in the tape format as shown in Exhibits 3 and 4 and must be 9 Track, ASCII, 1600 BPI, Odd Parity. See Section 8 for instructions on preparation of the magnetic tape data. The test tape will be verified and returned.

2. A microfiche copy of the FTD PROOF LIST. See Section 9.05 for detailed information regarding this microfiche. Also see Exhibit 6.

3. A schedule calendar showing the schedule shipment dates and the number of magnetic tapes the agent expects to ship each week. (Once accepted into the program, a yearly schedule calendar must be submitted four weeks prior to the new calendar year).

05 Agents who submit data on magnetic tape and are located in IRS regions having more than one IRS center have the option to consolidate and file FTDs at only one service center. Only those reporting agents using magnetic tape are allowed this option. If an agent deals with more than one regional service center and wishes to consolidate, the reporting agent must write to the Director of the IRS center elected and obtain approval prior to beginning to file with only one service center.

06 If the reporting agent will prepare tapes at more than one location or branch, each location or branch will be assigned a separate identifying number. After a reporting agent has been assigned an identifying number, all communications regarding the preparation of FTD tapes should include this number. Updates to the "Listing of Clients" must always contain the identifying number of the location or branch handling the particular client's records. The identifying number must be in tape positions 52-53, on both the AOC and FTD records.

07 New agents will be accepted to begin filing at the beginning of a quarter only.

SEC. 6. REPORTING AGENT AUTHORIZATION

01 The Reporting Agent Authorization (RAA) should be submitted on Form 8655 which is available upon request. See Exhibit 2. The form must be submitted for each taxpayer prior to the acceptance into the Federal Tax Deposit Magnetic Tape program.

02 Instructions for the preparation and submission of the Reporting Agents Authorization (RAA) can be found in Rev. Proc. 89- 18.

03 The reporting agent must keep copies of the forms or prior authorizations on file at the principle place of business for examination by the IRS upon request. The forms must be retained until the statute of limitations for the last return filed under its authority expires.

SEC. 7. UPDATES TO THE "LISTING OF CLIENTS"

01 After acceptance of the initial "Listing of Clients", all additions and deletions must be reported to the service center. Reporting Agent Authorizations (RAA) must be included with all new additions. New clients must not be included in the magnetic tape preparation of FTDs until they are accepted and the entity information (EIN, business name, name control, service center code, and filing requirements) is validated and provided by the IRS. If the reporting agent chooses to make FTDs for a new client prior to being accepted, the agent must use the IRS preprinted forms and deposit the payment with a qualified depositary separate from the magnetic tape.

02 The IRS will process updates to the addition listing within two weeks of receipt. The update listing should be in the same format as the initial "Listing of Clients", with the additions preceding and on a separate page from the deletions. Two copies of this listing should be submitted to enable the Service to maintain a file copy. The service center will process the additions on an expedite basis and in the same manner as the initial listing. Deletions will be acknowledged within 30 calendar days of receipt.

03 Once a client has been deleted under this program, the reporting agent must submit an addition report to reinstate. A new Reporting Agent Authorization (RAA) must be submitted when the request to re-enter the program is sent to the Service.

04 The reporting agent must send a consolidated listing of clients currently accepted by the Service within 14 calendar days after the end of each quarter. This listing must not include current additions or deletions which must be sent separately. The consolidated listing is for information only and will not be returned.

SEC. 8. PREPARATION OF THE MAGNETIC TAPE DATA

01 The magnetic tape specifications are listed below:

      1. Type of tape         1/2 inch Mylar base, oxide coated

03 The Advice of Credit record layout is an 81 character record. See Exhibit 3 for the AOC Record Layout. The data elements include the following:

1. Problem code, 1 position, numeric, Always Zero.

2. Service Center code, 2 positions, must be numeric and is assigned by the IRS.

3. Federal Reserve Bank code, 2 positions, must be numeric and is also assigned by the IRS.

4. American Bankers Association (ABA) number, 8 positions, numeric, is the routing and transmittal number authorized by the depositary bank.

5. Check digit, 1 position, numeric, and is for the routing and transmittal number.

6. Branch code, 3 positions, (alpha/numeric/numeric) assigned by the IRS.

7. AOC Transmittal Serial number, 3 positions, must be numeric. It must be separate for each AOC and in incremental order, beginning with 000 and ending with 999. The number must not be duplicated within two calendar months.

8. Deposit Date, 6 positions, numeric, in MMDDYY format. The deposit date must agree with the deposit date in the FTD data record.

9. Number of FTDs, 3 positions, numeric, in groups of 440. (001-440). Zero filled, right justified. However, the last group may contain fewer than 440.

10. Amount, 11 positions, numeric, and must represent the total of the related FTDs. Do not use the signs "+" or "-" in the amount field. Zero fill, right justify.

11. Agent code, 2 positions, numeric. This number will be assigned by IRS upon approval of the application.

12. Microfilm number, 6 positions, numeric, and will always be filled with 999999.

13. Record type ID code, 1 position, numeric, and is a constant 3.

04 The Federal Tax Deposit record is an 81 character record. See Exhibit 4 for the FTD Record Layout. The data elements include the following information:

1. Problem Code, 1 position, numeric, always zero.

2. Taxpayer EIN, 9 positions, numeric.

3. Name Control, 4 positions, (alpha/numeric) name control is provided by the IRS center on approved "Listing of Clients".

4. Service Center code, 2 positions, must be numeric and is assigned by the IRS.

5. Tax class code, 1 position, (alpha/numeric) and must be a "1" for withholding, Form 941; "3" for corporation, Form 1120; "4" for excise, Form 720; "5" for backup withholding, Form 941, (Schedule A); "6" for agricultural withholding, Form 943; "7" for railroad retirement, CT-1; "8" for unemployment, Form 940; "9" for foreign persons income, Form 1042; "C" for cooperative, Form 990C; "L" for exempt business income, Form 990T; or "P" for private foundation, Form 990PF.

6. Tax period, 2 positions, numeric, Month/Year format. For the month, use character "1 thru 9" for January through September, use character "0" (zero) for October, use character "-" for November and "&" for December. For the year, use the last digit of the tax year for which the deposit is being made, (e.g., for the tax year 1989, use "9").

7. Payment date, 4 positions in MMDD format, must be numeric. The payment date must agree with the deposit date in the related AOC. In no case should these dates be different.

8. Amount, 12 positions, numeric, zero filled right justified and must be included in the total deposit amount of the corresponding AOC.

9. Agent code, 2 positions, a unique code assigned by IRS to identify magnetic tape filers and to accumulate statistical data.

10. Deposit Identification Number, 6 positions, numeric, zero filled, right justified. Enter the AOC serial number, 3 positions (000-999) and the FTD sequence number, 3 positions (001-440) in this field.

05 The taxpayer identification, name control, service center code, and agent code must be from the information provided and verified by the IRS. No change should be made to this information for a particular client unless the IRS notifies the reporting agent to do so.

06 Affix an external label to each tape box. The label must state:

                              EXPEDITE

01 The magnetic tape containing federal tax deposit information must be prepared as specified in Section 8 of this Revenue Procedure.

02 The funds must be deposited in the Treasury Tax and loan (TT&L) account of an authorized depositary on or before the deposit due date. the depositary will establish and maintain procedures to ensure next business day delivery of the Advice of Credit to the Federal Reserve Bank of the district. Delivery must be prior to the Federal Reserve Bank's cutoff time for processing such Advices of Credit. The transaction data contained on the magnetic tape must be received at the IRS service center within 5 calendar days of the date of credit to the TT&L account of the authorized depositary. The 5 calendar day period is allowed for the reporting agent to make any necessary corrections to the magnetic tape prior to its shipment to the IRS Service Center. If an adjustment is required which ultimately affects the total deposit amount for a particular block of work, the agent must contact the FTD Interagency Coordinator at the IRS Service Center within 24 hours after the adjustment is found. If IRS rejects a magnetic tape, a corrected tape must be re-submitted within 24 hours of reject notification. The IRS will schedule the processing of the FTD data no later than 2 workdays from the date of service center receipt.

03 Requests by agents to adjust taxpayers' accounts after the magnetic tape has been received and processed by IRS will not be processed by the Federal Reserve Bank (FRB) or IRS. These types of adjustments are described as:

(a) Requests for a refund of an overpayment of tax;

(b) Requests for an adjustment due to a payment made in error (including non-sufficient fund items).

04 Reporting Agents should either adjust the next tax payment for the same type of tax or wait until the tax return is filed at which time the taxpayer will receive a refund from the IRS. Again, neither the FRB nor the service center will allow adjustments such as those described above to be performed on a taxpayer's account.

05 A microfiche must be provided listing specific deposit information. It should be titled FTD PROOF LIST and must be sent with the magnetic tape. See Exhibit 6. Also refer to Section 9.06 for microfiche specifications. The FTD PROOF LIST microfiche must be forwarded with the magnetic tape and must contain the following information:

1. Deposit date, 6 positions, MMD-DYY format.

2. Advice of Credit (AOC) serial number, 3 positions. (000-999) NOTE: The AOC serial number must appear on each page that has FTD client data for the AOC.

3. FTD sequence number, 3 positions (beginning with 001, not to exceed 440).

4. Employer Identification Number, 10 positions (including hyphen) in the following format: NN-NNNNNNN

5. Name Control, 4 positions

6. Deposit type, 5 positions (Form number)

7. Tax period, 5 positions, MM/YY (including slash)

8. FTD Amount, 12 positions (including proper placement of commas and decimals)

06 The microfiche recording process should reduce characters 48 times smaller than the original data. The reduction ratio should be set at 48X. The microfiche should include an eye-readable title line, up to 269 data frames at the 48X reduction ratio and should be on a dark blue background. The first data frame on the microfiche should be positioned in the upper left hand corner of the microfiche. Each additional data frame should be positioned below the first data frame until a vertical column is complete. If additional data frames are necessary, begin a new column until the column is complete. Continue this process until the microfiche is completely filed and begin a new microfiche if necessary. All microfiche data must be received by the IRS with the magnetic tape.

07 Form 8482, Transmittal of Magnetic Tape of Federal Tax Deposits, will be used for transmitting tapes and microfiche data between the service center and reporting agent. The initial supply of Forms 8482 will be provided upon approval of the agent's application to prepare deposit tapes. Additional forms can be obtained from the service center of jurisdiction. See Exhibit 8.

08 Each tape must be clearly identified by affixing a completed Form 3298, File Identity Label. See Exhibit 9. The initial supply will be provided by the service center. Each tape box must have an EXPEDITE label. The label must state:

                              EXPEDITE

10 Tapes will be retained at the IRS Service Center for 14 calendar days for verification purposes. The tapes will then be returned to the reporting agent.

11 Upon receipt of the deposit tapes, the IRS will send the agent an acknowledgment of receipt. If no acknowledgment of receipt is received within seven calendar days, the agent should contact the IRS Service Center Interagency Coordinator immediately.

SEC. 10. TERMINATION OF THIS AUTHORIZATION AND CONTACT INFORMATION

The Service reserves the right to terminate this agreement because of possible systemic changes which may preclude the use of magnetic tapes or failure to comply with the requirements of this procedure. If the reporting agent cannot modify processing to accomodate these changes or continuously neglects the revenue procedure requirements, the agreement may be terminated with sixty days notice. Requests for additional copies of this revenue procedure, applications to prepare FTDs, and update listings of clients, should be addressed to the Director, Internal Revenue Service Center, ATTN: FTD Interagency Coordinator, at one of the following addresses:

     1. NORTH ATLANTIC REGION

     1. NORTH ATLANTIC REGION

The Consolidated Listing is due on April 14th, July 14th, October 14th, and January 14th.

The Delete Listing should be submitted once a year in December.

Deposit requirements can be found in Circular E, Employer's Tax Guide, and applicable tax form instructions.

SEC. 12. EFFECTIVE DATE

This revenue procedure is effective December 31, 1989.

SEC. 13. EFFECT ON OTHER DOCUMENTS

Revenue Procedure 86-33, 1986-2 C. B. 420, is modified and, as modified, is superseded.

SEC. 14 DRAFTING INFORMATION

The principal authors of this revenue procedure are Carol Wallace and Tony Martinez of Returns Processing and Accounting Division (Federal Tax Deposit Section). For further information regarding this revenue procedure, contact Carol Wallace or Tony Martinez on (202) 566-3884 (not a toll-free call).

                              EXHIBIT 1

2. Sort by EIN number assigned to client by IRS.

3. Leave Name Control field blank -- this will be entered by IRS on initial and addition listings.

4. Double-space between entries of clients.

5. Indicate the type of tax in the appropriate column.

                              EXHIBIT 2

As referenced in Exhibit 5, a RECORD is equal to 81 characters and a BLOCK is equal to 20 RECORDS. Therefore, a maximum of 1,620 characters (blank spaces must also be included) can be housed within the BLOCK. The last block contained on the tape may be less than 1,620 characters depending on the number of FTD records in that block. The operating system will then create a Filemark and begin the EOF1, EOF2, Filemark, Filemark routine.

For those operating systems that cannot short block, after the last FTD RECORD, key in ** in the first two positions of the next RECORD in the BLOCK. The remainder of the block should be blank filled until the block reaches 1,620 characters. The operating system will then be able to execute properly.

A tape may be transmitted for multiple organizations. To use this option, data for one organization may stop within the block and the succeeding organization's data can be submitted on the same tape by entering data in the next available space.

                               EXHIBIT 6

DATE:

TO: Agent Name

FROM: Depositary Name

SUBJECT: AGREEMENT TO USE DEPOSITARY'S TREASURY TAX & LOAN ACCOUNT

We have agreed to allow your organization to utilize our Treasury Tax & Loan (TT&L) Account for the deposit of your customers' federal taxes. You must forward a completed copy of the Advice of Credit, Form 2284, with every deposit transaction. The available funds submitted to our branch office must be equal to the total deposit amount on the completed Form 2284. Our bank will accept cash, check, postal money order, or interbank transfer.

We understand that you will submit the individual customer's tax deposit information via magnetic tape to the IRS. This is in accordance with the requirements specified in the Internal Revenue Service Bulletin No. 1989-34 dated August 21, 1989.

Officer Approving This Agreement Title of Officer

                              EXHIBIT 8

/**/ List Deposit Date

                              EXHIBIT 9