Rev. Proc. 77-34

PART A -- GENERAL

Section 1. Purpose

.01 The purpose of this Revenue Procedure is to state the requirements and conditions under which payers, employees and nominees (herein collectively referred to as payers) and agents thereof (hereinafter referred to as transmitters) can file annual information returns on diskette instead of paper documents. The paper documents affected are:

(a) Form 1099-DIV, Statement for Recipients of Dividends and Distributions

(b) Form 1099-INT, Statement for Recipients of Interest Income

(c) Form 1099-MISC, Statement for Receipts of Miscellaneous Income

(d) Form 1099-MED, Statement for Recipients of Medical and Health Care Payments

(e) Form 1099-OID, Statement for Recipients of Original Issue Discount

(f) Form 1099-PATR, Statement for Recipients (Patrons) of Taxable Distributions Received From Cooperatives

(g) Form 1099L, U.S. Information Return for Distributions in Liquidation During Calendar Year

(h) Form 1087-DIV, Statement for Recipient of Dividends and Distributions

(i) Form 1087-INT, Statement for Recipients of Interest Income

(j) Form 1087-MISC, Statement for Recipients of Miscellaneous Income

(k) Form 1087-MED, Statement for Recipients of Medical and Health Care Payments

(l) Form 1087-OID, Statement for Recipients of Original Issue Discount

Sec. 2. Application For Diskette Reporting

.01 The above listed statements may be filed on diskette by payers or by transmitters acting for a single payer or a group of payers. Except as covered in PART A, Sec. 2.06, for Form 1099-MED filers, payers may submit all or part of their information on diskette; a combination of diskette records and paper documents is acceptable so long as there is no duplication or omission of documents. .02 Payers or transmitters who desire to file statements in the form of diskette must first file a letter of application or submit Form 4419, Application for Magnetic Tape Reporting. This letter or application should be addressed to the Director, Internal Revenue Service Center, Attention: Magnetic Tape Coordinator, where the payer or transmitter normally files statements. Address of the Internal Revenue Service Centers are shown in PART A, Sec. 9 of this Revenue Procedure.

If the prospective filer submits a letter of request, it must contain the following:

(a) Name, address and Employer Identification Number of person, organization or firm making the request;

(b) Name, title and telephone number of person to contact regarding the request;

(c) An estimate, by type of form, of the number of statements to be reported in diskette format, and the number, by type of form, to be reported on paper forms;

(d) Type and nature of equipment to be used to prepare disk files; i.e., manufacturer and model of main frame and disk drives;

(e) List of payers to be included in the file(s) if the requester is a transmitter;

(f) Signature of official responsible for the preparation of tax reports or the authorized transmitter.

.03 The Service will act on an application and notify applicants of authorization or disapproval within 30 days of receipt of applications.

.04 Generally, payers using equipment compatible with the Service's can presume that diskette reporting will be approved. Compatible diskette characteristics are shown in PART B, Section 1.

.05 In general, once authorization to file diskette has been granted to a payer, such approval will continue in effect in succeeding years, provided that the requirements of this Revenue Procedure are met, and there are no equipment changes by the payer. However, the Service Center magnetic tape coordinator must be notified before December 31 of the year ending if there has been or there will be any change in equipment or if diskette reporting is being discontinued. New applications are required whenever diskette reporting is to be resumed. Transmitters are required to notify the magnetic tape coordinator whenever there is a deletion or an addition to the list of payers for whom he is reporting.

.06 In accordance with Section 1.6041-7 of the Income Tax Regulations, medical payments may be reported on separate diskette submissions rather than aggregated into a single diskette submission, so long as all of the reports from a carrier are in diskette form. For these purposes, the headquarters office will be considered as a "transmitter," per Sec. 2.02 above, and the individual segments of the company filing reports will be considered to be payers. Thus, a single application form is to be submitted to one of the Service Centers, covering all of the individual diskette files to be submitted.

Sec. 3. Filing Of Diskette Reports

.01 Transmittal instructions will be provided in the authorizing letter issued by the Service in response to an application for diskette reporting.

.02 Payers submitting a portion of their statements on diskette and the remainder on paper forms, should file diskette records and paper documents at the same location, but in separate shipments.

.03 Form 4804, Annual Summary and Transmittal of Income, Tax and Information Statements Reported on Magnetic Tape or Disk Pack, will be required from each payer to cover each payer's portion of the diskette file. The required Form 4804 must be filed with the shipment of diskette. If only a portion of the returns are submitted on diskette, include a statement that the remaining returns are being submitted in the form of paper documents. Note on the address side of the diskette shipments, "DELIVER UNOPENED TO THE TAPE LIBRARY."

Form 1096, Annual Summary and Transmittal of U.S. Information Returns, will be included in the shipment of paper documents. If only a portion of the returns are submitted on paper documents, include a statement (that the remaining returns are being filed in the form of diskette) with the Form 1096. Please note that Form 1096 instructions normally apply to the filing of information returns on paper; however, filers of magnetic tape, disk, and diskette, must review the Form 1096 instructions and file Form 1096, if appropriate.

.04 The dates prescribed for filing paper documents with the Service will also apply to diskette filing. Requests for extensions of time for filing and related matters should be made to the magnetic tape coordinator of the Service Center that issued the authorizing letter.

If an extension is granted by the Service, a copy of the letter granting the extension should be attached to the Form 4804.

.05 The diskette specifications contained in PART B of this Revenue Procedure must be adhered to unless deviations have been specifically granted by the Service.

.06 Service programs may be able to accommodate some minor deviations. Hence, payers who can substantially conform to these specifications but require such minor deviations are encouraged to contact one of the Service Centers (see PART A, Sec. 9 below for addresses). However, under no circumstances may diskettes deviating from the specifications in PART B be submitted without prior approval of the Service.

.07 All diskette files submitted by 1099-MED filers per Sec. 2.06 above, should be assembled by the carrier and mailed in one shipment to the Service Center that received the application.

Sec. 4. Processing Of Diskette Statements

.01 The Service will extract the information from the diskettes. Normally, the original diskettes received by the Service will be returned to the payers or transmitters by August 15 of the year in which submitted.

.02 However, if the diskettes submitted are unprocessable, they will be returned for correction. Acceptable diskettes will then be returned within six months of receipt.

Sec. 5. Corrected Statements

.01 If a large volume of corrected statements is necessary and the payer or transmitter possesses the capability to provide such corrections on diskette, he should contact the magnetic tape coordinator of the Service Center to which the diskette statements were or are to be submitted. A Corrected Form 4804 must be filed whenever corrections on diskette are submitted.

.02 If corrections are not submitted on diskette, the appropriate paper form Form 1099 or 1087 must be used if it is necessary to correct Payee record in the diskette files. Each such form must be annotated in the manner specified for corrected statements in the Instructions for Form 1096. Corrected documents should contain all relevant information so that they completely supersede the statements recorded on diskette. Form 1096 must be annotated, "Corrected Returns for Diskette Filing", and filed with the corrected 1099 or 1087 returns.

Sec. 6. Effect On Paper Documents

.01 Diskette reporting of information documents listed in Section 1. above applies only to the original (Copy A). By filing with the Service on diskette, payers are permitted considerable flexibility in designing the copy of the information return to be furnished to the payee. The payer may combine the information return data with other reports or financial or commercial notices, or expand them to include other information of interest to a depositor, patron or shareholder. This is permissible so long as all required information present on the official form is included and the payee's copy is conducive to proper reporting on his tax return. Payers should also include the legend "This information is being furnished on Forms 1099 (or 1087) to the Internal Revenue Service" on the payee's copy.

.02 If only a portion of the statements is reported on diskette and the remainder is reported on paper forms, those statements not submitted on diskette must be filed on the appropriate prescribed forms, or on paper substitutes meeting the format requirements and paper specifications in the appropriate Revenue Procedure on the reproduction of Forms in the 1087 and 1099 Series.

Sec. 7. Calendar Year Basis

Diskette reporting to the Service for all types of Forms 1099 and 1087 must be on the calendar year basis. File diskettes on or before February 28 of the following tax year.

Sec. 8. Data Entries

.01 The Service expects that payers will make every effort to keep to a minimum those statements submitted without taxpayer identifying numbers, through continued compliance with the requirements set forth in Section 301.6109-1 of the Regulations on Procedure and Administration. If for legitimate causes the taxpayer identifying number of a payee has not been furnished to the payers, the specifications in PART B of the procedure permit its omission.

.02 The Service associates and verifies payments to payees with corresponding amounts on tax returns, principally through taxpayer identifying numbers. It is particularly important that correct social security and employer identification numbers for payees be provided on the forms, magnetic tape, disk pack, or diskette submitted to the Service.

For each omission of a required identifying number, the law provides that the Service may charge a $5.00 penalty, unless the payer or payee responsible for furnishing the number supplies an explanation that establishes reasonable cause for not having done so. For those engaged in a trade or business the taxpayer identifying number is the employer identification number (EIN), format (00-0000000). The valid ranges for the first two digits of the EIN are as follows: 01-6, 13-16, 21-25, 31, 34-39, 41-48, 51-59, 61-64, 66-67, 71-75, 81-88, or 91-99. For individuals, the identifying number is the social security number (SSN), format (000-00-0000). The first three digits will always range from 001-587 or 700-728. The middle two digits cannot be 00. The last four digits cannot be 0000. When entering either number on magnetic tape records, please do not include the hyphens. For more specific instructions see Sec. 10., Guidelines for Determining Proper Taxpayer Identifying Number To Be Furnished To the Service.

.03 For individuals the Service must be able to identify the surname associated with the taxpayer identifying number furnished on a statement. When statements are received in the form of paper returns, as 1099-DIV, 1099-INT, etc., this is accomplished through a manual editing process. However, manual editing is precluded when statements are received on diskette. Hence, the specifications in PART B of this procedure include a data field in the payee records called "Name Control", in which the first four alpha characters of the payee surname are to be entered by payers.

(a) The surname of the payee, whose taxpayer identifying number (SSN or EIN) is shown in the Payee "B" Record, must be the only name in the first name line. Use blanks to separate initials in the payee name.

(b) A blank must precede the identifying surname in the first name line of all Payee "B" Records. The only exceptions are cases where the surname begins in the first position of the name line. Always attempt to use the complete name of the payee.

(c) For multiple payees use one surname in the first name line. That name must agree with the SSN shown in the Payee "B" Record. The surnames of the other payees should be entered in the second name line.

(d) If payers are unable to provide the first four characters of the payee surname, the specifications permit the submission of statements on diskette with the Name Control Field left blank.

Sec. 9. Additional Information

Requests for additional copies of this Revenue Procedure, or requests for additional information on tape reporting, should be addressed to the attention of the Magnetic Tape Coordinator of one of the following:

(a) Internal Revenue Service, Andover Service Center, Post Office Box 311, Andover, Massachusetts 01810

(b) Internal Revenue Service, Brookhaven Service Center, DCA: CIDP, Holtsville, New York 11700

(c) Internal Revenue Service, Philadelphia Service Center, Post Office Box 245, Cornwells Heights, Pennsylvania 19020

(d) Internal Revenue Service, Atlanta Service Center, Post Office Box 47421, Doraville, Georgia 30340

(e) Internal Revenue Service, Memphis Service Center, Post Office Box 30309, Airport Mail Facility, Memphis, Tennessee 38130

(f) Internal Revenue Service, Cincinnati Service Center, Post Office Box 267, Covington, Kentucky 41012

(g) Internal Revenue Service, Kansas City Service Center, Post Office Box 5321, Kansas City, Missouri 64131

(h) Internal Revenue Service, Austin Service Center, Post Office Box 934, Austin, Texas 78767

(i) Internal Revenue Service, Ogden Service Center, Post Office Box 9941, Ogden, Utah 84409 (j) Internal Revenue Service, Fresno Service Center, Post Office Box 12866, Fresno, California 93779

Sec. 10. Guidelines For Determining Proper Taxpayer Identifying Number To Be Furnished To The Service

.01 Under Section 6109 of the Internal Revenue Code of 1954, recipients of dividends, interest, or other payments are required to furnish taxpayer identifying numbers to payers who must report such payments to the Internal Revenue Service. The number must be furnished to the payer whether or not the payee is required to file a tax return or is covered by social security.

.02 The taxpayer identifying number to be furnished to the Service depends primarily upon the manner in which the account is maintained or set up on the records of the payer. The number to be provided must be that of the owner of record. If the account is recorded in more than one name, furnish the taxpayer identifying number and name of one of the holders of record. The number provided must be associated with the name of the holder provided in first name line of the payee of the Payee "B" Record of PART B of this procedure.

Sole proprietors who are payers should show their employer identification numbers in the Payer/Transmitter "A" Record. However, payers should use the social security number of a sole proprietor in the Payee "B" Record.

The table below will help you determine the number to be furnished to the Service.

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