Rev. Proc. 80-31

Section 1. Purpose

.01 The purpose of this revenue procedure is to outline the requirements and instructions for reporting agents who perform a payroll service and who, in connection with this service, submit employment federal tax deposit payments for their clients. 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. Each payment must be accompanied by the appropriate federal tax deposit card.

.02 Under the provisions of this revenue procedure, qualifying agents may request permission to prepare federal tax deposit cards instead of using the prepunched cards provided by the Treasury Department. These agent-prepared federal tax deposit cards must accompany the payments of clients who have been approved under this program. Authorization will extend only to those agents who have a minimum of 500 clients and who satisfy all the requirements of this revenue procedure.

Sec. 2. Background

.01 The Treasury Department furnishes federal tax deposit cards to those taxpayers who can reasonably be expected to make tax deposits. These cards are prepunched and preprinted with essential identifying information for processing the payment data to the appropriate tax account. Many payroll and tax preparation businesses have not had the prepunched deposit cards for making the required tax deposits, and, in most instances, this occurred because the agent had not requested that the client forward the deposit cards furnished by the Treasury Department. Some of these reporting agents have mailed deposits directly to an Internal Revenue Service office when the deposit cards were not available to them. This practice is not in conformity with 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 cards is no longer dependent on the authority to file Form 941, Employer's Quarterly Federal Tax Return, on magnetic tape.

Sec. 3. FTD Payments Submitted by Reporting Agents

.01 All federal tax deposit cards prepared by an authorized agent must be submitted with payment to a qualified federal tax depositary. The only acceptable agent-prepared deposit cards are those relating to Forms 941, 940, and 943. Form 501 is used to report a deposit for withheld income and FICA taxes (Form 941). Deposit Form 508 is used to report a deposit for unemployment taxes (Form 940). Deposit Form 511 is used to report a deposit for agricultural FICA taxes and voluntarily withheld income tax (Form 943).

.02 Authorized agents will be furnished a supply of blank FTD cards. The same type of card is used for all three taxes. The agent will identify the type of tax by a tax class code punched in column 19 of the card.

.03 Deposits for other taxes and for clients who have not been accepted under this program must be made to a depositary by means of the prepunched cards provided by the Treasury Department. Reporting agents authorized under this program who mail payments directly to an Internal Revenue Service office will have their remittances returned to them under instructions that they obtain the appropriate deposit cards from their client and that they submit the same 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. Unless the client delivers the prepunched cards to them, reporting agents should not assume the responsibility of making tax deposits on behalf of a client as to any deposit that may become due before the client is actually under this program.

.04 Agent-prepared FTD cards must be submitted to a qualified depositary separate from the prepunched deposit cards which were mailed to the taxpayer by the Treasury Department.

Sec. 4. Application to Prepare FTD Cards

.01 Agents who wish to prepare federal tax deposit cards 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. See Exhibit 1 for a list of service centers and their respective addresses.

The letter of application should include all the following information:

1 The full name, address, and employer identification number of the firm making the application. If the reporting agent will prepare and submit deposit cards at more than one branch or location, each location must be identified in the letter of application, or each location must submit an individual letter of application.

2 The name, title, and telephone number of a person the Service can contact regarding the application. In most cases, any problem with the letter of application can be resolved by telephone and this will expedite processing by the service center.

3 The name, address, employer identification number, Federal Reserve Bank code, bank identification number/check digit code, and the branch code of the federal tax depositary which will forward the agent-prepared deposit cards to the Service. Prior to submitting the letter of application, the reporting agent must have an agreement with a depositary that the depositary will accept the agent-prepared FTDs and will submit them under a transmittal separate from Treasury Deprtment prepunched FTDs.

4 A listing of the taxpayers who will have their federal tax deposit cards prepared by the reporting agent. See Section 5 for the information required on this listing. See Exhibit 2 for an example of a list of clients.

5 A power of attorney for each taxpayer on the listing. See Section 6 for information concerning the power of attorney. See Exhibit 3 for an example of a properly prepared power of attorney.

6 A statement of the approximate number of deposit cards the agent expects to prepare during the first six months after approval. The Service will issue a six-month supply of blank deposit cards with the authorization letter.

.02 Applications containing a listing of less than 500 clients will be denied. If an agent has previously been preparing federal tax deposit cards under the provisions of Rev. Proc. 75-12 before supercession by Rev. Proc. 79-15, 1979-1 C.B. 498, the agent is exempt from this qualification.

Sec. 5. Listing of Clients

.01 Each letter of application must include a listing of the taxpayers who will have their federal tax deposits prepared by the reporting agent. The listing must include each taxpayer's complete business name, address (including ZIP code), employer identification number, and an account number not exceeding five digits assigned to the client by the agent. For each client, the listing must specify the types of taxes for which deposit cards will be prepared.

.02 The listing must be double spaced to allow room for notations by the service center. The clients must be listed in account number sequence. A duplicate listing must be submitted so that the Service can maintain a file of taxpayers accepted under this program. See Section 8 for updates to the initial listing of clients. See Exhibit 2 for an example of the way the listing should be submitted.

Sec. 6. Power of Attorney

.01 A power of attorney must be submitted for each client on the listing. The power of attorney may be submitted on Form 2848, Power of Attorney, which is available on request. A sample power of attorney is set forth in Exhibit 3. If this form is not used, the power of attorney must clearly state that the reporting agent is granted the authority to prepare and submit federal tax deposits for the applicable tax forms. The power of attorney must be signed by the taxpayer and the reporting agent.

.02 If a power of attorney is already on file for full tax reporting, it is not necessary to execute a new agreement. If a power of attorney is already on file for magnetic tape filing of Form 941, it does not need to be revoked. However, a new power of attorney must be submitted to cover any federal tax deposits not already covered.

.03 The power of attorney for agent-prepared FTDs will be a limited power of attorney. Notices, refunds, tax forms, and other output will be mailed to the taxpayer. Requests from a reporting agent for information or adjustments on an account will be honored by the Service only to the extent covered by the power of attorney.

.04 Requests for taxpayer name and address changes may not be made by a reporting agent with a limited power of attorney. The only requests that will be honored will be those originating from the taxpayer or an attorney-in-fact if the attorney has a full power of attorney for all tax matters concerning a taxpayer and has filed a copy of the full power of attorney with the Internal Revenue Service Center.

.05 The reporting agent must keep copies of the power of attorney on file at the agent's principal place of business for examination by the Internal Revenue Service upon request. If the power of attorney includes the authority to sign and file tax returns, it must be retained until the statute of limitations for the last return filed under its authority expires.

.06 The power of attorney will remain in effect until such time as it is revoked by the taxpayer, terminated by written notification by the reporting agent, or expires under its own terms.

.07 The power of attorney is automatically revoked when the reporting agent notifies the Service that the taxpayer will no longer have FTDs submitted by the agent. It is also automatically revoked when the Service notifies the reporting agent that the requirements of this revenue procedure have not been adhered to and the Service will no longer accept the agent-prepared FTDs from that agent.

.08 Any time a power of attorney has been terminated or revoked, a new power of attorney will be required if a client re-enters this program. The new power of attorney must be signed and dated subsequent to the revocation.

Sec. 7. Acceptance of Agent's Application

.01 The Service will process each letter of application within thirty days of receipt. The authorization letter will include a three-digit identifying number which the Service will assign to the reporting agent. If the reporting agent will prepare deposit cards at more than one location or branch, each location or branch will be assigned a separate identifying number. After an agent has been assigned an identifying number, all communication regarding the preparation of federal tax deposit cards should include this number. Updates to the agent's listing of clients must always contain the identifying number of the location or branch handling the particular client's records. The agent-identifying number must be punched in card columns 72-74 of the agent-prepared deposit cards.

.02 One copy of the listing of the reporting agent's clients will be returned with the authorization letter. The Service will verify each client's employer identification number and will provide the client's name control which must be punched in card columns 13-16 of the deposit cards. An Internal Revenue Service district office code will be written in for each taxpayer and must be punched in card columns 17 and 18. If there is a discrepancy, the Service will also provide the business name as it is maintained on record with the Service. Corrections will be indicated by a line through the agent's information with the corrected information written above.

.03 Reporting agents must not change the validated employer identification number, name control, or district office code except when notified to do so by the Internal Revenue Service.

.04 All discrepancies in taxpayer filing requirements will be resolved by telephone if a contact is established in the letter of application. If, for any reason, a particular taxpayer whose name is recited on the agent's list is not accepted by the Service under this program, the name of the taxpayer will be circled out and the reason for non-acceptance will be stated in the acceptance letter.

.05 Based on the request by the reporting agent in the letter of application, the Service will issue a six-month supply of blank deposit cards with the acceptance letter. Orders of additional blank cards should be made by the reporting agent to the FTD Coordinator at the appropriate service center. Requests for more cards should be made at least thirty days before the expected depletion of the stock each agent has on hand. Reporting agents are cautioned that blank federal tax deposit cards are intended only for clients accepted under this program. Misuse of this privilege will be cause for disqualification of the agent.

Sec. 8. Updates to the Agent's List of Clients

.01 After acceptance of the reporting agent's initial list of clients, all additions and deletions must be reported to the service center immediately. New clients may not be included in the preparation of federal tax deposits by a reporting agent until they are accepted and the entity information (EIN, name control, district office code, and filing requirements) is validated and provided by the Service. If the reporting agent chooses to make federal tax deposits for a new client prior to being accepted, the agent must use the Treasury Department prepunched deposit cards and deposit the payment with a qualified depositary separate from the agent-prepared deposit cards.

.02 The Internal Revenue Service will process the agent's update listing within two weeks of receipt. The update listing should be in the same format as the initial listing, 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 to the reporting agent.

.03 Once a client has been deleted under this program, the reporting agent may not request to re-enter that client until the next quarter. For example, if a client is deleted in the first quarter of the year (Jan., Feb., Mar.), the client may not be added back onto the accepted list of clients until the second quarter of the year (Apr., May, June). A new power of attorney must be submitted when the request to reenter the program is sent to the Service.

.04 Once each six months, the reporting agent must send a consolidated listing of their clients currently accepted by the Service. The consolidated listing is for information only and will not be returned to the agent. If no clients have been added or deleted during a six-month period, it is not necessary to submit this listing.

Sec. 9. Preparation of the Deposit Cards

.01 Keypunch instructions for agent-prepared federal tax deposits are included in this revenue procedure as Exhibit 4. The deposit cards must be interpreted across the top of the card. If the agent uses card columns 1-3 for internal control, interpretation of these three card columns should be suppressed, if possible. All other fields may be interpreted immediately above the punches, or each field may be separated by a single space. An uninterpreted card should never be included in the agent's shipment of deposit cards.

.02 The employer identification number, name control, and district office code fields must be punched with the information provided and verified by the Service. No change should be made to this information for a particular client unless the Service notifies the reporting agent to do so.

.03 The tax class field must be either a "1" for a Form 501 deposit (Form 941), a "6" for a Form 511 deposit (Form 943), or an "8" for a Form 508 deposit (Form 940).

.04 The tax period ending field must always contain the month in card column 20 and the year in card column 21. The month will be either a "3" for March, a "6" for June, a "9" for September, or a "12 (&) punch" for December. If the deposit is a Form 501 deposit (Form 941), the month will be either a "3", "6", "9", or "12" (&) punch". If the deposit is a Form 511 deposit (Form 943) or a Form 508 deposit (Form 940), the month will always be a "12 (&) punch". The year will always be the last position of the tax period year (8 = 1978, 9 = 1979, 0 = 1980, etc.).

.05 The payment date must always be punched in card columns 26- 29. Punch the month (01-12) in card columns 26-27 and the day (01-31) in card columns 28-29. It is essential that the payment date punched in this field be the same date the depositary receives payment for the deposit and date stamps the deposit card.

.06 The payment amount must be punched unedited and right- justified in card columns 30-38. If the amount exceeds 9 digits or if the payment amount is changed prior to submission, the corrected money amount should be punched unedited and right-justified in card columns 39-50. If not, leave card columns 39-50 blank.

.07 The three-digit agent-identifying number must be punched in card columns 72-74. The agent's account number assigned to the client must be punched in card columns 76-80.

Sec. 10. Submission of Agent-Prepared Federal Tax Deposits

.01 After all applicable deposit cards are punched and interpreted, the cards should be grouped and delivered with the appropriate payment to the qualified depositary specified in the agent's letter of application. It is required that the reporting agent deliver the deposit cards early in the day so that the depositary can date stamp each card and prepare transmittals on the same day as the payment date punched in card columns 26-29 of the deposit cards. The deposit cards should be in groups of 100 cards with a machine listing of each deposit amount and a total for each group. The depositary will prepare the transmittals and ship the deposit cards to the appropriate service center. The group of agent- prepared FTDs must be diagonally red-striped with a felt pen across the tops of the cards and the boxes must clearly indicate that the FTDs are prepunched agent-prepared FTDs. The boxes must be marked for the attention of the FTD Inter-agency Coordinator at the appropriate service center. See Exhibit 1 for the service center addresses.

.02 If the reporting agent is a bank business service and is authorized by the bank to prepare the transmittals (Form 2284, Advice of Credit), the agent-prepared federal tax deposits must be boxed separately from the prepunched cards. The group of agent-prepared FTDs must be diagonally red-striped with a felt pen across the tops of the cards and the boxes must clearly indicate that the FTDs are prepunched agent-prepared FTDs. The boxes must be marked for the attention of the FTD Inter-agency Coordinator at the appropriate service center. See Exhibit 1 for the service center addresses.

Sec. 11. Termination of This Authorization

The Service reserves the right to terminate this agreement with reporting agents because of possible systemic changes which may preclude the use of punched cards. If the reporting agent cannot modify processing to accommodate these changes, the agreement may be terminated with sixty days notice.