Rev. Proc. 75-27

PART "A" -- GENERAL

Section 1. Purpose.

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

(a) Form W-2, Wage and Tax Statement

(b) Form W-2P, Statement for Recipients of Annuities, Pensions or Retired Pay

(c) Form 1099R, Statement for Recipients of Lump-Sum Distributions from Profit-Sharing and Retirement Plans

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

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

(f) Form 1099-MISC, Statement for Recipients of Miscellaneous Income

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

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

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

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

(k) Form 1087-DIV, Statement for Recipients of Dividends and Distributions

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

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

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

(o) Form 1087-OID, Statement for Recipient of Original Issue Discount

(p) Agriculture Subsidy Payment Report

.02 This procedure supersedes Revenue Procedure 73-14, 1973-1 C.B. 797 and Revenue Procedure 74-47, 1974-2 C.B. 503.

.03 Revisions to Forms 1099-INT, 1087-INT and W-2 have necessitated certain changes in the magnetic disk specifications for reporting wage and statement amounts.

.04 The 1099-DIV is also applicable to those previously filing Form 1099M U.S. Information Return, Regulated Investment Company Distributions. Thus, regulated investment companies can file required statements with IRS on magnetic disk, in accordance with the specifications outlined in PART B of this procedure.

Sec. 2. Application for Disk Reporting.

.01 The above listed statements may be filed on magnetic disk 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, payers may submit all or a portion of their information on magnetic disk; a combination of disk 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 magnetic disk must first file a letter of application. This letter should be addressed to the Director, Internal Revenue Service Center, Attention: Magnetic Tape Coordinator, where the payer or transmitter normally files statements. Addresses of the Internal Revenue Service Centers are shown in Section 9 of this Revenue Procedure. The letter of application 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 disk 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. Identify which of the three sets in PART B--Disk Pack Specifications of this Procedure, described your equipment.

(e) List of payers to be included in the files 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 applications 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 disk reporting will be approved. Compatible disk characteristics are shown in PART B, Section 1.01.

.05 In general, once authorization to file magnetic disk 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 disk reporting is being discontinued. New applications are required whenever disk reporting is being resumed. Transmitters are required to notify the magnetic tape coordinator whenever there is an addition or deletion 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 magnetic disk pack submissions rather than aggregated into a single disk submission, so long as all of the reports from a carrier are in magnetic disk form. For these purposes, the headquarters office will be considered as a "transmitter", per Section 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 disk files to be submitted.

Sec. 3. Filing of Disk Reports.

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

.02 Payers submitting a portion of their statements on magnetic disk and the remainder on paper forms, should file magnetic disk 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 disk file. Only the payer can sign the affidavit provided on Form 4804. It is unacceptable for a transmitter, service bureau or paying agent to sign on behalf of the payer. The required Form 4804 must be filed with the shipment of magnetic disk. If only a portion of the returns are submitted on magnetic disk, include a statement that the remaining returns are being submitted in the form of paper documents. Note on the address side of the magnetic disk shipments, "DELIVER UNOPENED TO THE TAPE LIBRARY."

Form 1096, Annual Summary and Transmittal of U. S. Information Returns, or Form W-3, Transmittal of Income and Tax Statements, as appropriate, will be included in the shipment of paper documents. Only the payer can sign the affidavit provided on Forms 1096 or W-3. It is unacceptable for a transmitter, service bureau or paying agent to sign on behalf of the payer. 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 or magnetic disk) with the Form 1096 or W-3. Please note that Form 1096 or W-3 instructions normally apply to the filing of information returns on paper; however, filers of magnetic tape and disk must review the Form 1096 instructions and file Schedule A (Form 1096), if appropriate.

.04 The dates prescribed for filing paper documents with the Internal Revenue Service will also apply to disk pack filing. Requests for extensions of time 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 specifications in PART B of the Procedure describe in detail the requirements for reporting on disk.

.06 All disk files submitted by 1099-MED filers per PART A, Section 2.06, should be assembled by the carrier and mailed in one shipment to the Service Center that received the application.

Sec. 4. Processing of Disk Statements.

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

.02 However, if the disk packs submitted are unprocessable, they will be returned for correction. Acceptable disk packs 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 disk, he should contact the magnetic tape coordinator of the Service Center to which the disk statements were or are to be submitted. A Corrected Form 4804 must be filed whenever corrections on disk are submitted.

.02 If corrections are not submitted on disk the appropriate paper form (Form W-2, W-2P, 1099 or 1087) must be used if it is necessary to correct Payee "B" records in the magnetic disk files. Each such form must be annotated in the manner specified for corrected statements in the Instructions for Form 1096 or W-3, as appropriate. Corrected documents should contain all relevant information so that they completely supersede the statements recorded on disk.

.03 Form 1096 or W-3 instructions, as appropriate, are to be followed when paper documents are filed to correct statements submitted on disk.

Sec. 6. Effect on Paper Documents.

.01 Magnetic disk pack reporting of the information documents listed in Section 1 above applies only to the original (Copy A). By filing with the Service on magnetic disk, payers are permitted considerable flexibility in designing the copy of the information return to be furnished to the employee/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, shareholder or employee. This is permissible so long as all required information present on the official form is included and the employee/payee's copy is conducive to proper reporting on his tax return. Payers should also include the message that "This information is being furnished on Forms 1099 (or 1087, W-2, W-2P) to the Internal Revenue Service" on the employee/payee's copy.

.02 If only a portion of the statements is reported on magnetic disk and the remainder is reported on paper forms, those statements not submitted on magnetic disk 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 W-2 and W-2P or the reproduction of Forms in the 1087 and 1099 Series.

Sec. 7. Calendar Year Basis.

Magnetic disk pack reporting to the Service for all types of Forms 1099, 1087, W-2 and W-2P must be on the calendar year basis.

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 Income Tax Regulations on Procedures and Administration and section 31.6109-1 of the Employment Tax Regulations. If, for legitimate cause, the taxpayer identifying number of a payee has not been furnished to the payer, the specifications in PART "B" of the procedure permit its omission.

.02 The Service associates and verifies payments to employees/payees with corresponding amounts on tax returns, principally through taxpayer identifying numbers. It is particularly important that correct social security or employer identification numbers for employees/payees be provided on the forms, magnetic tape or disk pack sent 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 (including employee trusts, retirement systems, etc.) the taxpayer identifying number is the employer identification number (00-0000000). For individuals, it is the social security number (000-00-0000). When entering either number on magnetic disk records, please do not include the hyphens.

See Sec. 10 below, Guidelines for Determining Proper Taxpayer Identifying Number to be Furnished to the Service.

.03 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 documents, this is accomplished through a manual editing process. However, manual editing is precluded when statements are received on magnetic disk. 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 alphabetic characters of the payee surname are to be entered by payers. In addition, a blank must precede the identifying surname in the first name line of all Payee "B" Records unless the surname begins in the first position of the field.

.04 If payers are unable to provide the first four characters of the payee surname, the specifications permit the submission of statements on magnetic disk with the Name Control Field left blank. However, compliance with the following will facilitate the Service computer programs required to generate the Name Control.

(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.

(b) A blank must precede the surname unless the surname begins in the first position of the field.

(c) In the case of multiple payees, only the surname of the payee, whose taxpayer identifying number (SSN or EIN) is shown in the Payee "B" Record, must be present in the first name line. The surnames of the other payees may be entered in the second name line.

.05 Provision is also made in these specifications for data entries not required for Federal tax purposes, but which may be required by state or local governments. This should minimize the Payer/Transmitter's programming burden should payers desire to report on tape to state or local, as well as to the Federal, Government.

Sec. 9. Additional Information.

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

     (a) Internal Revenue Service

.01 Under section 6109 of the Internal Revenue Code, 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 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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If this type of account is related to the filing of a Form 1041, U. S. Fiduciary Income Tax Return, enter an Employer Identification Number in disk positions 12-20 of the Payee "B" Record and the legal trust or estate in the Payee 1st Name Line of the Payee "B" Record.