Rev. Proc. 65-25

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to state the requirements of the Internal Revenue Service relating to substitutes for Form W-2, Wage and Tax Statement. Requirements governing substitute forms have been changed considerably from preceding years. These changes are designed to facilitate processing by optical character recognition techniques, and to provide flexibility in their preparation by employers.

SEC. 2. SUBSTITUTE FORMS.

.01 The latest revision of the prescribed Form W-2 should be used as the basis for the privately printed form. A copy of the latest revision of Form W-2 may be obtained from any District Director of Internal Revenue.

.02 Substitutes for Form W-2 which adhere to the specifications contained herein may be privately printed without the prior approval of the Service. Proposed substitutes not meeting these specifications should be submitted to the Service for approval with an explanation of the need for the specific deviation sought. (See section 7.)

SEC. 3. NEW DATA ENTRY.

The Form W-2 now contains a block marked "Other Compensation." See exhibit A. This block is intended for use in reporting salary or other compensation which is not subject to withholding and which was heretofore required by regulations to be reported on Form 1099, U.S. Information Return for Calendar Year. Employers should use Form W-2 for reporting this type of income. Income subject to withholding and other compensation not subject to withholding may be reported either on one Form W-2 or on separate Forms W-2 at the option of the employer.

SEC. 4. FORMAT SPECIFICATIONS.

.01 Form sections.--For purposes of format specifications, the Form W-2 is divided into two sections: a specified format section and a variable format section. The specified format section consists of the area encompassed by the following data blocks: employee name and address, employee social security number, Federal income tax withheld, total wages paid, and other compensation, and includes also the left margin; i.e., the area within 3/8 inch of the left edge of the document. The variable format section consists of the remainder of the document, including the area encompassed by the following data blocks: the reporting year, FICA tax withheld, total FICA wages paid, and employer name, address, and identification number.

.02 Additional data entries.--Additional data blocks, beyond those contained on the official form, may be added to substitute Forms W-2, at the option of the employer or in accordance with State requirements. When present, such additional entries must be contained in the variable format section, except as noted in section 4.04(b) below.

.03 Variable format section layout.--The arrangement of data in the variable format section may be varied on substitute forms to fit the requirements of State law or to accommodate the needs of the data processing system used by the employer, except that the payment year must always be in the upper right corner of the form.

.04 Specified format section layout.--

(a) The layout of the specified format section, including contents, general arrangement, and typography must conform to one of the formats illustrated in exhibit B. Formats 1, 2, 3, 4, and 5 are preferred; however, formats 6 and 7 are acceptable. If 6 or 7 is used and the location of the social security number will be consistent for all returns prepared by a payer, a three-point vertical rule (0.045 inch) should be preprinted immediately to the left of this area. The length of the rule and the wording and placement of the block should conform to the dimension and location on the official form.

(b) If 6 or 7 is used and the location of the social security number is not consistent for all returns, due to the nature of the mechanical equipment used by the payer, the social security number need not be contained in a special box or identified. Preferably, it should be printed to the right of and on the same line as the name, but it can also be printed one or two lines above or below the name. There must be no other data between, or on the same line as, the social security number and the name. Also special precautions must be taken with respect to the printing of an employee number or badge number. The printing of such badge numbers in the specified format section should be avoided. However, if the printing of an employee or badge number in the specified format section is unavoidable, this number must not be on the same line as, or on any line above, the social security number or on the same line as wages.

(c) Employee name, street address, and city and State (including ZIP code) must be on separate lines. City, State, and ZIP code may be on the same line or printed on separate lines.

(d) The area within 3/8 inch of the left edge of the document (exclusive of stubs) must not contain any prepunched holes and must be free of any printing except for the format identifier and format guidelines appropriate to each permissible alternate format as illustrated in exhibit B. There must be no intervening data or marks between the left edge of the document and the specified format section.

(e) There must be a margin of at least 1/4 inch between the top and bottom edges of the document and any other printing. Variable format section data may be placed between the top or bottom edge of the document and the specified format section, or the specified format section may occupy the entire left side of the substitute form, at the option of the employer.

(f) The overall dimensions of the specified format section and the dimensions of the individual data blocks contained therein may be varied from the dimensions shown on exhibit A. However, the general arrangement of data within the section and the typography may not be altered, except for mailing guides. Mailing guides may be omitted if the substitute form is not intended to be mailed in window envelopes.

(g) The appropriate format identifier (1, 2, 3, 4, 5, 6, or 7) must be shown in the upper left corner of copy A, as illustrated in exhibits A and B, 1/4 inch from the top and left edges and there must be 1/8 inch clear space to the right of such number. In addition, the appropriate format guidelines must also be shown on the A copy.

(h) In using any of the formats, care should be taken to prevent disclosure of wage and tax information if a window envelope is used for mailing.

SEC. 5. SPECIFICATIONS.

.01 Color and quality of paper.--

(a) Paper used for copy A must be white 100 percent bleached chemical wood, 2 1/2 percent maximum groundwood permissible. No optical brighteners may be added; however, minimal trace amounts will be acceptable. The paper must be: Weight, 40 pound (basis 17x22--1,000), tolerance plus/minus 5 percent (weight must be inclusive of any coatings or chemical treatments); brightness, 80 percent or more when measured on a brightness meter in accordance with TAPPI specifications T-452; low finish; free of any dirt specks which would affect optical scanning; and must be uniformly textured. The minimum qualifications are the typical physical characteristics in weight, caliper, stiffness, and tear resistance normally associated with a 40-pound chemical wood bond or writing paper.

(b) The paper used for other copies must be white, at least 18-pound (basis 17x22--1,000) and of good quality.

.02 Color and quality of ink.--

All printing must be in a black nonreflective ink. A nonreflective ink is one which has a 10-percent reflectance or less between the wave-length range of 3,500 to 5,000 Angstroms and 20 percent less between the wave-length range of 5,000 to 10,000 Angstroms. (These reflectances are referenced to magnesium oxide which is 100 percent.)

.03 Typography.--Type must be substantially identical in size and shape with corresponding type on the official form. All horizontal rules on the document and all vertical rules outside the specified format section except format identifier lines, must be one point (0.015 inch). All vertical rules within the specified format section and format identifiers must be three point (0.045 inch). When present, mailing guides must be less than 1/2 point (0.0075 inch). The format identifier must be printed on the 10-point Remington typewriter font as shown in GPO "Specimens of Type Faces." Vertical rules must be parallel to the left edge of the document; horizontal rules parallel to the top edge.

.04 Dimensions.--The official form is eight inches wide by three and one-half inches deep, exclusive of a half-inch snap-stub on the left side of the form. The substitute forms may vary in width from seven and three-eights inches to eight inches and in depth from three and one-quarter inches to three and three-quarters inches, although adherence to the size of the official form is preferred. The snap feature is not required on substitutes. If the substitute forms are in continuous or strip form, they must be burst and stripped to conform to the size specified before they are filed.

.05 Clear area.--The back of copy A must be free of all printing.

.06 Carbonized forms or "spot carbons".--Carbonized forms and "spot carbons" are not permissible. Interleaved carbon, if used, must be of good quality to preclude smudging and, preferably, black.

.07 Special identification.--Copy B must show the full-face dots, arranged vertically on the upper right side.

.08 Printers' symbols.--The Government Printing Office symbol must not be placed on substitute Forms W-2. In place thereof, it is suggested the forms printer print an identifying symbol in the same place on such substitute forms.

.09 Copy D.--Copy D is included in the official assembly for the convenience of the employer. Although there is no requirement that privately printed substitute forms include copy D, employers may find it desirable to make and retain such copy.

SEC. 6. ADDITIONAL INSTRUCTIONS.

.01 Arrangement of assembly.--Except as provided below, the parts of the assembly shall be arranged, from top to bottom, as follows: copy A, "For District Director;" copy B, "To be filed with employee's tax return;" copy C, "For employee's record;" copy D, "For employer." The first two copies of a Form W-2 assembly must be copy A "For District Director" and copy B "To be filed with employee's tax return," except when an additional copy is prepared for submission to a State or local taxing authority. Such additional copy, labeled copy S, may be inserted between copy A and copy B.

.02 Additional copies.--Except as noted in .01 above, additional copies which may be prepared by employers shall not be placed ahead of the copy C in the assembly. All copies of the form must be clearly labeled to indicate the purpose for which intended and must carry the copy designation. Copy S and any other copies for State or local use must be clearly labeled to indicate the purpose for which intended and should not bear any part of the designation "Form W-2--U.S. Treasury Department, Internal Revenue Service."

.03 Excludable sick pay.--If desired, a block may be shown on Form W-2 for excludable sick pay. However, if such a block is provided and no amount is entered, the word "None" or "0" should be shown.

.04 Statement to support excludable sick pay.--A statement from the employer to support sick pay excludable from gross income may be made a part of the assembly, provided it is not placed ahead of copies A and B in the assembly and is printed on paper of distinctive color. Such statement should substantially conform with the statement set forth in Revenue Procedure 57-1, C.B. 1957-1, 721. It should be clearly indicated on such statement that it is to be attached to page 2 of the taxpayer's Federal income tax return, Form 1040.

.05 Instructions.--The instructions contained on the face of copy A and both the face and back of copies B and C must appear on all substitute forms.

.06 State agencies.--The amounts of wages paid and employee contributions withheld under a State-Federal agreement, entered into pursuant to section 218 of the Social Security Act, may be shown in the spaces on Form W-2 for Federal Insurance Contributions Act wages and employee tax, provided appropriate distinguishing captions are used to identify such amounts. In such cases, the identification number assigned by the Social Security Administration to the State (prefix 69) should be shown in the employer block in addition to the employer identification number assigned by the Internal Revenue Service for income tax withholding purposes.

.07 Instructions for employers.--The Service requests the cooperation of employers in typing or machine printing whenever possible and in providing good quality data entries on the forms, i.e., using a black ribbon, inserting data in the middle of blocks, well separated from other printing and guidelines, and taking any other measures that will guarantee a clear, sharp image. However, employers are not expected to purchase typewriters, machines, or special ribbons to prepare the forms.

SEC. 7. SUBSTITUTES NOT MEETING ABOVE CONDITIONS.

Proposed substitute forms which do not meet the conditions stated above, and requests for submission of Forms W-2 in the form of punched cards or magnetic tape, should be forwarded by letter to the Commissioner of Internal Revenue, Attention: D:S:Pl., Washington, D.C., 20226.

SEC. 8. REPRODUCTION PROOFS.

Reproduction proofs of the official Form W-2 (Format 1) are available upon the request of any employer who desires to use reproductions of such form. Requests for reproduction proofs should be addressed to the Commissioner of Internal Revenue, Attention: A:FM:P., Washington, D.C., 20224.

SEC. 9. EFFECT ON OTHER DOCUMENTS.

This Revenue Procedure supersedes Revenue Procedure 65-16, C.B. 1965-1, 827.

[Editor's note: Exhibits A and B illustrate physical specifications of the forms discussed. These illustrations are not suitable for electronic reproduction.]