SERVICE ANNOUNCES PROCEDURES FOR PREPARING FUTA TAX RETURN ON MAGNETIC TAPE.

Rev. Proc. 93-46

SECTION 1. PURPOSE

This revenue procedure sets forth requirements and conditions under which Reporting Agents preparing Form 940, Employer's Federal Unemployment Tax Return, for groups of taxpayers can furnish the required information in the form of magnetic tape.

SEC. 2. BACKGROUND

.01 Section 31.6011(a)-8 of the Employment Tax Regulations provides that the Commissioner may authorize the use, at the option of the employer, of composite return in lieu of any form specified in 26 CFR Part 21 (Employment Taxes and Collection of Income Tax at Source) for use by an employer, subject to such conditions, limitations, and special rules governing the preparation, execution, filing, and correction thereof as the Commissioner may deem appropriate. The composite return shall consist of a form prescribed by the Commissioner and an attachment or attachments of magnetic tape or other approved media. A single form and an attachment or attachments of magnetic tape may comprise the returns of more than one employer.

.02 The magnetic tape Form 940 is a composite return consisting of the magnetic tape data and Form 4996, Magnetic Tape Filing Transmittal for Form 941 or 940 Federal Tax Returns. A magnetic tape return must contain the same information that a return filed completely on paper contains.

.03 The procedures for filing Form 940 on magnetic tape differ from the procedures for filing Form 941 Employer's Quarterly Federal Tax Return on magnetic tape, principally in the Tax Data Records. Whereas in reporting Form 941, there is one Tax Data "B" Record, in reporting Form 940 there are three types of Tax Data "B" Records, "B1," "B2," and "B3."

.04 The need for three different records was established when the return was analyzed. Form 940 is complex with several different parts. In at least three places the return allows for multiple repeating lists: 1) state reporting numbers; 2) multiple reasons for exempt payments; and 3) multiple entries of state codes, state reporting numbers, and experience rates.

.05 To deal with the multiple list problem without paper attachments or typing up large pieces of record formats with seldom used fields, the specifications allow some record types ("B2" and "B3") to be repeated to take care of virtually all taxpayers. Furthermore, because information as to the states to which credit reductions will apply is not available until November of each year, all states and applicable territories are treated as potential credit reduction states. In addition, many intermediate fields (that is, fields resulting from the addition, subtraction, and multiplication of primary data fields) have been omitted from the "B" Record specification. The test of the final result field, "Total FUTA Tax," against the generated results of the primary fields (that is, fields only available from taxpayer records) will be used to determine the accuracy of the calculation of the correct tax by the Reporting Agent.

.06 Reporting Agents who choose not to develop software for exceptional cases may choose to file those returns on paper.

SEC. 3. CHANGES

.01 This revenue procedure supersedes Rev. Proc. 92-99, 1992-2 C.B. 518, and reflects the current tape specifications.

.02 Section 15, Magnetic Tape Specifications. The Form 940 Filing Indicator in tape position 154 of the Form 940 Tax Data "B1" Record (see Exhibit 11) has been modified to conform with the changes that a return filed completely on the 940 paper return contain. Form 940 Filing Indicator zero, paid unemployment taxes ("contributions") to only one state, was added. Form 940 Filing Indicator one, paid unemployment taxes ("contributions") to only one state and no state contributions were made, was added.

.03 A new section has been added, Section 17, Information a Reporting Agent must provide to the taxpayer.

.04 Exhibit 11, Form 940 Tax Data "B1" Record. In tape position 153 Final Return Indicator has been added. This field is used to describe a final return. The State Experience Rate field in the experience rate group has been expanded to a 6 position decimal (position 495-638).

.05 Exhibit 13, Form 940 Tax Data "B3" Record. The State Experience Rate field in the experience rate group has been expanded to a 6 position decimal (position 64-709).

.06 All record lengths have been expanded from 700 to 720 characters because of the increase in length of the State Experience Rate field to a 6 position decimal.

.07 Current Reporting Agents who are unable to comply with any changes in specification should contact the local Magnetic Tape Coordinator for Business Tax Returns for further instructions.

SEC. 4. APPLICATION FOR TAPE REPORTING

.01 Reporting Agents who desire to file Forms 941 and 940 on magnetic tape must first file a Letter of Application. Although this revenue procedure covers only Form 940 filed on magnetic tape, the Letter of Application may cover Form 941 as well. In addition, a separate but simultaneous letter may be submitted for permission to submit federal tax deposits on magnetic tape for Forms 940, 941, and 943. Separate revenue procedures cover the filing of Form 941 and the submission of federal tax deposits (FTDs) on magnetic tape. Contact the Magnetic Tape Coordinator for Business Tax Returns for current copies of the other revenue procedures.

.02 The Letter of Application should be addressed to the Director, Internal Revenue Service Center, Attention: Magnetic Tape Coordinator for Business Tax Returns, of the Service Center that serves the primary business address of the Reporting Agent. Addresses of the service centers are shown in section 12 of this revenue procedure.

.03 The Letter of Application must contain the following:

1. Name, address and EIN (Employer Identification Number) of the person, organization, or Letter of Application.

2. Name, title, and telephone number of the person to contact regarding the Letter of Application.

3. The first tax year for which the agent plans to file returns on magnetic tape.

4. The estimated volume of returns the agent plans to file by type of return (941 or 940).

5. An agreement by the Reporting Agent to keep copies of the Reporting Agent Authorization (RAA) on file at the agent's principal place of business for examination by the Internal Revenue Service upon request. Such copies must be retained until the period of limitation for assessment for the last return filed under its authority expires.

6. An agreement by the taxpayer to fully pay the tax by FTDs. This revenue procedure does not restrict a non-financial organization that performs a payroll or tax service from being a Reporting Agent. See Rev. Proc. 89-48, 1989-2 C.B. 599, concerning the requirements under which FTDs can be made by the Reporting Agent.

7. An agreement by the taxpayer to fully pay contributions to state unemployment funds on time and to timely file related state unemployment tax returns.

8. Signature of the Reporting Agent or the Reporting Agent's employee authorized to prepare federal tax returns for taxpayers.

.04 The Letter of Application must include two types of attachments as follows:

1. A Reporting Agent's List which identifies all taxpayers to be included in the Magnetic Tape Filing System.

2. RAAs for all taxpayers included on the Reporting Agent's List.

Details of these attachments are described in the current revenue procedure on RAAs.

.05 A Reporting Agent must submit a separate Letter of Application to each service center to which magnetic tape returns are to be filed.

SEC. 5. REPORTING AGENT AUTHORIZATION

A RAA must be submitted for each filer on the Reporting Agent's List attached to the Letter of Application. The RAA may be submitted on Form 8655, Reporting Agent Authorization, which is available on request; or any other instrument that meets the specifications identified in Rev. Proc. 89-18, 1989-1 C.B. 828. The RAA may convey the filing of Forms 940 and 941 and the magnetic tape submission of FTDs of Forms 940, 941, and 943, if desired.

SEC. 6. APPROVAL OF AGENT'S APPLICATION

.01 The Service will act on the Letter of Application and notify the Reporting Agent, with the return of a validated Reporting Agent's List, within 30 days of receipt. The validated Reporting Agent's List provides the name control for each taxpayer. The name control is a required field when the return is submitted on magnetic tape. See Exhibit 11, positions 73-76.

.02 Having secured a name control for each taxpayer, the Reporting Agent must submit a test tape. To allow sufficient time to work out problems, Reporting Agents are encouraged to submit the initial test tape by September 30th of the year preceding the due date of the returns which will be filed on magnetic tape. THE TEST TAPE DOES NOT CONSTITUTE THE FILING OF RETURNS.

.03 Generally, submission of magnetic tapes which can be read on the Service's computers without a "job abort" and with a 5 percent or less error rate on the returns is required for approval of a Reporting Agent's Letter of Application and continuation of filing privileges. If a Reporting Agent submits a bad test tape, the Magnetic Tape Coordinator will notify the Reporting Agent of that fact. The Reporting Agent must supply a new test tape within 30 days of the coordinator's notification. If a Reporting Agent has not received approval for magnetic tape filing by the end of the tax year for which the returns will be filed, paper tax returns must be filed. The Reporting Agent may, however, resubmit a test tape for the subsequent tax year.

.04 The Magnetic Tape Coordinator for Business Tax Returns will notify prospective and current Reporting Agents in writing of approval, denial and revocation of magnetic tape filing privileges. Once authorization to file tax data on magnetic tape has been granted to a Reporting Agent, such approval will continue in effect in succeeding tax periods so long as the requirements of the most recent revenue procedure are met, and there are no equipment changes by the Reporting Agent.

SEC. 7. EFFECT ON PAPER RETURNS

Authorization to file on magnetic tape does not prohibit the filing on paper federal tax returns, but merely permits filing of such returns through the Magnetic Tape Filing System. If for some reason (for example, late receipt of records), an agent prefers to file a paper return in lieu of magnetic tape filing for a given taxpayer, the agent may do so even after having been given authorization to file that taxpayer's returns on magnetic tape.

SEC. 8. FILING TAPE RETURNS

.01 The Service will allow a tape return to be submitted for those taxpayers who are approved for magnetic tape filing until the Reporting Agent formally notifies the Service that specific employers are being deleted from the current magnetic tape filing inventory.

.02 Under section 6091(b) of the Internal Revenue Code, federal tax returns must be filed at the Internal Revenue service center serving the legal residence or principal business address of the taxpayer. Thus, Reporting Agents must normally file the taxpayer's returns at the appropriate service center as described above even if it means submitting magnetic tapes to more than one service center. An exception may be granted once a Reporting Agent has applied for and received permission from the Service to do so. Contact your Magnetic Tape Coordinator for Business Tax Returns for details.

.03 Approval by the Service of a Letter of Application allows a Reporting Agent to file at any service center that services the clients. A Reporting Agent who wishes to file at additional service centers must notify the Magnetic Tape Coordinator for Business Tax Returns of the service center where the original application is filed at least 90 days prior to the initial transmittal to the new service center.

.04 The Reporting Agent will be provided with a validated copy of the Report Agent's List for taxpayers authorized to file on magnetic tape. This authorization will contain each taxpayer's EIN and an name control. This authorization will be the source of the EIN and name control to be used on magnetic tape by the Reporting Agent as an identification of each taxpayer. The name control must be retained in the agent's records and used in each taxpayer's Tax Data "B1" Record (positions 73-76). It is used by the Service to ensure the correct recording of the taxpayer's return. Failure to use the correct name control can result in delays in processing the return and notices of delinquent filing being sent to the taxpayer.

.05 Packaging, shipping, and mailing instructions will be provided in the letter granting initial approval issued by the Service in response to the Letter of Application for magnetic tape filing. The first box of the tape shipment to the service center must contain the following:

1. Form 4996, Magnetic Tape Filing Transmittal for Forms 941 or 940 Federal Tax Returns, in duplicate. Failure to complete and submit this form will cause delays in processing the magnetic tape. The submittal form must include:

(a) The name, address, and telephone number (including area code) of Reporting Agent.

(b) Employer Identification Number of Reporting Agent.

(c) Type of tax return filed on the magnetic tape (940).

(d) Tax period (use YYMM of tax year -- for example, 9412).

(e) Number of tax returns filed on accompanying tape.

(f) Total taxes reported.

(g) Total taxes deposited.

(h) Number of revenue procedure used as basis for magnetic tape preparation (for example, 93-46)

(i) Service center where RAAs are filed.

(j) Signature of agent or authorized employee, title and date.

2. A control listing identifying taxpayers on the current tape file being submitted. These taxpayers must be those who were previously approved by the Service for magnetic tape filing. List the taxpayers in EIN sequence with each taxpayer's name and address (address is optional).

.06 Only Form 940 data may be present on this magnetic tape. Form 941 data must be on a separate tape.

.07 The Reporting Agent should notify the Magnetic Tape Coordinator for Business Tax Returns if the agent does not receive notification of receipt of the transmittal within 15 days from the date the transmittal was sent.

.08 The Reporting Agent should notify the Magnetic Tape Coordinator for Business Tax Returns when the tape is received back from the Service. This may be done by telephone or by returning a receipted copy of the tape chargeout.

.09 If this revenue procedure is revised in terms of its computer specifications, current Reporting Agents will be advised by the Magnetic Tape Coordinator for Business Tax Returns to submit test tapes prior to their first usage of the new specifications. If the changes are minor, the Magnetic Tape Coordinator may waive the requirement.

.10 If a Reporting Agent changes computer equipment, a test tape must be submitted. The guidelines in section 6 of this revenue procedure will be followed, in regards to submission and acceptance of test tapes. If, by the end of the tax year for which the returns will be filed, the Reporting Agent has not submitted a test tape that meets the requirements of this revenue procedure, the Magnetic Tape Coordinator will advise the Reporting Agent to submit paper returns. The Reporting Agent may resubmit a test tape for the subsequent tax year.

SEC. 9. DUE DATES

.01 The due dates prescribed for filing paper returns with the Service also apply to magnetic tape filing of federal business tax returns.

.02 In no case should returns with more than one due date be included on one tape file.

SEC. 10. ADDING AND DELETING FILERS FROM MAGNETIC TAPE FILING SYSTEM

.01 After a Reporting Agent has been notified by the Service that the application for tape reporting has been approved, the agent may want to add and delete taxpayers from the Magnetic Tape Filing System.

.02 Specific instructions for adding and deleting taxpayers form the Magnetic Tape Filing System are contained in the current revenue procedure on RAAs. Contact the Magnetic Tape Coordinator for Business Tax Returns to secure the current version.

.03 Returns may not be filed for a taxpayer until a RAA has been submitted for the taxpayer and the taxpayer's identifying information has been included on a Reporting Agent's list which in turn has been subsequently validated by the Service. Until the Reporting Agent has received the validated list, a valid tax return cannot be submitted through the Magnetic Tape Filing System.

SEC. 11. CHANGE OF ADDRESS

.01 The taxpayer may notify the Service of an address change at any time by providing clear and concise written notification of a change of address (in accordance with Rev. Proc. 90-18, 1990-1 C.B. 491), on a Form 8822, Change of Address (see Exhibit 2). The change of address form is available on request. The toll-free number for forms is 1-800-TAX-FORM (1-800-829-3676).

.02 If a taxpayer requests that a change of address by processed from the address that is submitted in the taxpayer's magnetic tape record, enter an address change indicator (entry of "1" in tape position 152 of the "B1" Record, Exhibit 11). The street address, city, state code and zip code must be formatted as described in Exhibit 11.

.03 The taxpayer's address of record will be updated with the information that is given in tape positions 77-142 of the "B1" Record.

SEC. 12. RESPONSIBILITIES OF A REPORTING AGENT

Retain the following material for an appropriate period of four years after the due date of the return unless otherwise notified by the Service:

(a) a complete copy of the magnetic tape return (may be retained on magnetic media); and

(b) the notification of receipt of the transmittal received from the Service.

SEC. 13. ADDITIONAL INFORMATION

Request for additional copies of this revenue procedure, applications for magnetic tape filing, copies of Form 4996 and Form 8822, requests for copies of appropriate input record element specifications, and requests for tape filing information should be addressed to the Director, Internal Revenue Service Center, Attention: Magnetic Tape Coordinator of Business Tax Returns, at one of the following addresses:

1. North-Atlantic Region

.01 Conventions.

(1) Reporting Agents who submit Forms 940 and 941 on magnetic tape must conform to Level 3 of the ANSI Standard X3.27-1978 (Magnetic Tape Labels and File Structure for Information Interchange). Specifically this calls for recognition of the following label types: VOL1, HDR1, HDR2, EOV1, EOV2, EOF1, and EOF2 (see Exhibits 3 through 9 for specific label specifications). No user labels or non-labeled tapes will be accepted for processing.

(2) Record Mark. No restrictions apply to record marks.

(3) Tape Mark. The tape marks will be automatically generated for an interchange tape (as defined above in paragraph .01(1)). An example as to their positioning is given in section 15.02 of this revenue procedure.

.02 Definitions.

 Element             Description

.01 These specifications prescribe the required format and content of the records to be included in the file, but not the methods or equipment to be used in their preparation. A physical tape reel must have the following physical characteristics:

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

VOL1 HDR1 HDR2 TAPE MARK DATA RECORD A DATA RECORDS B (Up to 100 occurrences) /*/ DATA RECORD C DATA RECORDS B (Up to 100 occurrences) /*/ DATA RECORD C DATA RECORD E TAPE MARK EOF1 EOF2 TAPE MARK TAPE MARK

/*/ NOTE: Up to 100 "B1" Records may be submitted per "C" Record. "B2" and "B3" Records are used as needed with an associated "B1" Record. Repeat the sequence of "B" Records and "C" Records as needed.

.03 All records including headers and trailers, if used, must be written at the same density.

.04 Affix an external label to each tape with the following information:

     1. Name of Reporting Agent.

.06 Data. Only character data may be used. This means numeric fields cannot have over-punched signs and should be right justified with remaining unused positions zero filled. All money fields should include two decimal positions on the right. All numeric data should be in unsigned ASCII characters (no binary data). Currently, this revenue procedure includes no fields that require signs. All fields must have either numeric or alphabetic characters with the exception of the special characters which are allowed in the name line and street address fields. Special characters can only be used in the name line fields and the street address fields of the Agent "A" Record and Tax Data "B" Record. Special characters in the street address must be limited to hyphen (-) and slash (/). And special characters in the name line must be limited to hyphen (-) and ampersand (&).

.07 Agent "A" Record. The Agent "A" Record (see Exhibit 10) identifies the Reporting Agent who prepares and transmits the tape file. Only Form 940 data may be present on this magnetic tape. Form 941 data must be on separate tape. The Agent "A" Record must be reported on the first reel of the file and precede the first Tax Data "B" record.

.08 Form 940 Tax Data "B" Records.

(1) Tax Data "B" Records (see Exhibits 11, 12, and 13) contain tax information for each filer reported by the Reporting Agent. The number of Tax Data "B" Records of any type appearing on one tape reel depends on the number of taxpayers represented (only one tax return for each EIN).

(2) All records must be for the current tax period. All money amounts must contain dollars and cents, must be right justified with zero filling on the left. Fields identified as indicators must always carry a value.

(3) The return must be filed on paper if, (a) any "B" Record field is too small to accommodate the data, (b) the taxpayer reports more than four state identification numbers were assigned by a particular state, (c) the taxpayer has more than four experience rates in a given year for a particular state code and reporting number, or (d) the taxpayer has been assigned no experience rate by a state. "No experience rate" does not mean an experience rate of zero percent. Taxpayers assigned zero percent experience rates may file magnetic tape returns.

(4) There are three types of Form 940 Tax Data "B" Records.

(a) "B1" Record. The "B1" Record is required for all taxpayers. There can be only one record of this type per taxpayer. The format and description of the "B1" Record are in Exhibit 11. Additional information and instructions for preparing the "B1" Record are in paragraph (6) of this section.

(b) "B2" Record. The "B2" Record is used only if the taxpayer has more than 10 separate reasons for exempting payments to employees from FUTA. THe various reasons for exempting payments are defined in section 16 of the revenue procedure. Up to four "B2" Records may follow a "B1" Record. The format and description of this record are in Exhibit 12. Additional information and instructions for preparing the "B2" Record are in paragraph (7) in this section.

(c) "B3" Record. If a taxpayer has employees in more than one state, a "B3" Record is required. Each "B3" Record will accommodate up to four additional states. Up to thirteen "B3" Records may be present. The first "B3" Record used must follow the "B2" Records (if they are present). The format and description of the "B3" Record are in Exhibit 13. Additional information and instructions for preparing the "B3" Record are in paragraph (8) in this section.

(5) Form 940 Filing Indicator.

(a) The Form 940 Filing Indicator (position 154 of the "B1" Record) is used to determine how a taxpayer completes Form 940. The filing indicator is a key to the use of the "B1" and "B3" Records, but it has no bearing on "B2" Records. A detailed description of the indicator is given in Exhibit 11.

(b) If the Form 940 Filing indicator is equal to zero, then only a "B1" Record is required. The state contributions field (positions 157-169) must contain an amount, and positions 495-638 must be blank or zero filled as appropriate. No "B3" Record may be filed for the taxpayer if filing indicator zero is used.

(c) If the Form 940 Filing Indicator is equal to one, then only a "B1" Record is required. The state contributions field (positions 157-169) must be zero filled, and positions 495-638 must be blank or zero filled as appropriate. No "B3" Record may be filed for the taxpayer if filing indicator one is used.

(d) If the Form 940 Filing Indicator is equal to two, then at least one "B3" Record is needed, in addition to the "B1" Record. The state contributions field (positions 157-169 of the "B1" Record) must contain an amount. The amount must equal the total contributions paid to all state unemployment funds (reported in the Contributions Actually Paid to State fields in the "B1" Record and "B3" Records). Positions 185-229 of the "B1" Record (second, third and fourth State Reporting Number fields) must be blank filled. Tax information for the first state reported must be entered in the following "B1" Record fields: State Code Employees (positions 155-156), State Reporting Number (positions 170-184), and positions 495-638. The "B3" Record is used to report additional tax information for the remaining states.

(e) If the Form 940 Filing Indicator is equal to three, then a "B1" Record is required. Positions 185-229 (second, third and fourth State Reporting Number fields of the "B1" Record) must be blank filled. Positions 495-638 require some data. The State Contributions field (positions 157-169) must contain the amount of contributions paid to the state unemployment fund, and the amount must equal the total reported for Contributions Actually Paid to State in the "B1" Record (and "B3" Records, if used). A "B3" Record is required if the taxpayer has been assigned more than one state reporting number by the state. See paragraphs (8)(f) and (g) of this section for additional information and instructions.

(6) Instructions for Preparing the "B1" Record.

(a) Positions 1-156 of the "B1" Record must contain data for all taxpayers. Provide information as described in Exhibit 11.

(b) Positions 157-169 (State Contributions) and 170-184 (State Reporting Number) of the "B1" Record must contain data if the employer is required to contribute to state unemployment funds. (See previous paragraph (5), (b) through (e), for additional information on the use of the State Contributions field.)

(c) If a taxpayer reports multiple state reporting numbers for a state, positions 170-184 (State Reporting Number) must contain data. No more than four state reporting numbers may be reported for a state. If more than four state reporting numbers were assigned by the state, the taxpayer must file a paper return.

(d) Positions 185-229 (second, third, and fourth State Reporting Numbers) must be blank filled for taxpayers who must compute tentative credit. See the instructions for preparing the "B3" Record in paragraph (8) in this section for details on reporting additional state reporting numbers for these taxpayers.

(e) Positions 230-242 (Total Payments including Exempt Payments to Employees) of the "B1" Record require data from all taxpayers. Provide information as described in Exhibit 11.

(f) Positions 243-255 (Payments in Excess of Maximum Taxable Wages) must be filled if any employee's wages exceeded the maximum for the year.

(g) Positions 256-266 (Total FUTA Tax) of the "B1" Record must be filled by all taxpayers. Provide information as described in Exhibit 11.

(h) Positions 267-277 (Total FUTA Taxes Deposited plus Overpayment from Previous Year) of the "B1" Record must be filled by all taxpayers. Provide information as described in Exhibit 11.

(i) Positions 278-288 (Overpayment From Previous Year) may or may not contain data depending on whether the taxpayer requested transfer of the previous year's overpayment.

(j) Positions 289-299 (Excess/Credit) contain data only if Total Taxes Deposited plus Overpayment from Previous Year (267-277) exceeds Total FUTA Tax (256-266).

(k) Position 300 (Credit Elect Indicator) enables the taxpayer to make a decision as to whether overpayment will be refunded or credited to the following year's account.

(l) Positions 301-311 (Total Taxes Deposited for This Tax Year) must be filled. Provide information as described in Exhibit 11.

(m) Positions 312-351 (FUTA tax liabilities for first, second, third, and fourth quarters) must be filled if Total FUTA Tax (256- 266) exceeds $100.00.

(n) Positions 352-481 (Exemption Codes and Amounts) contain 10 combinations of a two position exemption code and an 11 position dollar and cents amount of wages exempted. The exemption codes and their meanings may be found in section 16 of this revenue procedure.

(o) Positions 482-494 (Credit Reduction Wages for Unrepaid Advances to the States) should have data only if the state identified in positions 155-156 is a credit reduction state for the tax year reported.

(p) Positions 495-638 (experience rate group) are a series of repeating fields which only require entries if more than one state is being reported by the taxpayer or if any part of the taxpayer's total taxable wages is exempt from state unemployment taxes. There are four series of five fields that allow for the reporting of up to four different experience rates in a given year (that is, initial rate and three changes). The five fields in each group are:

1. Taxable payroll (12 positions).

2. Date experience rate took effect. Use numeric month and day format (MMDD). For example, 0101. (4 positions)

3. Date experience rate was changed. Use numeric month and day format (MMDD). For example, 0615. (4 positions)

4. State experience rate (6 position decimal).

5. Contributions paid to state (10 positions).

Blank or zero fill unused experience rate group fields as appropriate.

The use of these fields is determined by the value of the Form 940 Filing Indicator. At least one series of the fields must contain information if a taxpayer reports more than one state (Form 940 Filing Indicator "2"), or if any part of the taxpayer's total FUTA taxable wages is exempt from state unemployment taxes (Form 940 Filing Indicator "3"). The other three series are used only if the employer's experience rate changed during the year. If the Filing Indicator is "0" or "1", positions 495-638 must be blank or zero filled as appropriate.

If the Form 940 Filing Indicator is "2" and the employer is not required to pay contributions to the state unemployment fund of the first state reported (in the "B1" Record) because that particular state has granted the employer a zero percent experience rate, only one experience rate group should contain data, and it should be used in the following manner:

1. Taxable payroll must have data. Enter the amount of wages on which the employer would have paid state unemployment taxes had the state not granted the zero percent experience rate.

2. Date experience rate took effect. Fill with 0101.

3. Date experience rate was changed. Fill with 1231.

4. State experience rate. Fill with six zeroes.

5. Contributions paid to state. Fill with ten zeroes.

Blank or zero fill the remaining experience rate group fields as appropriate.

(q) If part or all of the taxpayer's wages subject to FUTA tax is exempt from state unemployment tax, the total amount entered for taxable state payroll must be less than the amount of total FUTA taxable wages.

NOTE: If an employer reports more than four state reporting numbers for a state, or has more than four experience rates for a state in a given year, or if the employer has no experience rate assigned by a state, the return must be filed on paper. "No experience rate" does not mean a zero percent experience rate. Taxpayers granted a zero percent state experience rate may file magnetic tape returns.

(7) Instructions for Preparing the "B2" Record.

(a) Positions 1-13 and at least the first exemption code and amount group (positions 14-26) must have data if a "B2" Record is used. This information must be provided as described in Exhibit 12.

(b) Positions 14-143 are 10 groups of two fields. The two fields are exemption code and exemption amount. The exemption codes and their meanings can he found in section 16 of this revenue procedure.

(c) Exemption amount fields must be right justified with remaining unused positions zero filled. All unneeded exemption code and amount fields must be blank or zero filled as appropriate.

(8) Instructions for Preparing the "B3" Record.

(a) Positions 1-13 and at least positions 14-79 of the first state data group must have data if a "B3" Record is used. This information must he provided as described in Exhibit 13.

(b) Positions 14-709 contain four groups of fields. Each group is for a separate state code. Therefore, each "B3" Record can accommodate reporting of an additional four states.

Positions 14-187 relate to the first state reported in the "B3" Record.

Positions 188-361 relate to the second state reported in the "B3" Record.

Positions 362-535 relate to the third state reported in the "B3" Record.

Positions 536-709 relate to the fourth state reported in the "B3" Record.

The first state reported for the taxpayer must be reported in the "B1" Record. See paragraph (5)(d) in this section.

(c) Each state group in the "B3" Record is 174 positions. The state group is composed of the following fields:

1. State code. (2 positions)

2. Credit reduction wages. This field should contain an amount if the state referenced in the associated state code field is a credit reduction state for the tax year reported. (13 positions)

3. State reporting number. (15 positions)

4. Four groups of experience rate fields. Each experience rate group is composed as follows:

Taxable payroll. (12 positions)

Date experience rate took effect. Numeric month and day format (MMDD) must be used -- for example, 0201. (4 positions)

Date experience rate was changed. Numeric month and day format (MMDD) must be used -- for example, 0825. (4 positions)

State experience rate. (6 position decimal)

Contributions paid to state. (10 positions)

(d) The experience rate group fields allow for the reporting of up to four different experience rates in a given year (that is, an initial rate and three changes). Blank or zero fill unused experience rate group fields as appropriate.

(e) If the employer was granted a zero percent experience rate and not required to pay contributions to the state unemployment fund of a particular state, only one experience rate group must contain data. It must be used in the following manner:

1. Taxable payroll must have data. Enter the amount of wages on which the employer would have paid state unemployment taxes had the state not granted the zero percent experience rate.

2. Date experience rate took effect. Fill with 0101.

3. Date experience rate was changed. Fill with 1231.

4. State experience rate. Fill with six zeroes.

5. Contributions paid to state. Fill with ten zeroes.

Blank or zero fill the remaining experience rate group fields as appropriate.

(f) The "B3" Record must be used to report multiple state reporting numbers for taxpayers who compute tentative credit (Form 940 Filing Indicator "2" or "3"). Up to four state reporting numbers are allowed for each state the taxpayer reports. If the taxpayer has been assigned more than four state reporting numbers by any state, a paper return must be filed.

(g) Repeat the state code with each additional state reporting number. Do not repeat a state reporting number. Credit reduction wages must be reported with the first occurrence of the state code. Report the state taxable payroll and actual contributions paid to the state under each given state reporting number. All groups of state data for a given state code must consecutively follow the first occurrence of that state code. Refer to Exhibit 13, and use the following guideline:

1. Positions 1-13 must contain data.

2. The state code must be repeated in the applicable State Code fields (positions 14-15, 188-189, 362-363 or 536-537) and must consecutively follow its first occurrence.

3. Enter an amount in the first credit reduction wages field for a state only if the state is a credit reduction state for the tax year reported. Each occurrence of the credit reduction wages field that follows for that state (positions 16-28, 190-202, 364- 376 or 538-550) must be zero filled.

4. Additional state reporting numbers are reported in the applicable State Reporting Number fields (positions 29-43, 203- 217, 377-391 or 551-565).

5. Positions 44-187, 218-361, 392-535 or 566-709. The positions that relate to the INITIAL experience rate of a state (44-79, 218-253, 392-427 or 566-601, within each corresponding state data group) must be completed. The second, third or fourth experience rate group must be completed only if the experience rate changes for a given state code and reporting number. No more than four experience rates may be reported for a given state code and reporting number. Enter the data as follows:

          Taxable Payroll -- (positions 44-55, 218-229, 392-403 or

09 Checkpoint Totals "C" Record. A Checkpoint Totals "C" Record (see Exhibit 14) must be written after each 100 or fewer Tax Data "B1" Records. This record contains the sum of all FUTA tax reported in the preceding 100 (or fewer) "B1" Records and the sum of all "B1" Records, "B2" Records, and "B3" Records accumulated per "C" Record checkpoint. The "C" Record must be followed by a Tax Data "B1" Record, except if the "C" Record is at the end of the file. In which case, it is followed by an End of File "E" Record.

10 End of File "E" Record. The End of File "E" Record (see Exhibit 15) contains the total of all "B1" Records, "B2" Records, and "B3" Records reported on the tape file, and gives the sum of all FUTA tax reported on the tape file. The "E" Record must be the last record on the agent's tape file. It may be followed only by a tape mark.

SEC. 16. EXEMPTION CODES

.01 Exemption codes were established to give taxpayers the capability to claim FUTA exemptions through the magnetic tape filing system. These codes are updated periodically to reflect changes in the law; however, this revenue procedure does not establish authority for exemptions under FUTA. If an exemption that is listed in this section is not in effect for the tax year reported, the exemption code will not be accepted. Refer to Circular E, Publication 15, for details regarding exemptions under FUTA.

.02 If a FUTA exemption is claimed, the appropriate exemption code must be used in the two position fields in the exemption code and amount groups (in the "B1" and "B2" Records).

.03 Some of the following codes are group level exemption codes. If an asterisk is present before the exemption code, then a lower level subclassification is present on a later page. If the Reporting Agent cannot provide the subclassification, the higher level classification is sufficient.

 Exemption      Special Classes of Employment

.01 The Reporting Agent must furnish the taxpayer with a paper copy of the magnetic tape material that was sent to the Service. This information can be contained on a replica of an official form or on an unofficial form. However, on an unofficial form, data entries must be referenced to the line references on an official form.

.02 The Reporting Agent must also provide the taxpayer with a paper copy of the paper portion of the taxpayer's return.

.03 The Reporting Agent must advise the taxpayer to retain a complete copy of a return and any supporting material.

.04 The Reporting Agent must advise the taxpayer that an amended return, if needed, must be filed as a paper return and mailed to the service center that would handle the taxpayer's return.

.05 The Reporting Agent must, upon request, provide the taxpayer with the date the magnetic tape portion on the taxpayer's return was acknowledged as received by the service center.

SEC. 18. STATE ABBREVIATIONS

.01 You must use the following state abbreviations when developing the state code portion of address fields.

 State               Code           State                     Code

This revenue procedure supersedes Rev. Proc. 92-99, 1992-2 C.B. 518.

SEC. 20. EFFECTIVE DATE

This revenue procedure is effective November 15, 1993.

EXHIBIT 1 MAGNETIC TAPE FILING TRANSMITTAL FOR FORM 941, 941E OR 940 FEDERAL TAX RETURNS

[Editor's Note: Exhibit 1 has been omitted as it is not suitable for clear on-screen presentation.]

EXHIBIT 2 CHANGE OF ADDRESS

[Editor's Note: Form 8822, Change of Address, has been omitted as it is not suitable for clear on-screen presentation. A copy can be obtained from the IRS by calling, toll-free, 1-800-TAX-FORM.]

                               EXHIBIT 3

FORM 940 AGENT "A" RECORD

General Information. The "A" Record identifies the Reporting Agent, the tax year and the type of return being filed. This record must be the first record reported on the first reel of the tape file. It precedes the first Tax Data "B" Record reported.

Special characters may only be used in the name line and street address fields and must be limited to those characters listed in section 15.06 of this revenue procedure.

 Tape

FORM 940 TAX DATA "B1" RECORD

General Information. A "B1" Record is required for each taxpayer. Only one "B1" Record is allowed for a taxpayer, and it must be the first Tax Data "B" Record reported for the taxpayer.

Money amount fields must be right justified with remaining unused positions zero filled.

Special characters may only be used in the name line and address fields and must be limited to those characters listed in section 15.06 of this revenue procedure.

 Tape

 Tape

 352-353  Exemption Code   Enter the approved two character exemption

 Tape

 Tape

 Tape

 567-578  Taxable Payroll  Third entry, taxable payroll under compu-

 603-614  Taxable Payroll  Fourth entry, taxable payroll under compu-

EXHIBIT 12

FORM 940 TAX DATA "B2" RECORD

General Information. The "B2" Record is a continuation of the taxpayer's explanation of exempt payments. This record should be used only if the taxpayer has reasons for exempting payments that are in addition to the 10 reported in the "B1" Record; data must be present in tape positions 1-26 of the "B2" Record. Up to four (4) Agent "B2" Records may follow a "B1" Record. Each "B2" Record contains 10 combinations of a two position exemption code and 11 position dollar and cents amount of wages exempted. The exemption codes to be used are described in section 16 of this revenue procedure. Exemption amount fields must be right justified with any remaining positions zero filled.

All remaining unused exemption code fields must be blank filled. All remaining unused exemption amount fields must be zero filled.

 Tape

FORM 940 TAX DATA "B3" RECORD

General Information. The "B3" Record is a continuation of state tax information. Tax data for the first state reported for a taxpayer must be entered in the "B1" Record. Up to thirteen (13) Agent "B3" Records may follow a "B1" or "B2" Record.

Money amounts are dollars and cents. Money amounts must be right justified with any remaining positions zero filled. Blank fill unused date fields. Zero fill unused money amount and state experience rate fields.

If more than four experience rate changes occurred in one year for a given state code and reporting number, or if no experience rate was assigned by a state, or if a taxpayer was assigned more than four state reporting numbers for a state, a paper return must be filed for the taxpayer.

"No experience rate" does not mean a zero percent experience rate. Taxpayers granted a zero percent experience rate may file magnetic tape returns.

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Tape

 Posi-    Element

 464-475  Taxable Payroll  Third entry, taxable payroll under compu-

 500-511  Taxable Payroll  Fourth entry, taxable payroll under compu-

 Tape

 Tape

 Tape

 Tape

 Tape

FORM 940 AGENT "C" RECORD

General Information. A Checkpoint Totals "C" Record must be written after each 100 or fewer Tax Data "B1" Records. Each "C" Record must contain a count of each of the three types of Tax Data "B" Records and the sum of total taxes on all "B1" Records tallied per checkpoint. The money amount field will contain dollars and cents. All money amount fields must be right justified with any remaining unused positions zero filled. Any unused amount field must be zero filled.

The Checkpoint Totals "C" Record must be followed by a Tax Data "B1" Record unless the "C" Record is at the end of the file. If the "C" Record is at the end of the file, it is followed by an End of File "E" Record.

All Checkpoint Totals "C" Records must be fixed length (720 positions).

The Checkpoint Totals "C" Records cannot be followed by a tape mark.

 Tape

FORM 940 AGENT "E" RECORD

General Information. The End of File "E" Record is written after the last Checkpoint Totals "C" Record. The "E" Record contains a count of all Tax Data "B" Records by type and the sum of total taxes reported on the tape file.

The money amount fields contain dollars and cents. All money amount fields must be right justified with any remaining unused positions zero filled. All unused amount fields must be zero filled.

The End of File "E" Record must be fixed length (720 positions).

This record type must be the last record on the agent's tape file. It can be followed only by a tape mark.

 Tape

OASDI CONTRIBUTION AND BENEFIT BASE AND THE REPEAL OF THE HOSPITAL INSURANCE CONTRIBUTION BASE

Under authority contained in the Social Security Act ("the Act"), the Secretary, Department of Health and Human Services, has determined and announced (58 F.R. 58004, dated October 28, 1993) that:

1) the OASDI contribution and benefit base (Social Security wage base) for remuneration paid in 1994, and self-employment income earned in taxable years beginning in 1994 is $60,600, and

2) Section 13207 of Public Law 103-66 (the Omnibus Budget Reconciliation Act of 1993) repealed the limitation on the amount of earnings subject to the Hospital Insurance (HI) tax beginning with calendar year 1994.

The HI tax is now due on the total remuneration paid in 1994, at the rate of 1.45 percent for employees and employers, each, and on self-employment income earned in taxable years beginning in 1994, at the rate of 2.9 percent.

"OLD-LAW" CONTRIBUTION AND BENEFIT BASE

General. The 1994 "old-law" contribution and benefit base is $45,000. This is the base that would have been effective under the Act without the enactment of the 1977 amendments. The base is computed under section 230(b) of the Act as it read prior to the 1977 amendments.

The "old-law" contribution and benefit base is used by:

(a) The Railroad Retirement program to determine certain tax liabilities and tier II benefits payable under that program to supplement the tier I payments which correspond to basic Social Security benefits.

(b) The Pension Benefit Guaranty Corporation to determine the maximum amount of pension guaranteed under the Employee Retirement Income Security Act (as stated in section 230(d) of the Act).

(c) Social Security to determine a year of coverage in computing the special minimum benefit, as described earlier, and

(d) Social Security to determine a year of coverage (acquired whenever earnings equal or exceed 25 percent of the "old-law" base for this purpose only) in computing benefits for persons who are also eligible to receive pensions based on employment not covered under section 210 of the Act.