Rev. Proc. 81-9

Section 1. Purpose

.01 The purpose of this revenue procedure is to provide a means whereby Reporting Agents preparing Form 941, Employer's Quarterly Federal Tax Returns, for groups of taxpayers can furnish the required information in the form of magnetic tape instead of paper documents.

.02 This revenue procedure reflects the current changes to the tape specifications which were necessitated by the new requirements for depositing withheld income and FICA taxes which are effective January 1, 1981, and the new method for reporting "Tips Deemed to be Wages" paid by employers who are subject to the minimum wage laws under the Fair Labor Standards Act. Additional information on these subjects is contained in the instructions on the paper return, Form 941, Employer's Quarterly Federal Tax Return.

Sec. 2. Application for Tape Reporting

.01 Agents who desire to file authorized federal tax returns on magnetic tape must first file a letter of application or submit Form 4995, Application for Magnetic Tape Filing of Form 941, Employer's Quarterly Federal Tax Return (see Exhibit 1). The letter should be addressed to the Director, Internal Revenue Service Center, Attention: Magnetic Tape Coordinator, where the Reporting Agent normally files the returns. Addresses of the Internal Revenue Service Centers are shown in Section 10 of this revenue procedure. The letter of application must contain the following:

1. Name, address and EIN (Employer Identification Number) of the person, organization, or firm making the application. If the Reporting Agent desires to submit tape for returns prepared at more than one location, each location must be included.

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

3. Type and nature of equipment to be used to prepare the tape file, i.e., manufacturer and model of main frame and tape drives, tape width (1/2", 3/4", etc.), density (characters per inch), and recording code (BCD, Excess 3, Octal, etc.).

4. List of the taxpayers to be included on the initial establishment of the Magnetic Tape Filing System. The list must be in duplicate with the data shown in the exact order as Exhibit 2. Show each taxpayer's name, complete address (including Zip Code), and EIN: sort into EIN sequence. See Section 6.03 for additional details.

5. Internal Revenue Service Center where paper tax returns were last filed.

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

7. An agreement by the Reporting Agent to keep copies of the Powers of Attorney 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 statute of limitations for the last return filed under its authority expires.

8. An agreement to fully pay the tax by Federal Tax Deposits.

Sec. 3. Power of Attorney

.01 A Power of Attorney must be submitted for each filer on the list attached to Form 4995 or the letter of application. The Power of Attorney may be submitted on an Internal Revenue Service Form 2848, Power of Attorney (see Exhibit 3), which is available on request; or any other instrument which clearly states that the Reporting Agent is granted the authority to file and sign the return. The Power of Attorney filed under this revenue procedure is not subject to the rules contained in the Conference and Practice Requirements (Treasury Regulation 601.502).

.02 Both the taxpayer, or his authorized representative, and the Reporting Agent must sign the Power of Attorney. The signed document will remain in effect until such time as it is revoked by the taxpayer, terminated by written notification from the Reporting Agent, or expires under its own terms.

1. The following persons may execute a Power of Attorney on behalf of a corporation or other business taxpayer:

(a) The individual if the person required to make the return is an individual;

(b) The president, vice president, or other principal officer, if the person required to make the return is a corporation;

(c) A responsible and duly authorized member or officer having knowledge of its affairs, if the person required to make the return is a partnership or other unincorporated organization;

(d) The fiduciary, if the person required to make the return is a trust or estate; or

(e) The document may be signed for the taxpayer by an agent who is duly authorized in accordance with Regulations 31.6011(a)-7.

.03 The scope of the Power of Attorney for Magnetic Tape Filing will be governed according to the following:

1. Power of Attorney will delegate to the Reporting Agent the power to sign and file appropriate federal tax returns.

2. The Power of Attorney becomes effective for the tax period the Agent notifies the Service that the employer or filer is being added to the Magnetic Tape Filing System and remains in effect for subsequent periods until revoked, terminated or expired.

3. The Power of Attorney is automatically revoked when the Reporting Agent notifies the Service that a taxpayer is no longer included in the Magnetic Tape Filing System.

4. The receipt of a Power of Attorney for Magnetic Tape Filing has no effect on prior Powers of Attorney on file for other purposes for a given taxpayer.

5. The Power of Attorney for Magnetic Tape Filing will be a limited power of attorney, i.e., notices, refunds and other output resulting from filing on magnetic tape will be mailed to the taxpayer.

6. Requests from a Reporting Agent for information or adjustments on an account for which the taxpayer has authorized Magnetic Tape Filing will be honored by the service center.

7. Requests for address changes may not be made by the Reporting Agent. Requests for address changes for taxpayers that are reported under Magnetic Tape Filing will be processed only if they originate with one of the following:

(a) The taxpayer,

(b) An employee of the Internal Revenue Service, or

(c) 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 Power of Attorney with the Internal Revenue Service.

Sec. 4. Approval of Agent's Application

.01 The Service will act on applications and notify applicants of authorization or disapproval within 30 days of receipt of Form 4995.

.02 Generally, Reporting Agents using equipment compatible with the Service's can presume that tape filing will be approved. Compatible tape characteristics are shown in Section 12. If the Reporting Agent has the capability to prepare several types of tapes, the Service prefers that compatible tapes be prepared.

.03 If the Reporting Agents propose to submit convertible tapes, i.e., tapes requiring translation, the Service will either translate these tapes or provide translation through other government agencies. Magnetic Tape Filing will be disapproved when the Service is unable to obtain facilities to translate a Reporting Agent's file to a compatible form. (See Section 12 for specifications.)

.04 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 as long as the requirements of this revenue procedure are met, and there are no equipment changes by the Reporting Agent. However, new applications are required if users change from compatible tapes to equipment producing tapes that require translation, or if they discontinue Magnetic Tape Filing for one or more periods, then decide to resume this method of reporting.

Sec. 5. Effect on Paper Documents

.01 Authorization to file on magnetic tape does not immediately stop the filing of paper tax returns, but merely initiates filing of such returns on the Magnetic Tape Filing System.

.02 The initial filing of tax returns on magnetic tape will be on trial tapes. Each taxpayer included on the magnetic tape must also be on the paper form until authorized by the Service to discontinue filing returns on paper. The paper returns must be arranged in the same order as the returns reported on the magnetic tape and filed at the same location and in the same shipment. In general, the Service will be able to notify the Reporting Agent to discontinue filing paper returns within one quarter after the initial filing of magnetic tape. The notification will depend upon the performance standard of the magnetic tape.

.03 Duplicate returns or duplicate tape and paper returns should never be submitted after the Reporting Agent is authorized to discontinue filing paper returns.

Sec. 6. Filing Tape Returns

.01 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.

.02 The Service will expect a tape return to be submitted for those individually approved magnetic tape filers until the Reporting Agent formally notifies IRS that specific employers are being deleted from their current Magnetic Tape Filing inventory.

.03 The Reporting Agent will be provided with a validated copy of the Agent's Listing for taxpayers authorized to file on magnetic tape. This authorization will contain each taxpayer's EIN, four position alpha Name Control, the DO (District Office) Code and the Tax Class. This 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.

.04 Reporting Agents submitting magnetic tape for records prepared at more than one location must identify the records from each location by using the DO Code in the Agent "A" Record from the validated copy of the Agent's Listing. Each location will be indicated by a separate Agent "A" Record on the tape file. All the Tax Data "B" Records following the Agent "A" Record for a given location must be followed by an End of Location "D" Record.

.05 Enclose in the first box of the tape shipment to the Service the following:

1. Form 4996, Magnetic Tape Filing Transmittal for Form 941, Employer's Quarterly Federal Tax Return, in duplicate. (See Exhibit 4.)

2. A control listing identifying actual taxpayers previously approved by the Service for Magnetic Tape Filing that are contained on the current tape file being submitted. List the taxpayers in EIN sequence with each taxpayer's name and address.

Sec. 7. Adding and Deleting Filers from Magnetic Tape Filing System

.01 When adding or deleting filers, the Service must receive (in duplicate and in the same format as shown in Exhibit 2) a listing which contains the complete names, addresses and EIN's of the taxpayers the Reporting Agent wants added or deleted from the Magnetic Tape Filing System. The words "ADDITIONS" or "DELETIONS" should be entered after the title, "Agent's Listing."

.02 The Service will provide a validated copy of the updated Agent's Listing to the Reporting Agent. Under no circumstances is a new filer to be included on the Magnetic Tape Filing System until the validated copy is received from the Service.

.03 A Power of Attorney authorization must be included for each taxpayer to be added to the Magnetic Tape Filing System.

.04 The Reporting Agent should indicate on the last magnetic tape return submitted for a filer that it is either the "Final Return" or a "Discontinued Filer" in the Tax Data "B" Record.

.05 The Reporting Agent may not always know that the final magnetic tape return for a particular taxpayer is being submitted at the time the tape is being sent in. When the Reporting Agent determines that the previous tape contained the last return to be prepared for the individual filer, action should be taken to notify the service center which authorized the Magnetic Tape Filing of one of the following conditions:

1. The taxpayer is out of business (state the effective date) and will no longer be liable for filing returns (Final Return), or

2. The Reporting Agent will no longer be submitting returns on magnetic tape for the taxpayer who is still in business and is still liable for such returns (Discontinued Filer).

.06 Lists of proposed quarterly (Form 941) filer additions, deletions, etc., must be received in the service center at least 2 working days prior to the end of the second month of a quarter. This will permit the Service to properly validate applications and to respond to the Agent within 30 days of receipt of the lists.

.07 Once a year (by January 30), the Reporting Agent must send a consolidated Agent's Listing in the required format of all taxpayers approved for the Magnetic Tape Filing System.

Sec. 8. Due Dates and Corrected Returns

.01 The due dates prescribed for filing paper returns with the Service will also apply to Magnetic Tape Filing of Federal tax returns.

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

.03 Adjustments may be made on returns submitted on magnetic tape. If an offsetting entry is required to FICA taxes because there is a difference between the total amount of employee tax included in Line 8 (Total FICA Taxes) of Forms 941 and the total amounts actually deducted from the remuneration of employees, due to fractions of cents added or dropped in collecting employee tax from employees, this difference should be reported as a "Fractions Only" adjustment to FICA taxes on the magnetic tape (Tax Data "B" Record, tape positions 257-266).

.04 If employee FICA tax is not applicable to amounts included in Line 6 of Form 941 (Taxable FICA Wages Paid), report this amount as "FICA TIP" adjustment on the magnetic tape (Tax Data "B" Record, tape positions 257-266).

.05 All other adjustments, including adjustments to Income Tax Withheld and combinations of "Fractions Only" and "FICA-TIP adjustments must be reported as Adjustment for Preceding Quarters on the magnetic tape (Tax Data "B" Record, tape positions 189-198).

.06 All adjustments reported in Tax Data "B" Record in tape positions 257-266, except for fractions of cents, must be explained on Form 941c or in a detailed statement; fractions of cents must be explained in a statement. All other adjustments reported (Tax Data "B" Record, tape positions 189-198) also must be explained by an appropriate statement. Include all statements and Forms 941c with the magnetic tape shipment for approval and subsequent adjustment action.

Sec. 9. Filing Forms W-2 (Copy A) with the Social Security Administration

The Reporting Agents who file Forms 941 on magnetic tape for employers must file the wage information directly with the Social Security Administration on tape or paper documents. For directions for tape filing, you may call or write the appropriate Service Center Magnetic Tape Coordinator, or any Social Security Administration office and ask for Technical Information Bulletin 4a (TIB-4a), or you can write to the following address:

Social Security Administration Bureau of Data Processing P.O. Box 2317 Baltimore, MD 21203

Sec. 10. Additional Information

Requests for additional copies of this revenue procedure, applications for Magnetic Tape Filing, 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, at one of the following addresses:

1. North-Atlantic Region

(a) Andover Service Center P.O. Box 311 Andover, MA 01810

(b) Brookhaven Service Center P.O. Box 486 Holtsville, NY 11742

2. Mid-Atlantic Region (a) Philadelphia Service Center P.O. Box 245 Bensalem, PA 19020

3. Central Region

(a) Cincinnati Service Center P.O. Box 267 Covington, KY 41012

4. Southeast Region

(a) Atlanta Service Center P.O. Box 47-421 Doraville, GA 30340

(b) Memphis Service Center P.O. Box 30309 Airport Mail Facility Memphis, TN 38130

5. Midwest Region

(a) Kansas City Service Center P.O. Box 5321 Kansas City, MO 64131

6. Southwest Region

(a) Austin Service Center P.O. Box 934 Austin, TX 78767

7. Western Region

(a) Ogden Service Center P.O. Box 9948 Ogden, UT 84409

(b) Fresno Service Center P.O. Box 12866 Fresno, CA 93779

Sec. 11. Conventions and Definitions

.01 Conventions

1. Certain conventions may be required by the programming system or equipment used by the Reporting Agent, with respect to header and trailer labels, record and tape marks. Their use is optional, but if present they must adhere to the following:

(a) Header Label (1) Can only be the first record on a reel.

(2) Must consist of a maximum of 80 characters.

(3) First 4 characters must be 1HDR.

(b) Trailer Label (1) Can only be the last record of a reel.

(2) Must consist of a maximum of 80 characters.

(3) First 4 characters must be 1EOR (End of Reel) or 1EOF (End of File).

(c) Record Mark (1) Can only be at the end of a block or the end of a record.

(d) Tape Mark (1) If trailer labels are not used, the tape mark can only follow an End of Reel "F" Record or an End of File "E" Record.

(2) If header and trailer labels are used, the tape mark must precede the header label and must follow the trailer label.

.02 Definitions

 Element                  Description