IRS REVISES SPECIFICATIONS FOR FILING TIP REPORTING FORM ELECTRONICALLY.

Rev. Proc. 98-52

TABLE OF CONTENTS

PART A. GENERAL

SECTION 1. PURPOSE

.01 Form 8027 is used by large food or beverage establishments when the employer is required to make annual reports to the IRS on receipts from food or beverage operations and tips reported by employees.

*NOTE: All employees receiving $20.00 or more a month in tips must report 100% of their tips to their employer

.02 The Internal Revenue Service Martinsburg Computing Center (IRS/MCC) has the responsibility of processing Forms 8027 submitted magnetically/electronically. The purpose of this revenue procedure is to provide the specifications for filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, magnetically or electronically. This revenue procedure is updated when legislative changes occur or reporting procedures are modified. Major changes have been emphasized by italics [Editor's Note: Italic emphasis is not indicated in this version of Rev. Proc. 98-52. The full text of Rev. Proc. 98-52, including italicized emphasis, is available through the Tax Analysts Access Services as Doc 98-27899 (20 pages).

.03 This revenue procedure supersedes the following: Rev. Proc. 92-81 published as Publication 1239 (9-92), Specifications for Filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, on Magnetic Tape and 5 1/4 or 3 1/2 inch Magnetic Diskettes.

SECTION 2. NATURE OF CHANGES

.01 Numerous editorial changes have been made to the revenue procedure. Please read the publication carefully and in its entirety before attempting to prepare your magnetic media for submission. The changes are as follows:

(a) The title of Publication 1239 has changed from "Specifications for Filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, on Magnetic Tape and 5 1/4 or 3 1/2-Inch Magnetic Diskettes" to "Specifications for Filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips Magnetically/Electronically."

(b) Updated information on IRS/MCC's mailing addresses, telephone numbers and the Call Site are provided in Part A, Sec. 3.

(c) A note regarding denial of waivers in Part A, Section 5.06 was deleted. While IRS/MCC encourages filers to request waivers at least 45 days prior to the due date of the return, we WILL ACCEPT waivers postmarked by the due date of the return.

(d) Part A, Section 10, Extensions of Time To File, has been completely revised. Form 8809, Request for Extension of Time To File Information Returns, should be submitted to request an extension of time to file Form 8027.

.02 Starting with tax year 1997 returns, IRS/MCC will accept Forms 8027 via the following additional options:

(a) Tape cartridge specifications are in Part B, Sec. 4.

(b) 8mm, 4mm, quarter inch cartridges specifications are in Part B, Sec. 5.

(c) Asynchronous electronic filing specifications through the Information Reporting Program-Bulletin Board (IRP-BBS) are in Part B, Sec. 6.

.03 Form 5064 media label has been obsoleted. Filers can now prepare their own self-sticking label. Notice 210 details what information should be included on the label.

.04 A page of cut out labels has been included for filers to use in mailing their media to MCC. A label should be affixed to the outside of the package to help expedite handling.

.05 Part B, Section 7 is now titled Record Format and Layout. A record layout now follows the record format specifications.

SECTION 3. WHERE TO FILE AND HOW TO CONTACT THE IRS MARTINSBURG COMPUTING CENTER

.01 All Forms 8027 filed magnetically or electronically are processed at IRS/MCC and are to be sent to the following addresses:

  If by Postal Service: or If by truck or air freight:

.03 Requests for paper forms and publications should be requested by calling the "Forms Only Number" listed in your local telephone directory or by calling the IRS toll-free number 1-800- TAX-FORM (1-800-829-3676).

.04 Questions pertaining to magnetic media filing of Forms W-2 MUST be directed to the Social Security Administration (SSA). Filers can call 1-800-SSA-1213 to obtain the phone number of the SSA Magnetic Media Coordinator for their area.

.05 A taxpayer or authorized representative may request a copy of a tax return or a Form W-2 filed with a return by submitting Form 4506, Request for Copy or Transcript of Tax Form, to IRS. This form may be obtained by calling 1-800-TAX-FORM (1-800-829-3676).

.06 The IRS/MCC Call Site, located in Martinsburg, WV, provides service to the payer/employer community (financial institutions, employers, and other transmitters of information returns). The IRS/MCC Call Site answers questions concerning tax law and magnetic/electronic filing of Forms 8027 and other information returns (Forms 1096, 1098, 1099, 5498, W-2G, W-3, 1042-S), questionable Forms W-4, inquiries dealing with backup withholding due to missing and incorrect taxpayer identification numbers and questions concerning paper filing of Forms W-2. Recipients of information returns (payees) should continue to contact 1-800-829- 1040 or other numbers specified in the tax return instructions with any questions on how to report tax returns.

The Call Site accepts calls from all areas of the country. The number to call is 304-263-8700 or Telecommunications Device for the Deaf (TDD) 304-267-3367.

These are toll calls. Hours of operation for the Call Site are Monday through Friday, 8:30 a.m. to 4:30 p.m. Eastern Time. The Call Site is in operation throughout the year to handle the questions of payers, transmitters, and employers. Due to the high demand for assistance at the end of January and February, it is advisable to call as soon as possible to avoid these peak filing seasons.

.07 The telephone numbers for magnetic media inquiries or electronic submissions are:

     304-263-8700 -- Call Site

.01 Section 6011(e)(2)(A) of the Internal Revenue Code requires that any person, including corporations, partnerships, individuals, estates, and trusts, required to file 250 or more information returns must file such returns on magnetic media.

.02 The filing requirements apply separately to both original and corrected returns.

.03 Filing electronically through the Information Reporting Program-Bulletin Board System (IRP-BBS) fulfills the magnetic media filing requirement.

.04 The above requirements do not apply if you establish undue hardship (see Part A, Sec. 5).

SECTION 5. REQUEST FOR WAIVER FROM FILING INFORMATION RETURNS ON MAGNETIC MEDIA

.01 If an employer is required to file on magnetic media but fails to do so (or fails to file electronically, in lieu of magnetic media filing) and does not have an approved waiver on record, the employer will be subject to a penalty of $50 per return in excess of 250.

.02 If employers are required to file original or corrected returns on magnetic media, but such filing would create a hardship, they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, to IRS/MCC.

.03 Even though an employer may submit as many as 250 corrections on paper, IRS encourages magnetically or electronically submitted corrections. Once the 250 threshold has been met, filers are required to submit any additional returns magnetically or electronically. However, if a waiver for an original filing is approved, any corrections for the same type of returns will be covered under this waiver.

.04 Generally, only the employer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter signed by the employer stating this fact must be attached to the Form 8508.

.05 A transmitter must submit a separate Form 8508 for each employer. Do not submit a list of employers.

.06 All information requested on the Form 8508 must be provided to IRS for the request to be processed.

.07 The waiver, if approved, will provide exemption from magnetic media filing for the current tax year only. Employers may not apply for a waiver for more than one tax year at a time; application must be made each year a waiver is necessary.

.08 Form 8508 may be photocopied or computer-generated as long as it contains all the information requested on the original form.

.09 Filers are encouraged to submit Form 8508 to IRS/MCC at least 45 days before the due date of the returns.

.10 FILE FORM 8508 FOR FORMS W-2 WITH IRS/MCC, NOT SSA.

.11 Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth under section 6011(e) of the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/MCC to respond to a waiver request.

.12 If a waiver request is approved, the transmitter should keep the approval letter on file. THE TRANSMITTER SHOULD NOT SEND A COPY OF THE APPROVED WAIVER TO THE SERVICE CENTER WHERE THE PAPER RETURNS ARE FILED.

.13 An approved waiver from filing information returns on magnetic media does not provide exemption from all filing. The employer must timely file information returns on acceptable paper forms with the appropriate service center.

SECTION 6. APPLICATION FOR MAGNETIC/ELECTRONIC REPORTING

.01 For the purposes of this revenue procedure, the EMPLOYER is the organization supplying the information and the TRANSMITTER is the organization preparing the magnetic/electronic file and/or sending the file to IRS/MCC. The employer and the transmitter may be the same entity. Employers or their transmitters are required to complete Form 4419, Application for Filing Information Returns Magnetically/Electronically.

.02 Form 4419 can be submitted at any time during the year; however, it should be submitted to IRS/MCC at least 30 days before the due date of the return(s). IRS will act on an application and notify the applicant, in writing, of authorization to file. A five- character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an acknowledgment letter within 15 to 45 days of receipt of the application. Magnetic/electronic returns may not be filed with IRS until the application has been approved and a TCC assigned. Include your TCC in any correspondence with IRS/MCC.

.03 If you file information returns other than Form 8027 on magnetic media, you must obtain a separate TCC for those types of re- turns. The TCC assigned for Forms 8027 is to be used for the processing of those forms only.

.04 Upon approval, a magnetic media reporting package containing the current revenue procedure, forms, and instructions will be sent to the attention of the contact person indicated on Form 4419. Thereafter, IRS/MCC will send the transmitter a package containing the current revenue procedure and forms each year. This package will continue to be sent to the contact person indicated on the Form 4419 unless IRS/MCC has been notified in writing of any changes or updates. After you have received approval to file on magnetically/electronically, you do not need to reapply each year; however, notify IRS in writing if:

(a) You change your name or the name of your organization, so that your files may be updated to reflect the proper name;

(b) You discontinue filing on magnetic media for two years (your TCC may have been reassigned).

.05 If you plan to file for multiple employers, IRS encourages transmitters to submit one application and to use one TCC for all employers.

.06 Only employers or transmitters using equipment compatible with IRS equipment will have their application approved.

.07 If your magnetic media files have been prepared for you in the past by a transmitter, and you now have computer equipment compatible with that of IRS and wish to prepare your own files, you must request your own five-character alpha/numeric TCC by filing an application, Form 4419, as described in Sec. 6.02.

SECTION 7. TEST FILES

.01 IRS/MCC encourages new filers to submit test files for review in advance of the filing season. Employers or transmitters must be approved to file magnetically/electronically before a test file is submitted (See Part A, Sec. 6 for application procedures.)

.02 All test files must be submitted between October 1 and December 15 of the year before the returns are due. If you are unable to submit your test files by December 15, you may send a sample hard copy printout to IRS/MCC between December 16 and January 15. Clearly mark the hardcopy printout as "TEST DATA" and include the name, address, and telephone number of someone familiar with the test printout who may be contacted to discuss its acceptability.

SECTION 8. FILING OF FORM 8027 MAGNETICALLY/ELECTRONICALLY

.01 Form 4804, Transmittal of Information Returns Reported Magnetically/Electronically, must accompany ALL magnetic media shipments. If you file for multiple employers and have the authority to sign the affidavit on Form 4804, you should also submit Form 4802, Transmittal of Information Returns Reported Magnetically/ Electronically (Continuation). For electronic transmissions, the Form 4804 and Form 4802, if applicable, must be sent the same day as the electronic transmission.

.02 The employer MUST sign Form 4804, however, an agent (transmitter, service bureau, paying agent, or disbursing agent) may sign Form 4804 for the employer. To do this, the agent must have the authority to sign for the employer under an agency agreement (either oral, written, or implied) that is valid under the state law and must add to his or her signature the caption "For: (name of employer)".

*NOTE: Failure to sign the Form 4804 may delay processing or will result in your file being returned to you unprocessed.

.03 Although a duly authorized agent may sign the Form 4804, the employer is responsible for the accuracy of the Form 4804 and the returns filed. The employer will be liable for penalties for failure to comply with filing requirements.

.04 Be sure to include Form 4804, 4802 or computer-generated substitutes with your magnetic media shipment. DO NOT MAIL YOUR MAGNETIC MEDIA AND THE TRANSMITTAL DOCUMENTS SEPARATELY.

.05 Indicate on Form 4804, in the block captioned "Combined Total Payee Records," the total number of establishments being reported in this shipment. This figure should match the total number of records in your magnetic media file.

.06 DO NOT SUBMIT THE SAME INFORMATION ON PAPER FORMS THAT YOU SUBMIT MAGNETICALLY/ELECTRONICALLY. This does not mean that corrected documents are not to be filed. If a return has been prepared and submitted improperly, you must file a corrected return as soon as possible. Refer to Part A, Sec. 13 for requirements and instructions for filing corrected returns.

.07 If an allocation of tips is based on a good faith agreement, a copy of this agreement must accompany the submission.

.08 If, under Rev. Proc. 86-21, 1986-1 C.B. 560, the District Director granted the establishment a percentage of gross receipts of less than 8%, a copy of the determination letter must be sent with the submission. Employers with more than one establishment can receive approval from one district in each Internal Revenue Service region where the establishments are located (See sec. 31.6053-3(h)(4) of the Employment Tax Regulations).

.09 Before submitting your magnetic/electronic file, include the following:

(a) A SIGNED Form 4804, Transmittal of Information Returns Reported Magnetically/Electronically, along with a Form 4802, Transmittal of Information Returns Reported Magnetically/ Electronically (Continuation), if you submit data for multiple employers. These forms must be mailed the same day electronic files are submitted.

(b) Your media (tape, diskette, or cartridge) with an external identifying label. Notice 210 describes the information which should be included on this self-prepared label.

(c) On the outside of the shipping container, affix the label, IRB Special Projects. This label is included in the publication.

*NOTE: See Part B, Section 6 for electronic submission requirements.

.10 IRS/MCC will not pay or accept "Collect on Delivery" or "Charged to IRS" shipments of reportable tax information that an individual or organization is legally required to submit.

SECTION 9. FILING DATES

.01 Magnetic media reporting to IRS for Form 8027 must be on a calendar year basis. The due date of either paper or magnetically/ electronically reported Forms 8027 is the last day of February.

.02 If the due date falls on a Saturday, Sunday, or legal holiday, filing Form 8027 on the next day that is not a Saturday, Sunday, or legal holiday will be considered timely.

SECTION 10. EXTENSIONS OF TIME TO FILE

.01 An extension of time to file may be requested for Forms 8027, 1099, 1098, 5498, W-2G, W-2, and 1042-S.

.02 Form 8809, Request for Extension of Time To File Information Returns, should be submitted to IRS/MCC. This form may be used to request an extension of time to file information returns submitted on paper, magnetically or electronically.

.03 Requesting an extension of time for multiple employers may be done by submitting Form 8809 and attaching a list of the employer names and their TINs (EIN or SSN). THE LISTING MUST BE ATTACHED TO ENSURE THE EXTENSION IS RECORDED FOR ALL EMPLOYERS. Form 8809 may be computer-generated or photocopied. Be sure that all the pertinent information is included.

.04 Requests for extensions of time for multiple employers will be responded to with one approval letter, accompanied by a list of employers covered under that approval.

.05 AS SOON AS IT IS APPARENT that an extension of time to file is needed, Form 8809 may be submitted. When granted, the extension will be for 30 days. It will take a minimum of 30 days for IRS/MCC to respond to an extension request. Under certain circumstances, a request for an extension of time could be denied. When a denial letter is received, any additional or necessary information may be resubmitted within 20 days. When requesting an extension of time, DO NOT hold your files waiting for a response.

.06 While very difficult to obtain, if an additional extension of time is needed, a second Form 8809 must be submitted before the end of the initial extension period. Line 7 on the form should be checked to indicate that an additional extension is being requested. A second 30-day extension will be approved ONLY in cases of extreme hardship or catastrophic events.

.07 FORM 8809 MUST BE POSTMARKED NO LATER THAN THE DUE DATE OF THE RETURN FOR WHICH AN EXTENSION IS REQUESTED. IF REQUESTING AN EXTENSION OF TIME TO FILE SEVERAL TYPES OF FORMS, USE ONE FORM 8809, BUT THE FORM 8809 MUST BE POSTMARKED NO LATER THAN THE EARLIEST DUE DATE. FOR EXAMPLE, IF REQUESTING AN EXTENSION OF TIME TO FILE BOTH FORMS 8027 AND 5498, SUBMIT FORM 8809 POSTMARKED ON OR BEFORE THE LAST DAY OF FEBRUARY.

.08 If an extension request is approved, the approval letter should be kept on file. The approval letter or copy of the approval letter for extension of time should not be sent to IRS/MCC with the magnetic/electronic file or to the service center where the paper returns are filed.

.09 Request an extension for only one tax year.

.10 The extension request must be signed by the employer or a person who is duly authorized to sign a return, statement or other document for the employer.

.11 Failure to properly complete and sign the Form 8809 may cause delays in processing the request or result in a denial. Care- fully read and follow the instructions on the back of the Form 8809.

.12 Form 8809 may be obtained by calling 1-800-TAX-FORM (1-800- 829-3676).

*NOTE: AN EXTENSION OF TIME TO FILE IS NOT AN EXTENSION TO ISSUE THE FORM W-2 COPY TO THE EMPLOYEE.

.13 Request an extension of time to furnish the statements to recipients of Forms W-2 by submitting a letter to IRS/MCC containing the following information:

(a) Employer name

(b) TIN

(c) Address

(d) Type of return (W-2)

(e) Specify that the extension request is to provide W-2 statements to recipients

(f) Reason for delay

(g) Signature of employer or person duly authorized

Requests for an extension of time to furnish the statements for Forms W-2 to recipients are not automatically approved; however, if approved, generally an extension will allow a maximum of 30 additional days from the due date to furnish the statements to the recipients. The request must be postmarked by the date on which the statements are due to the recipients.

SECTION 11. PROCESSING OF MAGNETIC/ELECTRONIC RETURNS

.01 All data received at IRS/MCC for processing will be given the same protection as individual returns (Form 1040). IRS/MCC will process your magnetic/electronic files to ensure the records were formatted and coded according to this revenue procedure.

.02 If the data is formatted incorrectly, the file will be returned for replacement accompanied with a Media Tracking Slip (Form 9267). When media is returned, it is because IRS/MCC encountered errors (not limited to format) and was unable to process the media; therefore, requiring a replacement. Open all packages immediately.

.03 Files must be corrected and returned with the Media Tracking Slip (Form 9267) to IRS/MCC within 45 days from the date of the letter IRS/MCC included with the returned files. A penalty for failure to file correct information returns by the due date will be assessed if the files are not corrected and returned within the 45 days OR IF THE INCORRECT FILES ARE RETURNED BY IRS/MCC FOR REPLACEMENT MORE THAN TWO TIMES. A penalty for intentional disregard of filing requirements will be assessed if a replacement file is not received.

.04 Files will not be returned to you after successful processing. Therefore, if you want proof that IRS/MCC received your shipment, you may use a carrier that provides proof of delivery.

.05 To distinguish between a correction and a replacement, the following definitions have been provided:

(a) A correction is a record submitted by the employer/transmitter to correct a record that was successfully processed by IRS, but contained erroneous information.

(b) A replacement is media that IRS has returned because of format errors or data discrepancies encountered during processing. After necessary changes have been made, the media must be returned to IRS/MCC for processing.

SECTION 12. PENALTIES

.01 The Revenue Reconciliation Act of 1989 changed the penalty provisions for any documents including corrections, which are filed after the original filing date for the return. The penalty for failure to file correct information returns is "time sensitive," in that prompt correction of failures to file, or prompt correction of errors on returns that were filed, can lead to reduced penalties.

-- The penalty generally is $50 for each information return that is not filed, or is not filed correctly, by the prescribed filing date, with a maximum penalty of $250,000 per year ($100,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000). The penalty generally is reduced to:

-- $30 for each failure to comply if the failure is corrected more than 30 days after the return was due, but on or before August 1 of the calendar year in which the return was due, with a maximum penalty of $150,000 per year ($50,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).

-- $15 for each failure to comply if the failure is corrected within 30 days after the date the return was due, with a maximum penalty of $75,000 per year ($25,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).

.02 Penalties can be waived if failures were due to reasonable cause and not to willful neglect. In addition, section 6721(c) of the Code provides a de minimis rule that if:

(a) information returns have been filed but were filed with incomplete or incorrect information, and

(b) the failures are corrected on or before August 1 of the calendar year in which the returns were due, then the penalty for filing incorrect returns (but not the penalty for filing late) will not apply to the greater of 10 returns or one-half of 1 percent of the total number of information returns you are required to file for the calendar year.

.03 INTENTIONAL DISREGARD OF FILING REQUIREMENTS -- If any failure to file a correct information return is due to intentional disregard of the filing and correct information requirements, the penalty is at least $100 per information return with no maximum penalty.

SECTION 13. CORRECTED RETURNS, SUBSTITUTE FORMS, AND COMPUTER-GENERATED FORMS

.01 If returns must be corrected, approved magnetic/electronic filers must provide such corrections magnetically/electronically if you have 250 or more. If your information is filed magnetically/ electronically, corrected returns are identified by using the "Corrected 8027 Indicator" in field position 370 of the employer record. Form 4804 must accompany the shipment, and the box for correction should be marked in Block 1 of the form. (See Part A, Sec. 11.05 for the definition of corrections.)

.02 If corrections are not submitted on magnetic media, employers must submit them on official Forms 8027. Substitute forms that have been previously approved by IRS, or computer-generated forms that are exact facsimiles of the official form (except for minor page size or print style deviations), may be submitted without obtaining IRS approval before using the form.

.03 Employers/establishments may send corrected paper Forms 8027 to IRS at the address shown in Part A, Sec. 14.01. Corrected paper returns are identified by marking the "AMENDED" check box on Form 8027.

SECTION 14. EFFECT ON PAPER RETURNS

.01 If you are filing more than one paper Form 8027, you must attach a completed Form 8027-T, Transmittal of Employer's Annual Information Return of Tip Income and Allocated Tips, to the Forms 8027 and send to:

                    Internal Revenue Service Center

.02 If part of a submission is filed magnetically/electronically and the rest of the submission is filed on paper Forms 8027, send the paper forms to the Andover Service Center. For example, you filed your Forms 8027 magnetically/electronically with IRS/MCC, and later you found that some of the forms you filed need correcting. Because of the low volume of corrections, you submit the corrections on paper Forms 8027. You must send these corrected Forms 8027 along with Form 8027-T to the Andover Service Center.

SECTION 15. DEFINITIONS

 ELEMENT        DESCRIPTION

SECTION 1. GENERAL

.01 The magnetic/electronic specifications contained in this part of the revenue procedure define the required format and contents of the records to be included in the file.

.02 A self prepared media label must be affixed to each piece of media submitted for processing. Notice 210 provides instructions on how to complete a self-prepared media label.

.03 The record format in Part B, Sec. 7 applies to both magnetic and electronic files.

SECTION 2. TAPE SPECIFICATIONS

.01 In most instances, IRS/MCC can process any compatible tape files. Compatible tape files must meet any one set of the following:

(a) 9-track EBCDIC (Extended Binary Coded Decimal Interchange Code) with

(1) Odd Parity and

(2) A density of 1600 or 6250 BPI

(3) If you use Unisys Series 1100, you must submit an interchange tape.

(b) 9-track ASCII (American Standard Coded Information Interchange) with

(1) Odd Parity and

(2) A density of 1600 or 6250 BPI

Please be consistent in the use of recording codes and density on your files. If files are generated in more than one recording code and/or density, multiple shipments would be appreciated.

.02 All compatible tape files must have the following characteristics:

(a) Type of Tape -- 1/2 inch mylar base, oxide coated; computer grade magnetic tape on reels up to 2400 feet (731.52 m) within the following specifications:

(1) Tape thickness: 1.0 or 1.5 mils

(2) Reel diameter: 10.5 inch (26.67 cm), 8.5 inch (21.59 cm), or 7 inch (17.78 cm).

.03 All records have a fixed record length of 372 positions.

.04 The tape record defined in this revenue procedure may be blocked or unblocked, subject to the following:

(a) All records except the header and trailer labels may be blocked.

(b) If records are blocked, the block can not exceed 32,736 tape positions. The block length must be evenly divisible by 372.

(c) If the use of blocked records would result in a short block, all remaining positions of the block MUST be filled with 9's. DO NOT PAD A BLOCK WITH BLANKS. Padding a block with blanks will result in a short record, which will cause math computation errors. Your tape will then be returned for correction.

.05 For the purposes of this revenue procedure the following conventions must be used:

Header label:

(a) Transmitters may use standard headers provided they begin with 1HDR, HDR1, VOL1, or VOL2.

(b) Consists of a maximum of 80 positions.

(c) Header and trailer labels are optional unless more than one reel is being submitted. If more than one reel is being submitted, header and trailer labels are required. IRS/MCC PREFERS STANDARD OR ANSI LABELED TAPES. IF YOU SUBMIT AN UNLABELED TAPE, THIS MUST BE INDICATED ON THE EXTERNAL LABEL AND ON THE FORM 4804 OR COMPUTER-GENERATED SUBSTITUTE.

Trailer label:

(a) Standard trailer labels may be used provided that they begin with 1EOR, 1EOF, EOV1, or EOV2.

(b) Consists of a maximum of 80 positions.

(c) Header and trailer labels are optional unless more than one reel is being submitted. If more than one reel is being submitted, header and trailer labels are required.

Tape Mark:

(a) Used to signify the physical end of the recording on tape.

(b) May follow the header label and precede and/or follow the trailer label.

SECTION 3. DISKETTE SPECIFICATIONS

IRS-MCC WILL DISCONTINUE PROCESSING 5 1/4 INCH DISKETTES IN THE FUTURE. FILERS WHO USE 5 1/4 INCH DISKETTES ARE ENCOURAGED TO EXPLORE OTHER METHODS OF SUBMITTING INFORMATION RETURNS MAGNETICALLY/ELECTRONICALLY.

.01 To be compatible, a diskette file must meet the following specifications:

(a) 5 1/4 or 3 1/2 inches in diameter.

(b) Data must be recorded in standard ASCII code.

(c) Records must be fixed length of 372 bytes.

(d) Delimiter character commas (,) must not be used.

(e) Positions 371 and 372 of each record have been reserved for carriage return/line feed (cr/lf) characters.

(f) Filename of ATMTAX must be used. Do not enter any other data in this field. If a file will consist of more than one diskette, the filename will contain a 3-digit extension. This extension will indicate the sequence of the diskette within the file. For example, the first diskette will be named ATMTAX.001, the second diskette will be ATMTAX.002, etc.

(g) A file may contain more than one diskette as long as the filename conventions are adhered to.

(h) Diskettes must meet one of the following specifications:

      Capacity         Tracks       Sides/Density     Sector size

.03 Deviations from the prescribed format will not be acceptable.

SECTION 4. TAPE CARTRIDGE SPECIFICATIONS

.01 In most instances, IRS/MCC can process tape cartridges that meet the following specifications:

(a) Must be IBM 3480, 3490, 3490E, or AS400 compatible.

(b) Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:

(1) Tape cartridges will be 1/2-inch tape contained in plastic cartridges which are approximately 4-inches by 5-inches by 1- inch in dimension.

(2) Magnetic tape will be chromium dioxide particle based 1/2- inch tape.

(3) Cartridges must be 18-track or 36-track parallel (See Note).

(4) Cartridges will contain 37,871 CPI or 75,742 CPI (characters per inch).

(5) Mode will be full function.

(6) The data may be compressed using EDRC (Memorex) or IDRC (IBM) compression.

(7) Either EBCDIC (Extended Binary Coded Decimal Interchange Code) or ASCII (American Standard Coded Information Interchange) may be used.

.02 The tape cartridge records defined in this revenue procedure may be blocked subject to the following:

(a) A block MUST NOT exceed 32,736 tape positions.

(b) If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9s; however, the last block of the file may be filled with 9s or truncated. DO NOT PAD A BLOCK WITH BLANKS.

(c) All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control fields or block descriptor fields which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last block which may be shorter (see item b above). The block length must be evenly divisible by 372.

(d) Records may not span blocks.

.03 Tape cartridges may be labeled or unlabeled.

.04 For the purposes of this revenue procedure, the following must be used:

Tape Mark:

(a) Used to signify the physical end of the recording on tape.

(b) For even parity, use BCD configuration 001111 (8421).

(c) May follow the header label and precede and/or follow the trailer label.

*NOTE: Filers should indicate on the external media label and transmittal Form 4804 whether the cartridge is 36-track or 18- track.

SECTION 5. 8MM, 4MM, AND QUARTER INCH CARTRIDGE SPECIFICATIONS

.01 In most instances, IRS/MCC can process 8mm tape cartridges that meet the following specifications:

(a) Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:

(1) Created from an AS400 operating system only.

(2) 8mm (.315-inch) tape cartridges will be 2 1/2-inch by 3 3/4- inch.

(3) The 8mm tape cartridges must meet the following specifications:

                Tracks       Density            Capacity

(5) Compressed data is not acceptable.

(6) Either EBCDIC (Extended Binary Coded Decimal Interchange Code) or ASCII (American Standard Coded Information Interchange) may be used. However, IRS/MCC encourages the use of EBCDIC. This information must appear on the external media label affixed to the cartridge.

(7) A file may consist of more than one cartridge, however, no more than 250,000 documents may be transmitted per file or per cartridge. The filename, for example; ATMTAX, will contain a three digit extension. The extension will indicate the sequence of the cartridge within the file 1 of 3, 2 of 3, and 3 of 3 and would appear in the header label ATMTAX.001, ATMTAX.002, and ATM-TAX.003 on each cartridge of the file.

.02 The 8mm (.315-inch) tape cartridge records defined in this revenue procedure may be blocked subject to the following:

(a) A block MUST NOT exceed 32,736 tape positions.

(b) If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9's; how- ever, the last block of the file may be filled with 9's or truncated. DO NOT PAD A BLOCK WITH BLANKS.

(c) All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control fields or block descriptor fields which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last block which may be shorter (see item (b) above). The block length must be evenly divisible by 372.

(d) Records may not span blocks.

(e) No more than 250,000 documents per cartridge and per file.

.03 Various COPY commands have been successful, however, the SAVE OBJECT COMMAND is not acceptable.

.04 For faster processing, IRS/MCC encourages transmitters to use header labeled cartridges. ATMTAX may be used as a suggested filename.

.05 For the purposes of this revenue procedure, the following must be used:

Tape Mark:

(a) Used to signify the physical end of the recording on tape.

(b) For even parity, use BCD configuration 001111 (8421).

(c) May follow the header label and precede and/or follow the trailer label.

.06 IRS/MCC can only read one data file on a tape. A data file is a group of records which may or may not begin with a tape mark, but must end with a trailer label. Any data beyond the trailer label cannot be read by IRS programs.

.07 4mm (.157-inch) cassettes are now acceptable with the following specifications:

(a) 4 mm cassettes will be 2 1/4-inch by 3-inch.

(b) The tracks are 1 (one).

(c) The density is 19 (61000 BPI).

(d) The typical capacity is DDS (DAT data storage) at 1.3 Gb or 2 Gb, or DDS-2 at 4Gb.

(e) The general specifications for 8 mm cartridges will also apply to the 4 mm cassettes.

.08 Various Quarter Inch Cartridges (QIC)(1/4-inch) are also acceptable.

(a) QIC cartridges will be 4" by 6".

(b) QIC cartridges must meet the following specifications:

    Size         Tracks          Density              Capacity

SECTION 6. ASYNCHRONOUS (IRP-BBS) ELECTRONIC FILING SPECIFICATIONS

.01 Asynchronous electronic filing of Forms 8027, originals, corrections, and replacements is offered as an alternative to magnetic media (tape, tape cartridge, or diskette) or paper filing, but is not a requirement. Electronic filing using the Information Reporting Program-Bulletin Board System (IRP-BBS) will fulfill the magnetic media requirements for those employers who are required to file magnetically. It may also be used by employers who are under the filing threshold requirement, but would prefer to file their information returns this way. If the original file was sent magnetically, but was returned for replacement, the replacement may be transmitted electronically. Also, if the original file was submitted via magnetic media, any corrections may be transmitted electronically.

.02 The electronic filing of information returns is not affiliated with the Form 1040 electronic filing program. These two programs are totally independent, and filers must obtain separate approval to participate in each of them. All inquiries concerning the electronic filing of information returns should be directed to IRS/MCC. IRS/MCC personnel cannot answer questions or assist taxpayers in the filing of Form 1040 tax returns. Filers with questions of this nature will be directed to the Customer Service toll-free number (1-800-829-1040) for assistance.

.03 Filers participating in the electronic filing program for information returns will submit their returns to IRS/MCC electronically and not through magnetic media or paper filing. Files submitted in this manner must be in standard ASCII code.

.04 If a request for extension is approved, transmitters who file electronically will be granted an extension of 30 days to file. Part A, Sec. 10, explains procedures for requesting extensions of time. Filers are encouraged to file their data as soon as possible.

.05 The format of the record is the same for electronically filed records as it is for 5 1/4 and 3 1/2 inch diskettes, tapes, and tape cartridges; however, it must be in standard ASCII code.

.06 Filers must obtain a Transmitter Control Code (TCC) prior to submitting their files electronically. (Filers who currently have a TCC for filing Forms 8027 do not have to request a second TCC for electronic filing.) Refer to Part A, Sec. 6, for information on how to obtain a TCC.

.07 Filers using IRP-BBS assign their own passwords and do not need special approval.

.08 With all passwords, it is the user's responsibility to remember the password and not allow the password to be compromised. However, if filers do forget their password, call 304-263-8700 for assistance.

*NOTE: Passwords on the IRP-BBS are case sensitive.

.09 Electronically filed information may be submitted to IRS/MCC 24 hours a day, 7 days a week. Technical assistance will be available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern Time by calling 304-263-8700.

.10 Filers may submit as many documents as they choose electronically. Filers are allowed 240 minutes a day; however, more time may be requested if needed.

.11 DO NOT TRANSMIT DATA USING IRP-BBS JANUARY 1 THROUGH JANUARY 7. This will allow time for the IRP-BBS to be updated to reflect current year changes.

.12 Data compression is encouraged when submitting information returns by way of the IRP-BBS. MCC has the ability to decompress files created using several popular software compression programs such as ARC, LHARC, and PKZIP. Software data compression can be done alone or in conjunction with V.42bis hardware compression.

The time required to transmit information returns electronically will vary depending on the modem speed and the type of data compression used, if any. THE TIME REQUIRED TO TRANSMIT A FILE CAN BE REDUCED BY AS MUCH AS 85 PERCENT BY USING SOFTWARE COMPRESSION AND HARDWARE COMPRESSION.

The following are actual transmission rates for forms 1099 achieved in test uploads at MCC using compressed files (PKZIP) and the XMODEM-1K protocol. The actual transmission rates will vary depending on the protocol that is used. (ZMODEM is normally the fastest protocol and XMODEM and KERMIT are the slower protocols.)

      Transmission

.14 The results of the electronic transmission will be posted to the (F)ile Status area of the IRP-BBS; however, no further processing will occur until the signed Form 4804 is received. The transmitter must send or fax the signed Form 4804 the same day the electronic transmission is made. No return is considered filed until a Form 4804 is received by IRS/MCC.

.15 Form 4804 can be ordered by calling the IRS toll-free forms and publication order number 1-800-TAX-FORM, (1-800-829-3676), downloaded from the IRP-BBS, or it may be computer-generated. A copy of the form is also available in the back of this publication. If a filer chooses to computer-generate Form 4804, all of the information contained on the original form, including the affidavit, must also be contained on the computer-generated form.

.16 Forms 4804 are to be mailed to the following addresses:

     If by Postal Service:

.18 The IRP-BBS is an electronic bulletin board system available to filers of information returns. In addition to filing information returns electronically, the IRP-BBS provides other capabilities. Some of the advantages of IRP-BBS are as follows:

(1) Notification within two weeks as to the acceptability of the data transmitted.

(2) Immediate access to the latest changes and updates that affect the Information Reporting Program at IRS/MCC (program, legislative, etc.).

(3) Access to publications such as the Publication 1239 as soon as they are available.

(4) Capability to communicate with IRS/MCC personnel.

(5) Ability to retrieve information and files applicable to the IRP- BBS.

.19 The IRP-BBS is available for public use and accessible using various personal computer communications equipment; however, electronic submission of information returns is limited to holders of valid TCCs. ATCC is not needed to access those portions of the IRP- BBS that contain forms and publications or to leave questions or messages for IRS/MCC personnel.

.20 Filers using IRP-BBS can determine the acceptability of files submitted by checking the file status area of the bulletin board. These reports are not immediately available but will be available within two weeks after the transmission is received by IRS/MCC.

.21 Contact the IRP-BBS by dialing 304-264-7070. The communication software settings for IRP-BBS are:

- No parity

- Eight data bits

- One stop bit

- Full duplex

The communication software should be set up to use the fastest speed allowed by the filer's modem.

.22 Due to the large number of communication products available, it is impossible to provide specific information on a particular software package or hardware configuration. Filers should contact their software or hardware supplier for assistance.

.23 IRP-BBS software provides a menu-driven environment allowing access to different parts of IRP-BBS. Whenever possible, IRS/MCC personnel will provide assistance in resolving any communication problems with IRP-BBS.

.24 IRP-BBS can be accessed at speeds from 1200 to 28,800 bps. The speed is automatically negotiated for connection at the speed of the calling modem. The communication standards supported include Industry Standard 212A, V.22bis, V.32, V.32bis, V. speed of the calling modem. The communication standards supported include Industry Standard 212A, V.22bis, V.32, V.32bis, V and V.FC. Point-to-point error control is supported using the V.42 ITU-T standard or MNP 2-4. Data compression is supported using V.42bis ITU-T standard or MNP5.

.25 The following information will be requested to set up the filer's user profile when logging onto the IRP-BBS for the first time.

(1) Enter the letter that corresponds to the filer's terminal from the following:

      < A >   IBM PC        < B >  IBM w/ANSI        < C >   Hyperterm

(2) Upper/lower case, line feed needed, 0 (zero) nulls after each < CR >, do you wish to modify this? (Most users answer no.)

                            COMMON PROBLEMS

                        FORM 8027 RECORD FORMAT

.01 Rev. Proc. 92-81 is superseded.

SECTION 9. EFFECTIVE DATE

.01 This revenue procedure is effective for Forms 8027 due the last day of February 1999 and any returns filed thereafter.