REV. PROC. OUTLINES REQUIREMENTS FOR SUBSTITUTE FORMS 1040A AND RELATED FORMS AND SCHEDULES.

Rev Proc. 95-46

                              CONTENTS

The purpose of this revenue procedure is to provide general requirements and conditions for the development, printing, and approval of substitute Form 1040A and related forms and schedules to be input through the Document Processing System (DPS). Approved forms may be filed in lieu of official IRS produced and distributed forms.

SECTION 2. SCOPE

This special revenue procedure contains instructions only for the approval of Form 1040A and related forms and schedules. All other IRS tax forms are covered by other revenue procedures. The Service accepts quality substitute tax forms that are consistent with the official forms they represent, and that do not have an adverse impact on our processing. The IRS Substitute Forms Program administers the formal acceptance and processing of these forms nationwide. This revenue procedure will be incorporated into Publication 1167, Substitute Printed, Computer-Prepared, and Computer-Generated Tax Forms and Schedules.

SECTION 3. HIGHLIGHTS OF THIS REVENUE PROCEDURE

There are several differences between this revenue procedure and Publication 1167. The most important differences are listed here.

.01 Submissions should be produced in full graphic detail including all horizontal and vertical lines (Section 5.03).

.02 The taxpayer name and SSN must appear on all pages (Section 5.05).

.03 Barcodes are required on certain forms (Section 6).

.04 The Service requires three or four original copies of each form, depending on the treatment of the entity area (Section 7.01(2)).

.05 Companies may request exemption from the barcoding requirement (Section 9).

SECTION 4. DEFINITIONS

01. Substitute Form. A tax form (or related schedule) that differs in any way from the official version and is intended to replace the entire form that is printed and distributed by the Service.

02. Computer-generated Substitute Form. A tax return or form that is entirely designed and printed by the use of a computer printer, such as a laser printer, etc. on plain white paper.

This return or form must conform to the physical layout of the corresponding Service form although the typeface may differ. The text should match the text on the officially printed form as closely as possible; condensed text and abbreviations will be considered on a case-by-case basis. Exception: All jurats (perjury statements) must be reproduced verbatim.

03. Computer-Prepared Substitute Form. A preprinted form in which the taxpayer's tax entry information has been inserted by a computer, computer-printer or computer-type equipment, such as word- processing equipment.

04. Acceptable Reproduced Form. A legible photocopy of an original form or of an unchanged reproduction proof supplied by the Service. (A reproduction proof is not a substitute form, but may subsequently be used as a computer-prepared substitute.)

SECTION 5. DOCUMENT PROCESSING SYSTEM

.01 The Service is modernizing its computer equipment to improve the efficiency of returns processing and provide improved customer service. This Tax Systems Modernization (TSM) includes the input of returns and attachments through DPS.

.02 An integral part of DPS is the use of scanning equipment to capture return data. Templates will be designed for substitute forms, when these forms approximate the official form. This will allow the scanner to recognize forms developed by various sources.

.03 Substitute forms which duplicate published forms in graphic detail will be easier to develop templates for and will subsequently be processed more efficiently. Graphic detail includes all horizontal and vertical lines (or rules) as displayed on the officially- published form. Examples: the vertical line separating first and last name in the entity area or the horizontal lines where data is placed.

.04 If a submitted form varies significantly from the official form, so that a template cannot be easily developed, that form will not be approved. Examples of potential problems include the placement of data entry fields on the wrong page and extraneous graphics that interfere with data capture. Company logos are acceptable if they are not placed in close proximity to any data capture field.

.05 To aid the equipment in recognizing forms as they are fed into the scanner, the Service is adding barcodes to its documents.

.06 Documents will be phased into the system over a period of several years and barcodes will appear on the IRS-published forms as they are introduced to the system.

SECTION 6. BARCODES

.01 Barcodes for returns and attachments, other than Forms W-2 and the Form 1099 family, will be either seven in length using the 3 of 9 (or 39) format. The barcode must be positioned at least .5 inches from any edge of the paper. If possible, display the characters represented by the barcode. If these characters cannot be produced, display your three-character source code in the lower left corner on the first page of each document submitted for approval.

.02 A barcode is required on Forms 1040A and 8888 and Schedules 1, 2, 3, and EIC. The algorithm for the barcode is shown in Exhibit 1. A company that is not creating a substitute Form 1040A need not barcode Form 8888 or Schedule EIC for filing with Form 1040. Barcodes for Forms W-2 and the Form 1099 family are not required for tax year 1995 and will be covered in the appropriate revenue procedures.

.03 Barcodes will not appear for tax year 1995 on the official versions of other forms and schedules which may be associated with Form 1040A. However, we encourage creators of substitute forms to include barcodes on these forms as shown in Exhibit 1.

Barcodes on these forms may be placed anywhere in the data capture area either horizontally or vertically. The Service prefers placement in the lower left corner as shown on Form 1040A.

.04 The barcode will be seven digits long as follows:

     Digit 1 - version year and front or back of form

.06 If the form has a revision date under the form number, the first digit represents the year of revision and the fourth digit indicates the month. For example, the barcode for the front [page of a form revised in October 1995 will have a first digit of "5" and a fourth digit of "J".

.07 Digits 5 through 7, the source code, replace the Forms Approval Number previously used by the Substitute Forms Program.

.08 An eighth digit, a page number code, will be used only for documents with more than two pages. This does not apply for tax year 1995 Forms 1040A as the forms scheduled for bar coding consist of no more than two pages.

SECTION 7. GENERAL REQUIREMENTS FOR APPROVAL

01. Schedules are considered to be an integral part of a complete tax return when assigning consecutive page numbers and printed contiguously with page one of the return. However, Schedules 1, 2, and 3 of Form 1040A are examples of schedules that can be separately computer-generated. Although these schedules are published as part of the Form 1040A package, they are separate forms (i.e., not part of the actual 1040A), and must be submitted as separate computer-generated substitute schedules.

02. Things you cannot do to Internal Revenue Service Printed Tax Form 1040A to make it suitable for use as substitute tax form:

1 You cannot, without prior Service approval, change any Internal Revenue Service tax form or use your own (non-approved) versions, unless specifically permitted by this revenue procedure.

2 You cannot adjust any of the graphics on Form 1040A and subsequent forms/schedules without prior approval from the Service.

SECTION 8. APPROVAL

01. Requests for Approval.

1 The Service cannot grant final approval of any substitute form until the official form has been published. However, the Service releases advance proof copies of selected major tax forms that are subject to further changes and OMB approval before their release in final format for printing and distribution to the public. We encourage submission of proposed substitutes of these advance proof forms, and will grant conditional approval based solely on these early proofs. These advance proofs are subject to significant change before forms are finalized. If these advance proofs are used as the basis for your substitute forms, you will be responsible for subsequently updating your final forms to agree with the final official version before use.

2 When specific approval of Form 1040A and related forms/schedules is desired, forward three original copies of the proposed substitutes to:

     Internal Revenue Service

3 As no Service office except the one specifically mentioned above in Section 8.01.2, is authorized to approve substitute Form 1040A for DPS, unnecessary delay may result if forms are sent elsewhere for approval. All forms submitted to any other office must be forwarded to the appropriate office for formal control, review, and official approval. No IRS office is authorized to allow deviations from this revenue procedure.

4 The Service does not review or approve the logic of specific software programs, nor confirm the calculations entered on forms output from these programs that are submitted for approval. The accuracy of the program itself remains the responsibility of the software package developer, distributor, and/or user. The Substitute Forms Program is concerned with the pre-filing quality review of the final forms output, produced by whatever means, that are expected to be processed by IRS submission centers.

SECTION 9. EXEMPTION TO THE REQUIREMENTS FOR BARCODING

If the addition of barcodes to Form 1040A and related documents creates a hardship on the creator of the substitute form, enclose a letter with the submission requesting exemption from this requirement. State the reason for the request.

Requests for exemption will be handled on a case-by-case basis. If granted, an exemption is only in effect for one year.

SECTION 10. FILING FORM 1040A FOR DPS WITH THE SERVICE

Instruct the taxpayer to follow the same instructions used for filing official forms. These instructions are in the taxpayer's tax package.

SECTION 11. EFFECT ON OTHER DOCUMENTS

This revenue procedure has no effect on any other document.

                               EXHIBIT 1

Digits 5 through 7 - Source Code

This is a three-character code which has been assigned or will be assigned to companies producing substitute forms.

                               EXHIBIT 2