Rev. Proc. 66-41

SECTION 1. PURPOSE.

.01 This Revenue Procedure relates to the following employment tax returns or statements:

Form W-2, Wage and Tax Statement,

Form W-3, Reconciliation of Income Tax Withheld from Wages, and

Form 941, Employer's Quarterly Federal Tax Return.

.02 The purpose of the Revenue Procedure is to explain both the standard procedure, and an alternative procedure, for preparing or filing Forms W-2, W-3, and 941 when an employer (hereinafter called a successor) during any calendar year acquires substantially all the property used in a trade or business of another employer (hereinafter called a predecessor), and immediately after the acquisition the successor employs in his trade or business an individual who immediately prior to the acquisition was employed in the trade or business of the predecessor. (The words "trade or business," as used in this paragraph, may include the activity of a nonprofit organization or of a Federal or State agency.) This Revenue Procedure applies only if the predecessor ceases to pay wages, and must file a "Final return" as required by section 31.6011(a)-6(a)(1) of the Employment Tax Regulations.

.03 This Revenue Procedure does not apply under the circumstances stated in Revenue Ruling 62-60, C.B. 1962-1, 186, which relates to the absorption of one corporation by another in a statutory merger or consolidation, and in which the resultant entity is regarded as the same taxpayer and same employer as the absorbed corporation.

SEC. 2. STANDARD PROCEDURE.

.01 When a predecessor makes his final payment of wages to an employee under the circumstances stated in section 1.02, above, the predecessor ordinarily is required to furnish a Form W-2 to the employee on or before the thirtieth day following the day on which the final payment is made. (Sec. 31.6051-1(d) of the regulations.)

.02 The predecessor's "Final return" on Form 941 ordinarily would be accompanied by the District Director of Internal Revenue's copies of each of such Forms W-2, and by the predecessor's Form W-3. (Sec. 31.6011(a)-4(b) of the regulations.)

.03 Under the standard procedure, the predecessor thus performs all reporting duties in respect of the wages and other compensation he pays. The successor, under standard procedure, reports only his own payments of wages and other compensation.

SEC. 3. ALTERNATIVE PROCEDURE.

.01 If the predecessor and successor so agree, and the permission of the District Director is obtained, the predecessor may be relieved from furnishing a Form W-2 to any employee to whom he makes a final payment of wages under the circumstances stated in section 1.02. In such circumstances the employee presumably will be paid wages by the successor in the same calendar year, and the Form W-2 furnished to the employee by the successor for the year may include the wages paid, and taxes withheld, by both the predecessor and the successor. If the successor assumes the predecessor's obligation to furnish Forms W-2 to employees for a calendar year, the successor must assume the predecessor's entire obligation. Thus, the successor must include in such a Form W-2 any amount reportable by the predecessor as "Other compensation" or as uncollected employee tax on tips.

.02 To the extent that wages paid, and income tax withheld, by the predecessor are to be included in the successor's Forms W-2, there will be a discrepancy between the predecessor's Form W-3 and his returns on Form 941. When the predecessor files his final return on Form 941, accompanied by his Form W-3, his explanation of the discrepancy should include the name, address and identification number of the successor and a reference to (or copy of) the District Director's permission to follow the alternative procedure stated in the preceding paragraph. The predecessor's final Form 941 and Form W-3 also must be accompanied by the District Director's copies of any Forms W-2 furnished by the predecessor to his employees (for example, to employees who were not employed by the successor immediately after his acquisition of the trade or business).

.03 To the extent of the discrepancy described in the preceding paragraph, there will be a corresponding discrepancy between the successor's Form W-3 and his returns on Form 941. The successor's explanation of the discrepancy should include the predecessor's name, address and identification number and a reference to (or copy of) the District Director's permission to follow the procedure stated in paragraph .01 of this section.

SEC. 4. INQUIRIES.

Inquiries concerning this Revenue Procedure should refer to its number and should be addressed to the District Director of Internal Revenue for the district in which the predecessor or successor is located.