Rev. Proc. 79-20

PART "A" -- GENERAL

Section 1. Purpose.

.01 The purpose of this Revenue Procedure is to update and supersede Rev. Proc. 74-12, 1974-1 C.B. 423 which sets forth the requirements and conditions under which withholding agents, as defined in Section 1.02 below, may file Form 1042S information returns on magnetic tape beginning with TAX YEAR 1979 RETURNS.

.02 A withholding agent is defined as any person or entity required to withhold U.S. tax on payments of income subject to withholding from sources within the United States as provided for in Chapter 3 of the Internal Revenue Code. A withholding agent may be an individual, partnership, corporation, trust, estate, government agency (Federal, State or local), association, or a tax-exempt foundation or organization.

.03 The Internal Revenue Service encourages all entities who must file information returns and who have facilities for submitting this information on magnetic tape to use this method of filing. Withholding agents filing Form 1042S information returns in the form of magnetic tape should also be aware of Rev. Proc. 78-26, 1978-2 C.B. 505, relating to magnetic tape reporting for wage and information documents, Rev. Proc. 75-27, 1975-1 C.B. 725, relating to disk-pack reporting for wage and information documents, and Rev. Proc. 77-34, 1977-2 C.B. 542, relating to diskette reporting for wage and information documents. Copies of the above mentioned Revenue Procedures are available from any Internal Revenue Service Center.

Sec. 2. Application for Tape Reporting.

.01 Form 1042S statements may be filed on magnetic tape by withholding agents or by their designated agents. Tape reporting is not restricted to withholding agents with the ability to submit all their information on magnetic tape; a combination of tape records and paper documents is acceptable so long as there is no duplication or omission of documents.

.02 Withholding agents or their designated agents who desire to file statements in the form of magnetic tape must first file a letter of application. This letter should be addressed to the Director of the Philadelphia Service Center, Internal Revenue Service, P.O. Box 245, Cornwell Heights, Pennsylvania 19020, Attention: Magnetic Media Coordinator.

The letter of request must contain the following:

(a) Name, address, and Employer Identification Number of person, organization or entity making the request.

(b) Name, title, and telephone number of person to contact regarding the request.

(c) An estimate of the number of 1042S statements to be reported in tape format, and the number, if any, to be reported on paper forms.

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

(e) List of withholding agents to be included in the file(s) if the requester is an agent designated to file for a group of withholding agents. This list must include each withholding agent's name, complete address (including Zip Code), and EI number. The list should be in EI number sequence.

(f) Signature of official responsible for the preparation of tax reports or his authorized agent.

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

.04 Generally, withholding agents using equipment compatible with the Service's can presume that their application will be approved. Compatible tape characteristics are shown in PART "B", Section 1.01.

Where the capability to prepare several types of tapes exists, the Service prefers that compatible tapes be prepared.

.05 If withholding agents propose to submit convertible tapes, the Service will attempt to find conversion facilities. Generally, an application to file on magnetic tape will be disapproved only when the Service is unable to obtain facilities to convert a withholding agent's file to a compatible form.

.06 In general, once authorization to file on magnetic tape has been granted, such approval will continue in effect in succeeding years, providing that the requirements of this Revenue Procedure are met and there are no equipment changes by the withholding agent. However, new applications are required:

(a) If the users change from equipment producing compatible tapes to equipment producing convertible tapes.

(b) If the users submit tapes that are not listed as either compatible or convertible.

(c) If the users discontinue tape reporting for one or more years, then decide to resume this method of reporting.

Sec. 3. Filing of Tape Reports.

.01 Packaging, shipping, and mailing instructions will be provided in the authorizing letter issued by the Service in response to an application for tape reporting.

0.2 Withholding agents submitting a portion of their statements on magnetic tape and the remainder on paper forms, should file both magnetic tape records and paper documents at the Philadelphia Service Center, but in separate shipments.

.03 The withholding agent's Form 1042 tax return serves as the transmittal document for Form 1042S statements, including those on paper and on magnetic tape. For designated agents filing statements on tape for several withholding agents, separate Forms 1042 must be filed for each withholding agent included in the transmittal. Since the required Form 1042 is a tax return (with or without a remittance attached), it must be filed separately from the shipment of magnetic tape. Attach a statement to Form 1042 giving the number of Forms 1042S on magnetic tape and the number (if any) filed on paper. The total of Forms 1042S must be inserted on line 16a, Form 1042. Any additional documents required to be submitted should accompany Form 1042. (See instructions for Form 1042, U.S. Annual Return of Income Tax To Be Paid At Source under Chapter 3, Internal Revenue Code.)

.04 The dates prescribed for filing paper documents with the Service will also apply to magnetic tape filing. Requests for extensions of time for filing and related matters should be made to the Director, Philadelphia Service Center. If an extension has been granted by the Service a copy of the letter granting the extension should be attached to the Form 1042.

.05 Enclose a transmittal in triplicate, in the first box of the tape shipment, with the following information:

(a) The complete name, address, and EI number of the transmitter of the tape file.

(b) Name, address, title, and telephone number of the person to contact regarding any tape file problem.

(c) The complete name and address to be used in returning the tape file.

(d) The manufacturer and model of the main frame and tape drives, the tape width, the density in characters per inch, and the recording code (BCD, Excess 3, Octal, etc.).

(e) The type of document being reported--i.e. Form 1042S.

(f) Total number of tape reels in the file.

.06 Ship to Internal Revenue Service Center, Cornwell Heights, PA 19020. Note on the address side of the shipment: "EXPEDITE. FORM 1042S STATEMENTS ON MAGNETIC TAPE. DELIVER UNOPENED TO TAPE LIBRARY."

.07 The magnetic tape specifications contained in PART "B" of this Revenue Procedure must be strictly adhered to. Deviations will not be permitted under any circumstances. All magnetic tape filings will be scanned for competeness of required fields, mathematical verification, and proper format. Tapes failing to meet specifications will not be processed, but will be returned to the transmitter for correction at the discretion of the Director, Philadelphia Service Center.

Sec. 4. Processing of Tape Statements.

.01 The Service will copy the information from the original tapes and will return the original tapes to the withholding agent. Normally, tapes will be returned by September 15 of the year in which submitted. However, if the tapes submitted are unprocessable, and must be returned for correction prior to processing, they will be returned within six months of the receipt of acceptable tapes.

.02 The Service will prepare the appropriate statements for transmittal to Treaty countries.

Sec. 5. Corrected Statements.

.01 The appropriate paper forms will normally be used if it is necessary to correct Recipient "Q" records in the magnetic tape files. Since corrected statements supersede information previously supplied, all required data fields must be completed. Annotate each form "Corrected" at the top. Corrected documents should be bundled separately from other paper documents. When correcting documents are shipped separately, an amended Form 1042 must also be filed, also suitably annotated.

.02 If it becomes necessary for the withholding agent to submit a large volume of corrected statements, the Service would prefer that corrected statements be provided on tape. If the withholding agent possesses the capability to provide such corrections on tape, he should contact the Philadelphia Service Center, Magnetic Media Coordinator, for instructions.

Sec. 6. Effect on Paper Documents.

.01 Magnetic tape reporting to Internal Revenue Service eliminates the need for submission of paper Forms 1042S. However, withholding agents must continue to provide recipients with requisite information, although this need not be on a copy of 1042S.

.02 If only a portion of the statements is reported on magnetic tape and the remainder is reported on paper forms, those paper statements must be filed on the prescribed forms.

Sec. 7. Data Entries.

.01 Since taxpayer identifying numbers are not required on all Forms 1042S (see specific Instructions for Withholding Agents, Copy D of the official Form 1042S), the specifications in PART "B" of this Revenue Procedure permit omission of such identifying numbers. Although identifying numbers are not always required for nonresident alien income recipients, the Service appreciates their being furnished when available, because the identifying numbers are helpful in audit and return-matching programs.

.02 Recipient surnames are used to computer-generate Sort Names. Use an asterisk to indicate the beginning of the surname for this purpose. If the surname is the first name on the line, as may be the case for nationals of Asian countries, the asterisk is to be omitted. In the case of a partnership or joint ownership, or some other case where more than one individual is listed, asterisk only the first surname. A blank will always precede the asterisk when it is used, but no asterisk may be followed by a blank. Do not use an asterisk with corporate names or any other business entity or governmental organization name, except partnerships or sole proprietorships.

.03 In case of multiple recipients, the name of the person whose identifying number has been provided should be placed before all other names.

.04 Sometimes the recipient identification recorded on the withholding agent's records is lengthy, and exceeds the 105 characters allotted in the Recipient Name Line and the Supplemental Name Lines on the magnetic tape records. This is most common in the case of trusts or other types of fiduciary accounts. The first 105 characters of the recipient identification normally provide sufficient descriptive data for the Service's purposes. The Service encourages all agents to make every possible attempt to truncate or abbreviate lengthy recipient descriptions.

.05 All monetary amount fields must show dollars and cents (omit the decimal point). For example, $135.72 must be shown as 13572, and $100 must be shown as 10000. All money amount fields are positive and must not be signed in any fashion. All money amounts must be right-justified and zero filled.

Sec. 8. Additional Information.

Requests for additional copies of this Revenue Procedure, or request for additional information on tape reporting, should be addressed to the Internal Revenue Service, Philadelphia Service Center, Post Office Box 245, Cornwell Heights, Pennsylvania 19020.

PART "B" -- MAGNETIC TAPE SPECIFICATIONS

SECTION 1. GENERAL.

.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. Usually, the Service will be able to process, without translation, any compatible tape file. To be compatible, a tape file must meet all of the following:

Type of Tape--1/2 inch Mylar base, oxide coated

Recording Density--556 or 800 BPI

Parity--Even or Odd

Interrecord gap--3/4 inch

Reading Code--7 channel binary coded decimal (BCD)

.02 Convertible tapes for which conversion facilities are currently available are:

(a) 9 Channel EBCDIC (Extended Binary Coded Decimal Interchange Code);

(1) Odd Parity

(2) 800, 1600 and 6250 Densities

(b) 9 Channel ASC II (American Standard Coded Information Interchange);

(1) Odd Parity

(2) 800, 1600 Densities

(c) 200 Density

.03 An acceptable tape file for each withholding agent will contain data records as follows.

(a) Single Reel

(1) a Transmitter "T" Record; then

(2) one or more Recipient "Q" Records followed by a specific Withholding Agent "W" Record; then

(3) additional "Q" and "W" Record sequences for other withholding agents as needed; then

(4) an End of Transmission "Y" Record.

(b) Multiple Reels

(1) a Transmitter "T" Record at the beginning of each reel; then

(2) sequences of Recipient "Q" Records followed with corresponding Withholding Agent "W" Records; then

(3) an End of Reel "Z" Record on every reel except the last; and

(4) an End of Transmission "Y" Record ending the last reel.

(c) Notes

(1) a sequence of Recipient "Q" Records may be continued from one reel to the next if they apply to the same withholding agent, without the necessity of repeating the "W" Record. The sequence might be, for example, . . . QQQQZ (end of one reel); TQQQQW . . . (beginning of next reel).

(2) the End of Reel "Z" Record is identical to the Withholding Agent "W" Record, except that it also indicates the end of the reel. For example, when records for a specific withholding agent conclude at the end of a reel, the "Z" Record will be used in lieu of a "W" Record; the next tape reel will begin with a "T" Record, followed by "Q" records for an entirely new withholding agent.

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

(1) Name of Transmitter.

(2) Number of "Q" records on that reel.

(3) Density (200, 556, 800, 1600 CPI, etc.).

(4) Channel (7 or 9).

(5) Parity (odd or even).

(6) Manufacturer and model of main frame and tape drives.

(7) Sequence number of reel, and total reels in the file (i.e. 1 of 3, 2 of 4, etc.).

.05 All records, including Header and Trailer Labels (if used) must be transmitted at the same density.

SEC. 2. CONVENTIONS AND DEFINITIONS.

.01 Header Labels, Trailer Labels, Record Marks and Tape Marks are all optional. They may be used as required by the transmitter's equipment or programming. If used they must conform to the following standards:

(a) Header Labels must begin HDR1 or 1HDR. If used, they must be the first record on the reel immediately before the Transmitter "T" Record. Header labels may not exceed 80 characters in length. Headers are not read onto IRS magnetic media, but are automatically omitted. Thus, no Header may contain E, T, Q, W, Y, or Z in position 9, since this causes Service equipment to read data immediately following as if it were part of a record.

(b) Trailer Labels must begin 1EOR, 1EOF, EOF1, or EOR1. If used, they must be the last record on the reel, after the "Z" or "Y" Record and Tape Mark (if a Tape Mark is used). Trailer Labels may not exceed 80 characters in length.

(c) Record Marks, if used, may only appear at the end of a record or block. Use IBM Record Mark 111010 (Octal 72) in even parity, 011010 in odd. All Records are of uniform length, and marks are not needed.

(d) Tape Marks, if used, must be IBM 001111 (Octal 17) in even parity. They always appear immediately after the "Z" or "Y" Record. If Header and Trailer Labels are also used, the tape mark must precede the Header Label and must follow the Trailer Label.

.02 Definitions:

 Element                 Description

.01 Tape records prescribed in the specifications may be blocked or unblocked, subject to the following:

(a) All data records are of a fixed length of 388 positions.

(b) All records may be blocked, except Header and Trailer Labels.

(c) A block may not exceed 4,000 tape positions, although shorter blocks may be written as desired. If full-length blocks are being used, but sufficient records are not available to fill them, the block should be "padded" with 9's to fill all unused positions. Do not pad the block with blanks, or create blank records (for example, Q followed by 387 blanks, etc.).

(d) Two forms of blocking are acceptable:

(1) Only "Q" Records are blocked; all other records are unblocked.

(2) All records, except Header and Trailer Labels, if used, are blocked. In this case, a "T" Record may only be the first record in the first block on the reel; a "W" Record may only be the last record in a block and must follow all associated "Q" Records; and, "Y" or "Z" Records may only be the last record in the last block on the reel.

.02 The first position of each record indicates the record type:

                Transmitter                             T

SEC. 4. THE TRANSMITTER "T" RECORD.

This record identifies the entity who prepares and transmits the magnetic tape file. The Transmitter and one of the withholding agents may be the same, but they needed need not be. The Transmitter "T" Record must be the first record on a reel (second record, if header labels are used), and must appear on each reel in the file sent by the Transmitter. On multiple reel files, the reel number must be incremented by 1 (one) for each tape reel after the first reel. Each "T" Record has a fixed length of 388 positions. The elements of data prescribed for each "T" Record are as follows:

 Element  Positions      Title               Description

(1) For other Foreign countries use XX.

(2) APO & FPO addresses must show a city, state, and Zip. Do not use "XX" for APO & FPO; the three permissible State Codes are "NY", "CA", and "WA".

 Element  Positions      Title               Description

This Record contains complete name and address data for both Withholding Agent and Recipient of Income, together with all the particulars of the income paid and tax withheld. Complete Withholding Agent data is required because each Recipient "Q" Record is treated as if it were a separate Form 1042S, and is processed independently of other records. Since the "Q" Record is restricted to one type of income only, it may be necessary to write more than one "Q" Record (up to 20) for any given individual income recipient, who may have received income of more than one type. All Recipient "Q" Records for a particular Withholding Agent must be written before the corresponding Withholding Agent "W" Record, and before "Q" Records for another Withholding Agent may begin. Any order of "Q" Records within those belonging to a given Withholding Agent may be used (for example, they may be sorted alphabetically by surname, or by country code, or by country of the mailing address, etc.) at the convenience of the Transmitter or Withholding Agent, since the "Q" Records are fully independent. All "Q" Records have a fixed length of 388 positions. All Elements are required unless otherwise stated.

 Element  Positions      Title               Description

 Element  Positions      Title               Description

SEC. 6. WITHHOLDING AGENT "W" RECORD.

Write a "W" Record after the last "Q" Record submitted for a particular Withholding Agent has been written. The "W" Record serves as a summary of the preceding "Q" Record data, and enables the Service to double-check the correctness of information received. Several "W" Records for different withholding agents may appear on the same Transmitter's file; also, the "W" Record may refer to "Q" records on more than one reel, provided all of the preceding "Q" Records are for the same withholding agent. A "W" Record may only be followed by new Recipient "Q" Records for the next Withholding Agent, if any, or by an end of transmission "Y" Record. The "W" Record cannot be followed by a tape mark. Each "W" Record has a fixed length of 388 positions. All elements of data in the "W" Record are required as follows:

 Element  Positions      Title               Description

End every reel of a file, except the last reel, with an End of Reel "Z" record. A "Z" record may only appear as the last record of a reel. If records are blocked, the "Z" record must be the last record in the last block on the reel. The "Z" record is identical in format to the "W" record. The "Z" record will replace the "W" record in every case where the "W" record would ordinarily fall last on the reel; that is, when all "Q" records for a particular withholding agent have been completed, and reel-end is reached. The "Z" record may only be preceded immediately by a "Q" record, and may be followed immediately only by a "T" record followed by "Q" records. Elements of the "Z" record differ from the same elements of the "W" record as follows: (a) Element 1 Record Type, will be "Z" instead of "W"; (b) Element 9, Total Number of "Q" records, will include a count of all "Q" records since the last preceding "W" record or "T" record; (c) Elements 10, 11, 12 and 13, will likewise total corresponding amounts on "Q" records since the preceding "W" or "T" record.

SEC. 8. END OF TRANSMISSION "Y" RECORD.

End the last reel on a file with an End of Transmission "Y" Record. The "Y" Record may only be preceded by a "W" Record; it may only be followed by a tape mark or tape mark and a Trailer Label, if used. The "Y" Record will count the total number of withholding agents in the transmission, and the total number of tape reels in the file. The "Y" Record has a fixed length of 388 positions, and all elements listed are required.

 Element  Positions      Title               Description

This Revenue Procedure supersedes Rev. Proc. 74-12, 1974-1 C.B. 423.