IRS PUBLISHES RULES FOR PAPER SUBSTITUTES OF FORMS W-2 AND W-3.

Rev. Proc. 98-33

PART A. GENERAL

SECTION 1. PURPOSE

.01 The purpose of this revenue procedure is to provide the general rules for filing and to state the requirements of the Internal Revenue Service (IRS) and the Social Security Administration (SSA) for reproducing paper substitutes for Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, for amounts paid during the 1998 calendar year. The information reported on Forms W-2 and W-3 is required to establish tax liability for employees and their eligibility for Social Security and Medicare benefits.

.02 Forms W-2 and W-3 have only minor changes for 1998. Please see "Nature of Changes" (Section 2, below) and the exhibits at the end of this revenue procedure for changes to the Form W-2 and W-3.

.03 For the purpose of this revenue procedure, a substitute form is one that is not printed by IRS. A substitute Form W-2 or W-3 MUST conform to the specifications in this revenue procedure to be acceptable to the IRS. Preparers should also refer to the separate instructions for Forms W-2 and the instructions on Form W-3 for details on how to complete these forms. See Part C, Sec. 4.01, for information on obtaining the official IRS forms and instructions. See Part B, Sec. 2, for requirements for substitute forms furnished to employees.

.04 IRS has a centralized call site at the IRS Martinsburg Computing Center (IRS/MCC) to answer questions related to information returns (Forms W-2, W-3, 1099, etc.). The Call-Site phone number is (304) 263-8700 (not a toll-free number). The number for Telecommunication Device for the Deaf (TDD) is (304) 267-3367 (not a toll-free number). The hours of operation are Monday through Friday from 8:30 A.M. to 4:30 P.M. eastern time.

.05 IRS maintains a personal computer based Information Reporting Program Bulletin Board System (IRP-BBS) at the IRS Martinsburg Computing Center (IRS/MCC). This system provides access to the forms and publications relating to information returns, news of the latest changes, the ability to receive answers to specific questions, access to shareware, and other features. The IRP-BBS is available for public use and can be reached by dialing (304) 264-7070 (not a toll-free number). The IRP-BBS is compatible with most modems. For more information concerning this system, call IRS/MCC at (304) 263-8700 (not a toll-free number).

.06 Employers are reminded that under Section 6722 of the Internal Revenue Code (IRC) they can be assessed a penalty of $50 per Form W-2 that is not furnished to an employee on a form acceptable to the IRS (up to $100,000). To be acceptable to IRS, the Form W-2 must be either the "official" form or a substitute form with the core data placed exactly as specified in Part B., Section 2.04 of this Revenue Procedure. No IRS office is authorized to allow deviations from this Revenue Procedure.

.07 This revenue procedure supersedes Rev. Proc. 97-24 and Rev. Proc. 97-24A, 1997-16 I.R.B., dated April 21, 1997, and 1997-20 I.R.B., dated May 19, 1997 (Reprinted as Publication 1141).

SECTION 2. NATURE OF CHANGES

.01 The text and exhibits were updated for tax year 1998.

.02 Box 15 check boxes for Household Employee and Subtotal were deleted from the Forms W-2. All employers including household employers must now file Form W-3 even for a single submission of Forms W-2 thus eliminating the need for the check box. Also SSA no longer needs subtotals to process Forms W-2 allowing the elimination of another checkbox.

.03 Added sentence at the bottom of Form W-2 reminding filers not to separate forms, not to staple forms, and not to send in photocopies.

.04 Added last item to back of instructions on copy C to make filers aware that Form W-2 should be retained until you start to receive benefits from SSA. Also employees should confirm their work record with SSA from time to time.

.05 Added additional boxes to Forms W-3 just before the signature area for name of contact person, telephone number, fax number, and E-Mail address. This was done at SSA's request so that they could more easily contact the filer to resolve any processing problems.

.06 SSA recommended inserting a note at the bottom of Forms W-3 and just before the W-3 instructions informing the filer that the entire first page of the Forms W-3 and the entire first page of the Forms W-2 should be sent to SSA. Filers are also informed not to send in any payments with these forms to SSA.

.07 Deleted the Paper Work Reduction Act Notice from Form W-3 page 1 as a space saving measure. The notice information is located inside the Forms W-2 instructions.

.08 The Earned Income Credit notification to employees may now be placed on the back of copy B or the back of copy C. See Part B, Section 2.05.5 for new information.

.09 The tax year (1998) must be printed in non-reflective black ink on copy A of Form W-2 and Form W-3 using 24 pt OCR-A font. The forms identification numbers, e.g., 22222 or 33333, at the top of the forms must be printed in non-reflective black ink. It is imperative that SSA's scanning equipment be able to recognize the form number so that, for example, a Form W-3 is recognized and is not scanned or keyed as a Form W-2. The form number (W-3), and the signature line information on Form W-3, must be printed in non-reflective black ink. The word "Form" as well as the form title(s), e.g., Wage and Tax Statement and Transmittal of Wage and Tax Statements, should be printed in red OCR drop-out ink. Tax Year (1998) Copies B, C, and 2 are not required to be 24 pt OCR-A font (See Part B, Section 2.05.)

.10 The Catalog Number, shown on the 1998 Form W-2 as "Cat. No. 10134D", and the Catalog Number shown on the 1998 Form W-3 as "Cat No. 10159Y", is used for IRS distribution purposes and should not be printed on substitute Forms W-3 or W-2 (Copy A or employee copies).

.11 Added information on how forms can be obtained through computer on-line services.

.12 Various editorial changes were made.

SECTION 3. GENERAL RULES FOR FILING FORMS W-2

.01 Employers MUST use magnetic media for filing with SSA if they prepare and file 250 or more 1998 Forms W-2 (Copy A). This requirement applies unless:

1. The employer can establish that filing on magnetic media will result in undue hardship, AND

2. The employer is granted a waiver of the requirement by IRS.

To request a waiver of the magnetic media filing requirement, for the current tax year only, submit Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, to:

If by Postal Service:

     Internal Revenue Service

EMPLOYERS WHO FILE FORM W-2 INFORMATION ON MAGNETIC MEDIA WITH SSA MUST NOT SEND THE SAME DATA TO SSA ON PAPER FORMS W-2. This would result in duplicate reporting and may subject the filer to an unnecessary contact by the IRS.

.02 TIB-4, Magnetic Media Reporting, Submitting Annual W-2 Copy A Information to the Social Security Administration, (SSA Pub. No. 42-007, revised Oct., 1997) contains the specifications and procedures for filing Form W-2 information on magnetic media with SSA. Specifications for both tape and diskette reporting for Forms W- 2 are included in the TIB-4.

.03 TIB-4 may be obtained by writing to:

     Social Security Administration

.04 Employers not using magnetic media must file a paper Copy A of Form W-2 with SSA on either the IRS printed official form or a privately printed substitute paper form that exactly meets the specifications shown in Parts B and C.

.05 Employers can design their own statements to give to employees. This applies to both employers who file with SSA either on magnetic media or paper Forms W-2, Copy A. Employee statements designed by employers MUST comply with the requirements shown in parts B and C, below.

NOTE: Copy A must not be filed on paper with SSA when the same Form W-2 information is filed on magnetic media. Therefore, magnetic media filers who use the official IRS printed form or any other pre-printed form are advised not to print Copy A, or to discard a printed Copy A, to prevent duplicate information from being submitted to SSA.

.06 If you are terminating your business, you must provide your employees with Forms W-2 on or before the due date of the business filing its final Form 941. Employers must also file Forms W-2 and W-3 with SSA on or before the last day of the month following the due date of the final Form 941. See Rev. Proc. 96-57, Automatic Extensions for Forms W-2, Internal Revenue Cumulative Bulletin 1996-2 page 389, dated 12/30/96, for more information.

NOTE: Use of a reporting agent or other third-party payroll service provider does not relieve an employer of the responsibility to ensure that tax and information returns are sent out and/or filed correctly and on time.

.07 1998 Forms W-2, whether filed on magnetic media or paper, must be submitted to SSA on or before March 1, 1999. In addition, the employee copies must be furnished to the employee on or before February 1, 1999. If employment ended before December 31, 1998, the employee may be furnished his/her copy any time after employment ends, but no later than February 1, 1999. However, if the employee requests Form W-2, you must furnish him or her the completed copies within 30 days of the request or of the final wage payment, whichever is later. This requirement is met if the form is properly addressed, mailed, and postmarked on or before the due date. Failure to timely file with SSA or to timely provide the employee copies may subject the employer to penalties. Employers needing additional time to file Form W-2 information (paper or magnetic media) with SSA may request an extension of time to file by submitting Form 8809, Request for Extension of Time to File Information Returns, to the IRS/MCC at the address (or alternative address) listed in Sec. 3.01, above. The extension request should be filed as early as possible, but must be postmarked no later than the due date of the forms (March 2, 1999). DO NOT SEND FORM 8809 TO SSA.

NOTE: APPROVAL OF THE EXTENSION IS NOT AUTOMATIC. Approval or denial is based on administrative criteria and guidelines. The requestor will receive an approval or denial letter from IRS and must allow at least 30 days for IRS to respond. You do not have to wait for a response before filing your return. File your return as soon as they are ready. If you have received a response DO NOT send a copy of the letter or Form 8809 with your return. Form 8809 may be obtained through electronic options on the Internet at http://www.irs.ustreas.gov; by modem to IRIS (703) 321-8020; or by using the IRS Fax Forms Program (703) 487-4160, or by calling 1-800- 829-3676. You can also contact IRS/MCC (See the address and phone number in Sec. 3.01, above).

.08 If requesting extension of time for more than 10 employers, IRS encourages filers to submit the request on tape, tape cartridge, 5-1/4 or 3-1/2-inch diskette, or electronically through the Information Reporting Program Bulletin Board System (IRP-BBS). Transmitters requesting an extension of time to file more than 50 payers are required to file the extension request on magnetic media or electronically. Transmitters who submit requests for multiple payers will receive one approval letter with an attached list of payers covered under that approval. Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Magnetically or Electronically, provides information on how to file requests for extensions of time on tape, tape cartridge/quarter inch cartridge, diskette, or electronically.

NOTE: To file a request for extensions of time magnetically or electronically for multiple payers, third party filers and transmitters, must have an IRS Transmitter Control Code (Authorization to file information returns).

SECTION 4. GENERAL RULES FOR FILING FORM W-3

.01 Employers submitting Form W-2 (Copy A) on PAPER to SSA must send Forms W-2 with Form W-3.

.02 Form W-3 must be the same width (7 inches) as the Forms W-2 filed.

.03 Form W-3 should only be used to transmit paper Forms W-2 (Copy A). Magnetic media filers do not file Form W-3. Employers using magnetic media must transmit Form W-2 data with Form 6559, Transmitter Report and Summary of Magnetic Media, (and Form 6559-A, Continuation Sheet for Form 6559, if necessary). These forms may be obtained by calling either your SSA MMC (see listing in Appendix) or IRS at 1-800-829-3676.

PART B. REQUIREMENTS FOR FILING PAPER SUBSTITUTES

SECTION 1. REQUIREMENTS FOR SUBSTITUTE "PRIVATELY PRINTED" FORMS SUBMITTED TO SSA (FORMS W-2, COPY A, AND FORMS W-3)

.01 Employers may file privately printed substitute Forms W-2 and W-3 with SSA. The substitute form must be an exact replica of the IRS printed form (or official reproduction proof) with respect to layout and contents because it will be read by machine. The Government Printing Office (GPO) symbol must be deleted (see Sec. 1.16, below). The specifications and allowable tolerances for the Copy A of substitute Forms W-2 are provided later in this Revenue Procedure. See Exhibit A for Form W-2 specifications. The specifications for Forms W-3 are provided in Exhibit B.

.02 Paper for substitute Forms W-2, Copy A, and Form W-3 (cut sheets and continuous pinfeed forms) that are to be filed with SSA must be white 100% bleached chemical wood, 18-20 POUND PAPER ONLY, optical character recognition (OCR) bond produced in accordance with the specifications shown as follows:

 Paper Requirements

.03 All printing for Copy A of Forms W-2 and Form W-3 will be put in red OCR drop-out ink, as specified below.

1. The identifying control number '22222' (Exhibit C) at the top of Form W-2 must be printed in non-reflective black ink.

2. The Form W-2 tax year at the bottom of the form (see Exhibit C) must be printed in non-reflective black ink.

3. The identifying control number '33333' (Exhibit D) at the top of Form W-3 must be printed in non-reflective black ink.

4. The Form W-3 tax year at the bottom of the form (Exhibit D) must be printed in non-reflective black ink.

5. The form identification at the bottom 'W-3' must be printed in non-reflective black ink (Exhibit D).

All other printing will be in red OCR drop-out ink meeting, or comparable to, the specifications in this paragraph. The OCR drop-out ink for paper Forms W-2, Copy A, and W-3 is specified as Flint Ink (formerly Sinclair and Valentine) J-6983 red ink or equivalent. This is the same ink that is used for Copy A of the Form 1099 series. The use of this is required for 1998 Forms W-3 and W-2, Copy A.

NOTE: Printing in any other red OCR drop-out ink must be cleared by contacting Banc-Tech Corp., Attn: Forms Designer & Analyst, P.O. Box 660204, MS-77, Dallas, TX 75266 (214-579-6927 -- This is a voice mail number. Leave a message and your call will be returned).

.04 Type must be substantially identical in size and shape with corresponding type on the official form. The form identifying number MUST be printed in non-reflective black ink using an OCR-A font; 10 characters per inch.

1. On Form W-3 and Copy A of Forms W-2, all the perimeter rules must be 1-point (0.014 inch), while all other rules must be one-half point (0.007 inch).

2. Vertical rules must be parallel to the left edge of the form; horizontal rules parallel to the top edge.

.05 Two official Forms W-2 (Copy A), or one official Form W-3 are contained on a single page that is 7 inches wide (exclusive of any snap-stubs) by 11 inches deep. The form identifying control number for the official forms (7 inches wide) is '22222' (5 digits) for form W-2 and '33333' (5 digits) for Form W-3. The top margin for 1998 Forms W-3 and W-2, Copy A is .375 inch (3/8 inch). The right margin must be .15 inch and the left margin .35 inch (plus or minus .0313 inch). The margins are unchanged from 1997. Margins must be free of all printing. No printing should appear anywhere near the Form ID control number (33333, 22222). For Forms W-2, Copy A, the combination width of Box a, "Control number", and the box containing the form identifying number (22222) must always be 2.0 inches. For Form W-3, the combined width of these boxes must always be 2.2 inches.

NOTE: All form identifying numbers are to be printed in non- reflective black ink, using OCR-A font, printed 10 characters per inch.

.06 The depth of the individual scannable image on a page must be the same as that of the IRS printed forms. For Form W-2, the depth is 4.92 inches (see Exhibit A). The scannable image depth of the Form W-3 on a page must be 4.47 inches (see Exhibit B).

.07 The words "Do not Cut, STAPLE, or Separate Forms on This Page" must be printed in red OCR drop-out ink between the two Forms W-2 on Copy A only (see Exhibit A). Perforations are required on all copies (except Copy A) to enable the separation of individual forms. Continuous pinfeed Copy A forms must be separated at the page perforation into individual 11-inch deep pages before submission to SSA. The pinfeed strips must also be removed. However, the two W-2 documents contained on the 11-inch deep page MUST NOT be separated.

.08 The words "For Privacy Act and Paperwork Reduction Act Notice, see separate instructions", MUST be printed in red OCR drop- out ink on Forms W-2, Copy A (see Exhibit A for format and location). The Notice has been removed from Form W-3, and placed inside the Forms W-2 Instructions. (See Exhibit B)

.09 The Office of Management and Budget (OMB) Number MUST be printed on EACH ply of Form W-2 and W-3 (see Exhibits A and B for format and location).

.10 The section titled "Where to File" in the general instructions on the employer's copy of the official Form W-3, MUST BE printed in its entirety on all substitute Forms W-3 (see Exhibit B). HOUSEHOLD EMPLOYERS FILING FORMS W-2 FOR HOUSEHOLD EMPLOYEES SHOULD SEND THE FORMS TO THE SAME ADDRESS LISTED IN THE INSTRUCTIONS.

NOTE: Household employers, even those with only one household employee, must file Form W-3 with Form W-2. On Form W-3 mark the "Hshld." Box in Box b.

.11 The Privacy Act and Paperwork Reduction Act Notice was deleted from Form W-3 in the interest of space conservation (see Exhibit B). The Notice was placed inside the Form W-2 instructions.

.12 PRIVATELY PRINTED CONTINUOUS SUBSTITUTE FORMS W-2, COPY A, MUST BE PERFORATED AT EACH 11-INCH PAGE DEPTH. NO PERFORATIONS ARE ALLOWED BETWEEN THE INDIVIDUAL FORMS (5-1/2-INCH FORMS W-2) ON A SINGLE COPY PAGE OF COPY A. Continuous pinfeed Copy A forms must be separated at the page perforation prior to submitting them to SSA. Two Copy A forms are contained on one page. The two copies must remain together on the page. Only the pages are to be separated (burst). Perforations are required between all the other INDIVIDUAL copies on a page (Copies 1, B, C, 2, and D) included in the set.

.13 The back of a substitute Form W-2, Copy A, and Form W-3 (page 1) must be free of all printing.

.14 Spot carbons are NOT PERMITTED for Copy A of Forms W-2 or for Form W-3. Interleaved carbon should be black and must be of good quality to assure legibility of information on all copies and to preclude smudging.

.15 Chemical transfer paper is permitted for Form W-2, Copy A, and Form W-3 only if the following standards are met:

1. Only CHEMICALLY BACKED paper is acceptable for Copy A.

2. Carbon coated forms ARE NOT permitted. Front and back chemically treated paper cannot be processed properly by machine.

3. Chemically transferred images must be black in color.

.16 The GPO symbol must not be placed on substitute Copy A of Forms W-2.

.17 The Catalog Number, shown on the 1998 Form W-2 as "Cat. No. 10134D", and the Catalog Number shown on the 1998 Form W-3 as "Cat. No. 10159Y", is used for IRS distribution purposes and should not be printed on substitute forms.

SECTION 2. REQUIREMENTS FOR SUBSTITUTE FORMS FURNISHED TO EMPLOYEES (COPIES B, C, AND 2 OF FORMS W-2)

.01 All employers (including those who file on magnetic media and do not file a paper Copy A) must furnish employees with at least two copies of the Forms W-2 (three or more for employees required to file a state, city, or local income tax return). The dimensions of these copies (Copies B, C, etc.) but not copy A, may be expanded from the dimensions of the official form to allow space for conveying additional information, such as additional entries required for Boxes 13 or 14, withholding from pay for health insurance, union dues, bonds, charity, etc. The requirement that a maximum of three items are permitted in Box 13 of Form W-2 applies only to the paper Copy A that is filed with SSA. As long as sufficient space is provided on the substitute employee copies, as many items as needed may be placed in Box 13 or Box 14. Also, on these copies (Copies B, C, etc.), the size of these boxes may be adjusted. (However, see the minimum size for certain boxes, below). This may permit the employer to eliminate other statements or notices that would otherwise be furnished to employees.

1. The MAXIMUM allowable dimensions for employee copies of Forms W-2 are:

(a) depth should be no more than 6.5 inches;

(b) width should be no more than 8.5 inches.

2. The MINIMUM allowable dimensions for employee copies of Forms W-2 are:

(a) 2.67 inches by 5.0 inches.

(b) horizontal or vertical format is permitted.

NOTE: These minimum and maximum size specifications are for 1998 only and may change for future years. The maximum width of 8.5 inches is for employee copies of Form W-2 only. The width of the paper Copy A, submitted to SSA, is specified in Part B, section 1.05 above.

.02 The paper for all copies should be white. The substitute Copy B (or its equal), that employees are instructed to attach to their Federal income tax return, must be at least 12 pound paper (basis 17 x 22-500), while the other copies furnished the employee should be at least 9-pound paper (basis 17 x 22-500).

.03 Interleaved carbon and chemical transfer paper for employee copies must meet the following standards:

1. All copies must be CLEARLY LEGIBLE;

2. All copies must have the capability to be photocopied; and

3. Fading must not be of such a degree as to preclude legibility and the ability to photocopy.

In general, black chemical transfer inks are preferred; other colors are permitted only if the above standards are met. "Spot carbons" are NOT permitted (See Part B, Sec. 1.15, above, for standards for chemical transfer paper for Copy A.)

.04 The following requirements govern the private printing of employee copies of Forms W-2. All substitutes must be a form, which contains boxes, box numbers, and box titles that, where applicable, match the IRS printed form. Please insure that the employee copy of Forms W-2 (Copy C) contains the note "This information is being furnished to the Internal Revenue Service. If you are required to file a tax return, a negligence penalty or other sanction may be imposed on you if this income is taxable and you fail to report it." The placement, numbering, and size of certain boxes (the "core" information) is specified as follows:

1. The items and box numbers that constitute the core data are:

     Box 1 -- Wages, tips, other compensation,

The "core" boxes MUST be printed in the exact order on each line as on the IRS printed form (see the Exhibits at the end of this revenue procedure). Boxes 1 and 2 must be next to each other, with Boxes 3 and 4 below on the next line, and Boxes 5 and 6 on the line below Boxes 3 and 4.

2. The block of core data (Boxes 1 through 6) must be placed in the upper right of the form. Substitute employee copies of Form W-2, which are printed using a vertical format with dimensions smaller than the IRS printed form, may have the core data entirely on the top of the form (see Exhibit F). In no instance will boxes or other information be permitted to the right of the core data. Standard margins or a small amount of other blank space may appear to the top or right of this data. The form title, number, or copy (Copy B, C, etc.) may be at the top of the form. Also, a reversed or blocked-out area to accommodate a postal permit number or other postal considerations is permitted at the upper right of the form.

3. Boxes 1 through 6 must each be a minimum of 1-3/8 inches wide and 1/4 inch deep.

4. Other required boxes:

     -- Employer identification number (EIN),

5. The Tax Year (1998) MUST be clearly printed (in non- reflective blank ink) on all copies of substitute Forms W-2. It is recommended (but not required) that this information be located to the right of the form title on the lower left of the Form W-2. The use of 24 pt OCR-A font is recommended but not required.

6. If applicable, Social Security tips MUST be shown separately from Social Security wages. A separate box is not required unless Social Security tips are to be reported.

Boxes 1 and 2 on Copy B are required to be outlined in bold 2- point rule (see Exhibit E) or highlighted in some manner to distinguish these boxes.

7. If a box for Advance EIC (Earned Income Credit) payments (Box 9) is present, the box must be outlined in bold 2-point rule or highlighted in some manner to distinguish this box. However, if no amounts are paid for Advance EIC, this box is not required and may be omitted by printers. Do not use Box 9 for any other purpose than reporting Advance EIC payments.

8. If Allocated tips (Box 8) are being reported for the individual employee (or class of employees that are being provided Forms W-2), it is recommended (but not required) that this box also be outlined in bold 2-point rule or highlighted on Copy B. However, if allocated tips are not being reported, this box may be omitted by printers.

9. If Form W-2 contains additional data concerning payroll deductions (e.g., saving bonds withholding, retirement withholding, or payroll savings), there should be a special highlighting of the areas pertaining to Federal income tax withheld; wages, tips, and other compensation; or Advance EIC (Earned Income Credit) payments that are related to those items.

10. Employers who are required to report or withhold state income tax information are required to include the following boxes on substitute Forms W-2:

     Box 16 -- State and Employer's state identification (I.D.)

     Box 19 -- Locality name

13. Other boxes on the IRS printed form (Boxes 7 through 15) need not appear on substitute Forms W-2 provided to employees UNLESS an employer has that item of information to report to an employee. For example, if an employee did not have Social Security tips (Box 7), Allocated tips (Box 8), or Advance EIC payments (Box 9), the form could be printed without these boxes. However, if the employer had provided amounts for dependent care benefits, those amounts would be required to be reported separately and shown in a box labeled "Box 10, Dependent care benefits," as on the IRS printed form and the exhibits in this revenue procedure.

14. Employers may provide multiple entries in Box 13, but each entry should use the same codes as assigned by the IRS for that type of item. (See Reference Guide for Box 13 Codes in the 1998 Form W-2 instructions). For example, employers reporting deferred compensation must label the box as "13d" and not as "13a", even though it is the first or only item to go in this box. Use the codes shown with the dollar amount. On Copy A, Form W-2, do not enter more than three codes in this box. If more than three items need to be reported in box 13, use a separate Form W-2 to report the additional items (see Multiple Forms in the 1998 Form W-2 instructions). However, employers may enter more than three codes in box 13 of Copies 1, 2, B, C, and D of form W-2. Do not report in box 13 any items that are not listed as codes A-T in the Form W-2 instructions. Do not report the same Federal tax data to the SSA on more than one Copy A, Form W-2.

15. For codes D, E, F, G, H, and S, if any elective deferrals, salary reduction amounts, or non-elective contributions to a section 457(b) plan during the year are make-up amounts under the Uniformed Service Employment and Reemployment Rights Act of 1994 (USERRA) for a prior year, you must enter prior year contributions separately. You must enter the code, the year, and the amount. For example, elective deferrals to a section 401(k) plan are reported in box 13 as follows: D-1996-2250.00, D-1997-1250.00. The 1998 contribution does not require a year designation, enter it as D 7000.00.

16. If you are a military employer and provide your employee with basic quarters, subsistence allowances, and combat zone compensation, report the amount in Box 13, Form W-2, using code Q.

17. Employers contributions to an employees Medical Savings Account's (MSA), must be reported in Box 13, Form W-2, using Code R.

18. An employee elective contribution to a salary reduction SIMPLE retirement account must be included in Box 13, Form W-2, using code S. However, if the amount contributed to a SIMPLE that part of section 401(K) arrangement, that amount must be reported in Box 13, Form W-2, using Code D.

19. Amounts paid or expenses incurred by an employer to or for an employee for qualified adoption expenses must be reported in Box 13, Form W-2, using Code T.

20. Employers must use Box 14 for any other information you want to give your employee. Please label each item. Examples are union dues, health insurance, premiums deducted, nontaxable income, voluntary after-tax contributions, or educational assistance payments.

21. If you are reporting prior year payments contributions under USERRA (see item 15 above), you may report Box 14 make-up amounts for non-elective employer contributions, voluntary after-tax contributions, required employee contributions, and employer matching contributions. Report such amounts separately for each year.

.05 Substitute forms for employees (Copies B, C, and 2 and Forms W-2) must meet the following requirements:

1. All copies of Forms W-2 must clearly show the form number, the form title, and the tax year. The title of Form W-2 is "Wage and Tax Statement." It is recommended (but not required) that this be located on the bottom left of Form W-2. The reference to the Department of the Treasury -- Internal Revenue Service must be on all copies of Form W-2 provided to the employee. It is recommended (but not required) that this be located on the bottom right of Form W-2.

2. If the substitute forms are NOT LABELED as to the disposition of the copies, then written notification must be provided to each employee as specified below:

(a) The first copy of the form (Copy B) is filed with the employee's Federal tax return.

(b) The second copy of the form (Copy C) is for the employee's records.

(c) If applicable, the third copy (Copy 2) of the form is filed with the employee's state, city, or local income tax return.

3. If the substitute forms are LABELED, the forms must contain the applicable description:

"Copy B, to be filed with employee's Federal tax return," AND "Copy C, for employee's records." It is recommended (but not required) that this be located on the lower left of Form W-2. The designation "Form W-2, is recommended (but not required) to be located on the lower left of Form W-2 and Department of the Treasury -- Internal Revenue Service." It is recommended (but not required) that this be located on the lower right of Form W-2.

4. Instructions similar to those contained on the back of Copies B and C of the official Form W-2 must be provided to each employee. Employers may modify or delete certain information in these instructions (such as modification for employees of railroads to cover Railroad Retirement Tier I and II Compensation and Taxes). Employers are allowed to delete instructions that do not apply to the employee. For example, if none of the employees have dependent care benefits (Box 10), the employer may delete the instructions for that item. Also, if an employer will only be reporting amounts for a 401(k) plan in Box 13, those instructions may be modified to cover only Section 401(k) contributions.

5. You must notify employees who have no income tax withheld that they may be able to claim a tax refund because of the earned income credit (EIC). You will meet this notification requirement if you issue the IRS Form W-2 with the EIC notice on the back of the employee's copy (Copy B), or a substitute Form W-2 with the same statement. You may also meet the requirement by providing a substitute Form W-2 without the EIC notice and Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. You also may change the font on Employee Copy C (back page only) so that the EIC notification and W-2 instructions may fit entirely on the back of Copy C. For more information about notification requirements, see Notice 1015 (formerly Pub. 1325), Employers -- Have You Told Your Employees About the Earned Income Credit (EIC).

NOTE: Printers are cautioned that the rules set forth here (Part B, Sec. 2) apply to employee copies (Copies B, C, etc.) only. Paper filers who send Copy A of Form W-2 to SSA MUST follow the requirements in Part B, Sec. 3, below for those paper submissions.

SECTION 3. GENERAL RULES FOR FILING "PAPER SUBSTITUTES" FOR FORMS W-2 AND W-3

.01 Paper substitutes that conform totally to the specifications contained in this revenue procedure may be privately printed without the prior approval of the IRS. Penalties may be assessed for not complying with the form specifications set forth in this publication. SUBSTITUTE FORMS THAT DO NOT CONFORM TOTALLY TO THESE SPECIFICATIONS ARE NOT ACCEPTABLE. This applies to both paper substitutes that are filed with SSA and those that are given to employees. Forms should NOT be submitted to IRS or SSA for specific approval. However, if you are uncertain of any specification set forth herein and want that specification clarified, you may submit a letter citing the specification in question, your interpretation of that specification, and an example of how the form would appear if produced using your understanding of the specification. Any questions pertaining to Copies B, C, and 2 of Forms W-2 should be sent to:

     Internal Revenue Service

     Social Security Administration

.02 Forms W-2 and W-3 are subject to annual review and possible change. Employers are cautioned against overstocking supplies of privately printed substitutes.

.03 Copies of the current year IRS printed Forms W-2 and W-3 and the instructions for these forms may be obtained through electronic options on the Internet at http://www.irs.ustreas.gov, or from most IRS offices or by calling 1-800-829-3676. The IRS provides only cut sheet sets.

.04 Substitute Forms W-2 and W-3 transmitted to SSA should generally contain only data that is required by the Form W-2, the Form W-2 instructions, and this revenue procedure.

.05 Substitute Forms W-2, Copy A, and W-3 are machine imaged and scanned by Social Security, therefore these forms must meet the same specifications as Forms W-2 and W-3 produced by IRS. The vertical and horizontal spacing for all Federal payment and data boxes on Form W-2 must be in compliance with the specifications contained herein.

.06 All ballot boxes on Forms W-2, Copy A (Box 15), and W-3 (Box "b") must be 8-point boxes.

NOTE: If a box is marked, more than 50% of the applicable ballot box must be covered by an "X".

.07 Copy A of Form W-2 and Form W-3 must have the form producer's EIN entered to the left of "Department of Treasury".

PART C. ADDITIONAL INSTRUCTIONS

SECTION 1. INSTRUCTIONS FOR FORMS PRINTERS

.01 Except as provided below, if magnetic media is not used for filing with SSA, the substitute copies of Forms W-2 assembly should be arranged in the same order as the IRS printed Forms W-2. Copy A should be first, followed sequentially by perforated sets (Copies 1, B, C, 2, and D). The substitute form to be filed by the employer with SSA must carry the designation "Copy A."

NOTE: Magnetic media filers do not submit Copy A of Form W-2 or Form W-3. Form 6559 is the transmittal for magnetic media filed Form W-2 data.

1. It is not a requirement that privately printed substitute forms contain a copy to be retained by employers (Copy D). However, employers must be prepared to verify or duplicate this information if it is requested by the IRS or SSA. Paper filers that do not keep Copy D should be able to generate a facsimile of Copy A in case of loss.

2. Except as provided in the arrangement of the official assemblies, additional copies that may be prepared by employers shall not be placed ahead of the copy "For EMPLOYEE'S RECORDS," Form W-2 (Copy C).

3. Instructions similar to those contained on the back of Copies B and C of the official form MUST be provided to each employee. These instructions may be printed on the back of the substitute Copy B and C or may be provided to employees on a separate statement. Do not print these instructions on the back of copies 1 or 2 that is to be filed with the employee's state or local returns.

.02 All privately printed Forms W-3 and Forms W-2 (Copy A), must have the tax year, form number, and form title printed on the bottom face of each form using identical type to that of the official format. THE TAX YEAR MUST BE PRINTED IN NON-REFLECTIVE BLACK INK USING 24 PT OCRA-FONT (COPY A) OF FORMS W-2, AND FORMS W-3. THE FORM TITLE, E.G., WAGE AND TAX STATEMENT MUST BE PRINTED IN RED OCR DROP- OUT INK ON FORM W-2, COPY A, AND FORM W-3. THE FORM IDENTIFYING CONTROL NUMBER OF FORMS W-2 AND W-3, MUST BE PRINTED IN NON- REFLECTIVE BLACK INK, USING OCRA-FONT, PRINTED 10 CHARACTERS PER INCH. THE WORD "FORM" ON THE W-2 AND W-3 MUST BE PRINTED IN RED OCR DROP-OUT INK.

.03 The substitute Form W-2, Copy B, which employees attach to their Federal income tax return, must be at least 12-pound paper (basis 17 x 22-500) while the other copies furnished to employee's should be at least 9-pound paper (basis 17 x 22-500).

.04 Employee copies of Forms W-2 (Copies B, C, etc.), including those that are printed on a single sheet of paper, MUST be produced so as to be easily separated by the employee. Perforations between the individual copies that are printed on a single sheet of paper satisfy this requirement.

.05 The Form W-2, Copy A, and the OCR bond Form W-3 that are filed with SSA must have no printing on the reverse side.

.06 Instructions similar to those provided as part of the official form must be provided as part of any substitute Form W-3.

.07 The copy of the substitute Form W-3 that contains the instructions and is to be retained by the employer should be at least 18-pound paper (basis 17 x 22-500).

SECTION 2. INSTRUCTIONS FOR EMPLOYERS

.01 Only originals or ribbon copies of Copy A (Forms W-2) and Form W-3 may be filed with SSA. CARBON COPIES AND PHOTOCOPIES ARE NOT ACCEPTABLE.

.02 Employers should type or machine print entries on forms whenever possible and provide good quality data entries by using a high quality type face, inserting data in the middle of blocks that are well separated from other printing and guidelines, and taking any other measures that will guarantee clear, sharp images. The print character size must be no no more than 12 characters per inch. Omit dollar signs but include decimal points for all cents amounts. The employer must provide a machine scannable form for Copy A. The employer must refrain from printing any data in the top margin of the forms. The employer must also provide payee copies (Copies B, C, and 2) that are legible and capable of being photocopied (by the employee).

.03 The Employer Identification Number (EIN) may be entered in the Employer's name and address box on Copy A of Forms W-2 (Box "c" on the IRS printed Form W-2). If this is done, the EIN need not be entered in the box provided for the EIN (Box "b" on the IRS printed Form W-2). The EIN must be entered in Box "e" of the Form W-3. NOTE: EIN entered on Form W-3 Box "e" must be the same EIN entered on Forms W-2 Box "b", and on Form 941 as well.

.04 The employer's name, address, and EIN may be preprinted.

.05 The optional employer's state number may be pre-printed in the employer's name, address, and ZIP code box. If this is done, the Employer's state I.D. Number section in Box 16 of Forms W-2 need not be completed, as long as the applicable state taxing authority does not object. PLEASE CHECK WITH THE APPROPRIATE STATE TAXING AUTHORITY BEFORE DOING THIS.

.06 Generally, an agent that has an approved Form(s) 2678, Employer Appointment of Agent, should enter its name as the employer in box c of Form W-2, and file one Form W-2. However, if the agent is acting as an agent for two or more employers, or is an employer and is acting as an agent for another employer, and pays social security wages in excess of the wage base to an individual, special reporting for payments to that individual is needed. The agent should file separate Forms W-2 reflecting the wages paid by each employer. Box "c" of Form W-2 should include name of agent, agent for (name of employer), and address of agent. Each form W-2 should reflect the EIN of the agent in Box "b". In addition the employer's EIN should be shown in Box "h" of Form W-3.

.07 The preparation and filing instructions for Forms W-2 are contained in the 1998 Instructions for Form W-2. The preparation and filing instructions for Form W-3 are contained as part of the 1998 Form W-3 snap set assembly.

.08 To avoid confusion and questions by employees, employers are encouraged to delete the following items from the employee copies of Forms W-2 that are provided to employees:

1 Form identifying number (e.g., 22222);

2 The word "void" and associated box

3 Any other captions or box number that would not be of any informational use to employees (unless otherwise required).

.09 Employers should use the IRS supplied label when filing Form W-3 with SSA. The label should be placed inside the brackets printed in Boxes "e" and "f".

SECTION 3. OFFICE OF MANAGEMENT AND BUDGET (OMB) REQUIREMENTS FOR SUBSTITUTE FORMS

.01 The Paperwork Reduction Act requires: (1) OMB approval of IRS tax forms, (2) that each form (all copies) show the OMB approval number and, when appropriate, the form's expiration date, and (3) that the form (or its instructions) state why IRS is collecting the information, how we will use it and whether it must be given to us. The official IRS form (or instructions) will contain this information.

.02 As it applies to substitute IRS forms, this means:

1. All substitute forms (all copies) MUST show the OMB number as it appears on the official IRS printed form (see Exhibits A and B).

2. The OMB number must be in one of the following formats:

OMB No. 1545-0008 (preferred),

or

OMB # 1545-0008

3. You must inform the users of your substitute forms of the reasons for IRS collection, use, and requirements, as stated in the instructions for the official IRS form.

SECTION 4. FORMS AND PUBLICATIONS

.01 Electronic access to IRS tax forms, instructions, publications, and other tax data is available through the following:

Modem: IRIS at FedWorld (703) 321-8020

Technical questions regarding FedWorld can be directed to the FedWorld help desk 24 hours a day at (703) 487-4608.

Internet: Telnet -- iris.irs.ustreas.gov

FTP -- ttp.irs.ustreas.gov

WWW -- http://www.irs.ustreas.gov

Fax Forms: (703) 487-4160

.02 Over 100 of the most requested forms and instructions may be obtained via your fax machine. Just call (703) 487-4160 from the telephone connected to your fax machine.

.03 A CD-ROM containing over 2,000 tax forms, instructions, and publications may be purchased from the Government Printing Office (GPO), Superintendent of Documents (Supt. Docs.). Current tax year materials, and tax forms from 1991 and publications from 1994, are included on the disc. To order the CD-ROM, contact Supt. Docs. at (202) 512-1800 (select Option #1), or by computer through GPO's Internet Web Site (http://www.access.gpo.gov/su docs).

.04 List of Social Security Administration's Magnetic Media Coordinators is included in the Appendix.

SECTION 5. EFFECT ON OTHER REVENUE PROCEDURES

.01 Rev. Proc. 97-24 and Rev. Proc. 97-24A, I.R.B. 1997-16, dated April 21, 1997, and I.R.B. 1997-20, dated May 19, 1997, (Reprinted as Publication 1141, Revised 4-97), is superseded.

                         EXHIBIT A: FORM W-2

Refer to Internal Revenue Service (IRS) Publication 393, Federal Employment Tax Forms, for instructions on filing paper W-2s/W-3s. Employers, payroll services, or an "agent" filing W-2s for employers may telephone the IRS Martinsburg Computing Center at (304) 263-8700 with employment tax questions.

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