Rev. Proc. 71-20

Section 1. Purpose

.01 The purpose of this Revenue Procedure is to state requirements and conditions under which information reportable on the following returns:

(a) Form 1099, U.S. Information Return;

(b) Form 1087, Nominee's Information Return;

(c) Form W-2, Wage and Tax Statement;

(d) Agriculture Subsidy Payment Reports by the Department of Agriculture;

(e) Form W-2P, Statement for Recipients of Annuities, Profit-Sharing Distributions, etc.;

(f) Form 1099-MED -- U.S. Information Return for Recipients of Medical and Health Care Payments;

(g) Form 1099-OID -- U.S. Information Return for Original Issue Discount; and

(h) Form 1087-OID -- Nominee's Information Return for Original Issue Discount (hereafter referred to collectively as information returns), may be submitted to the Internal Revenue Service by payers, employers, or nominees (hereafter referred to collectively as payers), in the form of magnetic tape in lieu of original copies of paper documents.

.02 This procedure replaces Revenue Procedure 69-16, C.B. 1969-2, 288, dated August 25, 1969. The changes embodied herein are intended to clarify and simplify the requirements for magnetic tape reporting and to incorporate the additional information returns into the magnetic tape reporting program.

The tape specifications contained herein are unchanged from those in Revenue Procedure 69-16. Even parity remains the desired compatible tape characteristic. Odd parity is accepted as a convertible characteristic, i.e., the Service will have odd parity tapes translated. However, if the Payer/Transmitter can provide either even or odd parity tapes, the Service prefers that even parity tapes be submitted. Other than the new filing requirements and the Savings and Loan Code, any magnetic tapes which fully met the requirements of Revenue Procedure 69-16 will be accepted in calendar year 1972. (See Attachment 1, Sec. 1.03).

Sec. 2. Application for Tape Reporting

.01 Information returns may be filed in the form of magnetic tape in lieu of paper documents. Such returns may be filed by payers, or by agents acting for a single payer or a group of payers. Except as covered in Section 2.07, tape reporting is not restricted to payers with the ability to submit all of their information on magnetic tape; a combination of tape records and paper documents are acceptable so long as there is no duplication or omission of documents.

.02 Payers or agents who desire to file information returns in the form of magnetic tape must first file a letter of application. This letter should be addressed to the Director of Internal Revenue Service Center in the region in which the payer or agent normally files returns, marked "Attention, Chief of Program Analysis Staff." Addresses of the Internal Revenue Service Centers are shown in Section 8 of this Revenue Procedure.

The letter of request must contain the following:

(a) Name, address, and EI number of person, organization, or firm making the request.

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

(c) An estimate, by type of form, of the number of returns to be reported in tape format, and the number, by type of form, to be reported on paper forms.

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

(e) Internal Revenue office where paper forms were filed last year.

(f) List of payers to be included in the file if the requester is an agent.

(g) 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, payers using equipment compatible with the Service's can presume that tape reporting will be approved. Compatible tape characteristics are shown in Attachment 1, Section 1.01. If payers or agents have the capability to prepare several types of tapes, the Service prefers that compatible tapes be prepared.

.05 If payers or agents propose to submit convertible tapes, the Service will attempt to find conversion facilities. Generally, magnetic tape reporting will be disapproved only when the Service is unable to obtain facilities to convert a payer's file to a compatible form.

.06 In general, once authorization to file magnetic tape has been granted to a payer, 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 payer. However, new applications are required if users change from compatible tapes to equipment producing convertible tapes, or tapes not listed as either compatible or convertible, or if they discontinue tape reporting for one or more years, then decide to resume this method of reporting.

In accordance with section 1.6041-7 of the Income Tax Regulations, medical payments may be reported on separate magnetic tape submissions rather than aggregated into a single tape submission, so long as all of the reports from a carrier are in magnetic tape form. For these purposes, the headquarters office will be considered as an "agent," per Section 2.02 above, and the individual segments of the company filing reports will be considered to be payers. Thus, a single application form is to be submitted to one of the Service Centers, covering all of the individual tape files to be submitted.

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.

.02 Payers submitting a portion of their information returns on magnetic tape and the remainder on paper forms, should file magnetic tape records and paper documents at the same location, but in separate shipments.

.03 A single Form 1096 (for 1099, 1087, 1099-MED, 1099-OID, 1087-OID or W-2P (if income tax has not been withheld)) or Form W-3 for W-2P (if income tax has been withheld) and for all W-2's, will be required from each payer to cover the entire shipment of returns, including those on paper and on magnetic tape. For agents filing returns for several payers, the appropriate transmittal documents, Forms 1096 or W-3, must be filed for each payer whose payments are included in the transmittal. The required Form 1096 or W-3 should be filed separately from the shipment of magnetic tape. If only a portion of the information returns are submitted on magnetic tape, the paper documents should be submitted with the Form 1096 or W-3, along with a statement that remaining returns are to be submitted in the form of magnetic tape. Note on the address side of the magnetic tape shipments, "DELIVER UNOPENED TO THE TAPE LIBRARY."

.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 Service Center which has issued the authorizing letter, marked "ATTENTION: CHIEF, PROGRAM ANALYSIS STAFF."

If an extension is granted by the Service, a copy of the letter granting the extension should be attached to the Form 1096 or W-3.

.05 The magnetic tape specifications contained in Attachment 1 to this Revenue Procedure, must be adhered to unless deviations have been specifically granted by the Service.

.06 Service programs are flexible and may, therefore, be able to accommodate some minor deviations. Hence, payers who can substantially conform to these specifications but require such minor deviations are encouraged to contact the Chief of the Program Analysis Staff at one of the Service Centers (see Sec. 8 below for addresses). However, under no circumstances may tapes deviating from the specifications in Attachment 1 be submitted without prior approval of the Service.

.07 All tape files submitted by 1099-MED filers per Section 2.07, should be assembled by the carrier and mailed in one shipment to the Service Center that received the application.

Sec. 4. Processing of Tape Returns

.01 The Service will copy the information from the tapes. Normally, the original tapes received by the Service will be returned to the payers or agents by August 15 of the year in which submitted.

.02 However, if the tapes submitted to the Service are unprocessable, and must be returned for correction prior to processing that they will be returned within 6 months of receipt of acceptable tapes.

Sec. 5. Corrected Returns

.01 The appropriate paper form will normally be used if it is necessary to correct Payee "B" records in the magnetic tape files. Each such form must be annotated in the manner specified for corrected returns in Circular E, Revenue Procedure 68-39, C.B. 1968-2, 932, or 68-42, C.B. 1968-2, 944, as appropriate. Corrected documents should contain all relevant information so that they completely supersede the returns recorded on tape.

.02 Returns correcting paper documents should be bundled separately from other paper documents. When correcting documents are shipped separately, corrected Form 1096 or W-3 must also be filed.

.03 If a large volume of corrected returns is necessary and the payer or agent possesses the capability to provide such corrections on tape, he should contact the Chief of the Program Analysis Staff at the Service Center to which the tape returns were or are to be submitted.

Sec. 6. Effect on Paper Documents

.01 Reports on magnetic tape can be substituted for only only the original copy (copy A) of information returns. When magnetic tape returns are filed in lieu of information returns other than Form W-2 or W-2P, payers will not be required to furnish payees or other persons with copies which conform to the format and paper specifications of Revenue Procedures 68-39 or 68-42 as appropriate. However, payers must supply their payees with the information required to be shown on the paper forms, in a manner conducive to proper reporting on their tax returns. Payers filing magnetic tape returns in lieu of Form W-2 or W-2P, must continue to furnish their payees with the prescribed forms or with paper substitutes which meet the requirements and specifications in Revenue Procedure 68-38, C.B. 1968-2, 927.

.02 If only a portion of the information returns is reported on magnetic tape and the remainder is reported on paper forms, those returns not submitted on magnetic tape must be filed on the appropriate prescribed forms, or on paper substitutes meeting the format requirements and paper specifications in Revenue Procedure 68-38, Revenue Procedure 68-39 or Revenue Procedure 68-42.

Sec. 7. Data Entries

.01 The Service expects that payers will make every effort to keep to a minimum information returns submitted without taxpayer identifying numbers, through continued compliance with the requirements set forth in section 1.6109-1 of the Income Tax Regulations, and section 31.6109-1 of the Employment Tax Regulations. However, when a taxpayer identification number of a payee has not been furnished to the payer, the attached specifications permit its omission.

.02 The Service must be able to identify the surname associated with the taxpayer identifying number furnished on an information return. When returns are received in the form of paper documents this is accomplished through a manual editing process. However, manual editing is precluded when returns are received on magnetic tape. Hence, the attached specifications include a data field in the payee records called "Name Control," in which the first four alphabetic characters of the payee surname are to be entered by payers.

.03 If payers are unable to provide the first four characters of the payee surname, the specifications permit the submission of information returns on magnetic tape with the Name Control Field left blank. However, compliance with the following will facilitate the Service computer programs required to generate the Name Control.

(a) The surname should be recorded on the first name line.

(b) A blank space should precede the surname unless the surname begins in the first position of the field.

(c) In cases of multiple payees, the required linkage should be provided by recording an asterisk immediately preceding the surname of the person whose identifying number has been provided, or placing the surname of the linked payee before all other names.

.04 Sometimes the payee identification recorded on the payer's records is lengthy, and exceeds the 80 characters allotted on the magnetic tape records. This is most common in the case of trusts or other types of fiduciary accounts. The first 80 characters of the payee identification normally provide sufficient descriptive data for Service purposes. Although it is preferred that payers would truncate or abbreviate lengthy payee descriptions, provision is made in the specifications for additional payee descriptions.

.05 Provision is also made in these specifications for data entries not required for Federal tax purposes but which may be required by State or Local governments, in order to minimize the programming burden should payers desire to report on tape to State or Local as well as to the Federal Government.

Sec. 8. Additional Information

Requests for additional copies of this Revenue Procedure and the attached specifications, or requests for additional information on tape reporting should be addressed to the Chief, Program Analysis Staff, Internal Revenue Service Center, at one of the following addresses:

     (a) Southeast Region

This Revenue Procedure supplements Revenue Procedures Revenue Procedure 68-38, C.B. 1968-2, 927; Revenue Procedure 68-39, C.B. 1968-2, 932; and Revenue Procedure 68-42, C.B. 1968-2, 944; and supersedes Revenue Procedure 69-16, C.B. 1969-2, 288.

ATTACHMENT 1 -- 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.

9 channel EBCDIC (Extended Binary Coded Decimal Interchange Code);

9 channel ASCII (American Standard Coded Information Interchange) see Bureau of Standards FIPS (Federal Information Processing Standards Publications), Odd Parity; 200, 1600 densities.

The Service will attempt to find conversion facilities for any other characteristics listed on the Magnetic Tape Application Form that differ from the above specifications.

.03 Any magnetic tapes which fully meet the requirements of Revenue Procedure 69-16 will also meet the requirements specified herein.

An acceptible tape file will contain, for each payer, the following:

(1) A Payer/Transmitter "A" Record,

(2) A series of Payee "B" Records, and

(3) An End of Payer "C" Record.

In addition, multiple reel files will have under Option 1 the following:

(4) End of Reel "D" Records.

Each file or series of files (a Transmitter may file for multiple payers) will contain the following:

(5) An End of Transmission "F" Record.

All records including headers and trailers, if used, must be written at the same density.

SEC. 2. CONVENTIONS AND DEFINITIONS

.01 Certain conventions may be required by the programming system or equipment used by the payer, with respect to header and trailer labels, record marks, and tape marks. Their use is optional, but if present they must adhere to the following:

 Header Label         1. Can only be the first record on a reel.

      Element                            Description

SEC. 3. RECORD LENGTH

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

1. A block may not exceed 4,000 tape positions.

2. If the use of blocked records would result in a short block at the end of the file representing all payments made by the payer, all remaining positions of the block must be filled with 9's. However, filling with 9's is allowable only in the last block of returns for a payer.

3. Two forms of blocking are acceptable:

(a) Only payee records are blocked; all other records are unblocked.

(b) All records, except Header and Trailer Labels, if used, are blocked. If so, and if payments from more than one payer are reported on the same tape, a Payer/Transmitter Record cannot be in the middle of a block, but must be the first record in a block.

.02 Provision is made for special data entries in the Payee "B" Record. These entries are optional; a payer or agent may choose not to utilize this field. If the field is utilized, it must be present on all Payee "B" Records of a Payer. The field is intended to serve one or both of these purposes:

1. Carry information required by state or local governments in connection with income reporting on magnetic tape to those jurisdictions when authorized.

2. Carry additional payee description if the eighty characters provided in the Payee "B" Record are insufficient. However, it would be preferable to the Service if such lengthy Payee Records were truncated or otherwise shortened. (Contact the Service Center for detailed instructions if additional Payee description will be required.)

3. Carry up to 50 positions of data required by Form W-2P filers depending on the number of payment amount fields that are required. See Sec. 5. Payee "B" Record, Special Data Entries.

SEC. 4 PAYER/TRANSMITTER "A" RECORD.

Identifies the payer and transmitter of the tape files and provides parameters for the succeeding Payee "B" Records. The Service relies in its computer programs on the absolute relationship between the parameters in the Payer/Transmitter "A" Record and the data fields in the Payee "B" Records to which they apply. The number of Payer/Transmitter "A" Records appearing on one tape reel will depend on the number of payers being reported. A transmitter may include Payee "B" Records for more than one payer on a tape reel; however, each separate Payer's Payee "B" Records must be preceded by a Payer/Transmitter "A" Record. Separate tape files on separate reels must be submitted if the payer is reporting payment data for more than one type of information return (Forms 1099 and W-2, for instance). There are two optional ways the Payer/Transmitter "A" Record may be used.

Option 1: When multiple reels are required for a single file, the correct Payer/Transmitter "A" Record must be repeated as the first record (second record if Header Labels are used) on every succeeding reel in the file to which it applies, and the reel sequence number must be incremented by 1 on each tape reel after the first reel.

Option 2: A Header Label must be present as the first record of every reel. The Payer/Transmitter "A" Record must appear as the second record of the first reel only and will not be repeated as the second record on subsequent reels. Enter an "X" in position 5 of the Payer/Transmitter "A" Record to indicate that the reel sequence number is in the Header Label. Enter the high order position of the 3 position reel sequence number on the Header Label in positions 3 and 4 of the Payer/Transmitter "A" Record.

Example 1: If the reel sequence number is in positions 20 through 22 on the Header Label, enter 20 in positions 3 and 4 of the Payer/Transmitter "A" Record.

Example 2: If the reel sequence number is in positions 8 through 10 on the Header Label, enter 08 in positions 3 and 4.

By using this method, a Payer/Transmitter "A" Record is not required as the first record (second record if Header Labels are used) of subsequent reels to the first reel. This method is especially adaptable to users of COBOL.

  Tape position       Element name          Entry of definition

Contains payment record from individual information returns. Records may be blocked or unblocked. A block may not exceed 4,000 tape positions. All records must be fixed length.

 1                  Record Type       Enter "B". Must be 1st character

SEC. 6. END OF PAYER "C" RECORD

.01 Write this record after the last Payee "B" Record for a Payer has been written. A tape reel may contain more than one End of Payer "C" Record if the last Payee "B" Record for more than one Payer is written on the reel. Each End of Payer "C" Record must contain a count of Payees and totals of each payment amount reported for all Payee "B" Records written on the same reel, which have not been summarized in preceding End of Payer "C" Records on the reel.

.02 When Payer "B" Records for one Payer are written on multiple reels under Option 2 (the reel sequence number is in the Header Label), the End of Payer "C" Record must contain the count of employees and totals of each payment amount for all Payee "B" Records following the prior Payer "A" Record for this reel and the prior reel(s).

.03 The End of Payer "C" Record must be followed by a new Payer/Transmitter "A" Record or an End of Transmission "F" Record for both Options 1 and 2. In addition, under Option 1, the following record may be an End of Reel "D" Record. A new block, with the new Payer/Transmitter "A" Record as the first record, must be started. The End of Payer "C" Record cannot be followed by a Tape Mark.

  Tape position       Element name          Entry or definition

SEC. 7. END OF REEL "D" RECORD

Write this record when the end of the normal writing area of each reel has been reached, but all records in the file have not been written. This record indicates that there are additional reels in the file. Each End of Reel "D" Record must contain a count of payees and totals of each payment amount reported for all Payee "B" Records not summarized in End of Payer "C" Records which may precede it on the reel. The counts and totals in the End of Reel "D" Record should summarize only the Payee "B" Records which precede it on the reel. This record cannot be followed by an "A" Payer/Transmitter, "C" End of Payer, or "F" End of Transmission Record. A Tape Mark or Tape Mark and Trailer Label (see Attachment 1, Sec. 2.01) may follow. The End of Reel "D" Record is present for Option 1 only.

  Tape position       Element name          Entry or definition

SEC. 8. END OF TRANSMISSION ("F" RECORD)

Write this record after the last End of Payer Record in the file. This record can be followed only by a Tape Mark or Tape Mark and Trailer Label (see Attachment 1, Sec. 2.01).

  Tape position     Element name            Entry or definition

SEC. 9. TAPE LAYOUTS -- OPTION 1

The following charts show by type of file, the record types to be used in the first two and the last three records written on a tape reel:

                                                 2nd     Next

² Must contain "Number of Payees" and "Control Totals" summarizing all Payee Records written on this reel.

³ "Number of Payees" and all "Control Totals" fields must be zero filled.

SEC. 10. TAPE LAYOUTS -- OPTION 2. (REEL SEQUENCE NUMBER IS IN THE HEADER LABEL)

The following charts show, by type of file, the record types to be used in the first two and the last three records written on a tape reel:

                                                 2nd     Next

² Must contain "Number of Payees" and "Control Totals" summarizing all Payee "B" Records written for this Payer on this reel and on prior reel(s).

³ Must contain "Number of Payees" and "Control Totals" summarizing all Payee "B" Records written for this Payer on this reel and for this payer on the prior reel.