SERVICE PROVIDES GUIDANCE FOR MAGNETIC TAPE FILING OF FORM 8027.

Rev. Proc. 89-55

                              CONTENTS

SECTION 1. PURPOSE

01 The purpose of this revenue procedure is to provide the requirements and conditions for submitting Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, on magnetic media instead of filing paper returns. Form 8027 information is filed on paper or magnetic tape and sent annually to the Internal Revenue Service (IRS). The due date of the submission of Form 8027 is the last day of February.

02 Section 301.6011-2 of the Regulations on Procedure and Administration requires that any person, including corporations, partnerships, individuals, estates, and trusts, required to file 250 or more Forms 8027 must file such returns on magnetic media. Please note that this requirement applies separately to both original and corrected returns. If you are required to file Forms 8027 on magnetic media and fail to do so, and you have not received a waiver from these filing requirements, you may be subject to a penalty of $50 per document for each document not submitted on magnetic tape, with a maximum penalty of $100,000.

03 This procedure supersedes the following revenue procedure: Rev. Proc. 86-45, Publication 1239 (12-86), Requirements and Conditions for Submitting Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, on Magnetic Tape.

SEC. 2. NATURE OF CHANGES-CURRENT YEAR

01 Numerous editorial changes have been made to the publication. Please read the publication carefully and in its entirety before attempting to prepare your magnetic media for submission. Please note, as of October 1, 1988, the name of the National Computer Center changed to the Martinsburg Computing Center.

02 Under Section 1571 of the Tax Reform Act of 1986 for payroll periods beginning after December 31, 1986, the method of allocation of tips based on the number of hours worked as described in Section 31-6053-3(f)(1)(iv) may be utilized only by an employer that employs less than the equivalent of 25 full-time employees at the establishment during the payroll period. Section 31.6053-3(j)(19) provides that an employer is considered to employ less than the equivalent of 25 full-time employees at an establishment during a payroll period if the average number of employee hours worked per business day during the payroll period is less than 200 hours. If this ruling applies to you, you are prohibited from using Allocation Method "1" for those establishments in Position 360 of the 8027 magnetic tape record.

SEC. 3. APPLICATION FOR MAGNETIC MEDIA REPORTING

01 For the purposes of this revenue procedure, the EMPLOYER is the organization supplying the information and the TRANSMITTER is the organization preparing the magnetic media file. The employer and the transmitter may be the same organization. Employers or their transmitters are required to complete Form 4419, Application for Filing Information Returns on Magnetic Media. Requests for forms or additional information on magnetic media reporting should be addressed to the attention of the Computer Assistant at the Martinsburg Computing Center (MCC). (See Part A, Sec. 11 of this revenue procedure for the address.)

02 Applications should be filed with the Martinsburg Computing Center 90 days before the due date of the return. IRS will act on an application and notify the applicant, in writing, of authorization to file. A five-character Transmitter Control Code (TCC) will be assigned and included in an acknowledgment letter within 30 days of receipt of the application. Magnetic tape returns may not be filed with IRS until the application has been approved. Include your TCC in any correspondence with the Computer Assistant.

03 A copy of Form 4419 is included in this publication. Form 4419 has been revised for 1989. When completing Form 4419, follow the instructions on the back of the form carefully. Requests for additional information or forms related to magnetic media processing should be address to the IRS, Martinsburg Computing Center. The address is listed in Part A, Sec. 11.

04 If you plan to file for multiple employers, IRS encourages transmitters to submit one application and to use on TCC for all employers. Include a list of all employers and their Taxpayer Identification numbers (TINs) (Social Security number or Employer Identification number) with the Form 4419. If you file for additional employers in later years, you may simply notify IRS in writing providing the additional names and TINs. Do not submit a new application for these additional employers.

05 IRS will assist new filers with their initial magnetic tape submission by encouraging the submission of test files for review in advance of the filing season. Approved employers or transmitters who wish to submit test files should contact the Computer Assistant at the Martinsburg Computing Center. The address is listed in Part A, Sec. 11 of this revenue procedure. IRS prefers that all "TEST" files be submitted between August 15 and December 15 of the year before the returns are due. If you unable to submit your "TEST" files by December 15, you may send a sample hard copy printout or tape dump to the Martinsburg Computing Center between December 16 and January 15. Clearly mark the hardcopy printout or tape dump as "TEST DATA" and include identifying information such as name, address and telephone number of someone familiar with the "TEST" print or tape dump who may be contacted to discuss its acceptability.

06 Only employers or transmitters using equipment compatible with IRS equipment will have their application approved. Compatible tape characteristics are shown in Part B, Sec. 1.

07 If your magnetic tape files have been prepared by you in the past by a service agency, and you now have computer equipment compatible with that of IRS and wish to prepare your own files, you must request your own five-character TCC by filing an application, Form 4419, as described in Sec. 3.02.

08 After you have received approval to file on magnetic media, you do not need to re-apply each year; however, notify IRS in writing if:

          (a) You change your name or the name of your organization,

SEC. 4. FILING OF MAGNETIC MEDIA REPORTS

01 If you do not file your returns on time, you may be subject to a $50 per document failure to file penalty. If you file without following instructions in this revenue procedure, you may also be subject to a $50 per document failure to file penalty.

02 Packaging, shipping, and mailing instructions will be provided by IRS within 45 days of granting of approval to file. A magnetic tape reporting package, which includes all necessary transmittals, labels and shipping instructions, will be mailed out between October and December of each year to all approved filers.

03 Forms 8027-T, Transmittal of Employer's Annual Information Return of Tip Income and Allocated Tips, must accompany paper submissions and Form 4804, Transmittal of Information Returns Reported on Magnetic Media, must accompany magnetic tape submissions. Indicate on Form 4804, in the block captioned "Number of Payee Records," the total number of establishments being reported in this shipment. This figure should match the total number of tape records in your file. If you report on paper Form 8027, send the forms to:

          Internal Revenue Service

04 Form 4804, Transmittal of Information Returns Reported on Magnetic Media, must accompany magnetic media submissions. If you file for multiple employers and have the authority to sign the affidavit on Form 4804, you should also submit Form 4802, Transmittal for Multiple Magnetic Media Reporting. Form 4804 has been revised for tax year 1989. The revised form should be used for your submissions. Be sure to include Form 4804, 4802 or computer-generated substitutes with your magnetic tape shipment. DO NOT MAIL YOUR MAGNETIC TAPE AND THE TRANSMITTAL DOCUMENTS SEPARATELY. IRS encourages the use of a computer-generated Form 4804 that includes all necessary information requested on the current form.

05 The affidavit which appears on Form 4804 should be signed by the employer. A transmitter, service bureau, paying agent, or disbursing agent may sign the affidavit on behalf of the employer (or other person required to file) if the following conditions are met.

     (a) The service bureau, paying agent, or disbursing agent has

07 DO NOT REPORT THE SAME INFORMATION ON PAPER FORMS THAT YOU REPORT ON MAGNETIC MEDIA. This does not mean that corrected documents are not to be filed. If a return has been prepared and submitted improperly, you must file a corrected return as soon as possible. Refer to Part A, Sec. 10 for requirements and instructions for filing corrected returns.

08 If an allocation of tips is based on a good faith agreement, a copy of this agreement must accompany the submission.

09 In accordance with Rev. Proc. 86-21, 1986-1 C.B. 561, if an allocation rate of less than 8% has been granted by the District Director, a copy of the determination letter must accompany the submission. Employers with more than one establishment can receive approval from one district in each Internal Revenue Service region where the establishments are located (see Sec. 31.6053-3(h)(4) of the Employment Tax Regulations).

10 When submitting magnetic media files include the following:

(a) A signed Form 4804 or computer-generated substitute.

(b) A Form 4802 if you transmit for multiple employers and have the authority to sign the affidavit on From 4804.

(c) The magnetic media with an external identifying label, Form 5064, as described in Part B, Sec. 1.04.

(d) On the outside of the shipping container, include a Form 4801 or a substitute for the form which reads "DELIVER UNOPENED TO TAPE LIBRARY-MAGNETIC MEDIA REPORTING-BOX ___ of ___." If there is only one container, mark the outside as Box 1 of 1. For multiple containers, include the sequence (e.g., Box 1 of 5, 2 of 5, etc.).

(e) If you were granted an extension, include a copy of the approval letter with the magnetic media shipment. See Part A, Sec. 06 for information on how to apply for an extension of time to file.

11 IRS will not pay or accept "Collect on Delivery" or "Charged to IRS" shipments of reportable tax information that an individual or organization is legally required to submit.

12 Files may be returned to you because of coding or format errors. These are to be corrected and returned to IRS within 30 days of the date of notice or the payer may be subject to a failure to file penalty. If you are unable to return the file within 30 days, request an extension of time. (See Part A, Sec. 06.) Please be sure that your format and coding comply with this revenue procedure.

13 Files will be returned to the filer by the Martinsburg Computing Center within six months of receipt. The current policy is to return magnetic tapes or requested material at U.S. Government expense.

SEC. 5. FILING DATES

01 Magnetic tape reporting to IRS for Form 8027 must be on a calendar year basis. Generally, the due date of either paper or tape Forms 8027 is the last day of February. If the due date falls on a Saturday, Sunday, or legal holiday, filing Form 8027 on the next day that is not a Saturday, Sunday, or legal holiday will be considered timely.

SEC. 6. EXTENSION OF TIME TO FILE

01 If an employer or transmitter of Form 8027 on magnetic tape is unable to submit its files by the filing date, submit a letter requesting an extension of time to file. In order to be considered, the request must be postmarked by the due date of the return. You will be subject to the late filing penalty of $50 per return if your files are received after the due date of return and no extension has been granted.

02 Request an extension of time in increments of 30 days, not to exceed a maximum of 60 days, AS SOON AS YOU ARE AWARE an extension is necessary but not later than the due date of the return. The request must be sent to IRS/MCC. (See Part A, Sec. 11 for the address.) You must allow a minimum of 30 days for IRS/MCC to respond to an extension request. EXTENSION REQUESTS WILL NO LONGER BE GRANTED AUTOMATICALLY. APPROVAL OR DENIAL IS BASED ON ADMINISTRATIVE GUIDELINES.

03 A letter requesting an extension should contain the following information:

          (a) The employer's (or transmitter's, if filing for multiple

CAUTION: AN EXTENSION OF TIME TO FILE IS NOT AN EXTENSION TO ISSUE THE FORM W-2 COPY TO THE EMPLOYEE.

SEC. 7. REQUEST FOR WAIVER FROM FILING INFORMATION RETURNS ON MAGNETIC MEDIA

01 Any person required to file original or corrected returns on magnetic tape may request a waiver from these filing requirements if such filing would create an undue hardship by submitting Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, with IRS Martinsburg Computing Center.

02 The employer may sign the Form 8508. The transmitter may sign only if it has a Power-of-Attorney and a letter is attached to the Form 8508 stating this fact.

03 A separate Form 8508 must be submitted for each employer. Do not submit a list of employers. Specify the type of returns for which a waiver is being requested on the Form 8508.

04 The waiver, if approved, will provide exemption from magnetic media filing for one tax year only. Filers may not apply for a waiver for more than one tax year at a time; application must be made each year a waiver is necessary.

05 Copies of the Form 8508 are included in this publication and also may be obtained from the IRS Martinsburg Computing Center (see Part A, Sec. 11, for the address) or from other IRS offices.

06 All requests for magnetic media related undue hardship exemptions must be submitted to the IRS Martinsburg Computing Center at least 90 days before the due date of the return. IN THE PAST, WE HAVE ACCEPTED WAIVER REQUESTS UP TO THE DUE DATE OF THE RETURN. HOWEVER, THIS IS NO LONGER TRUE. IF A REQUEST IS NOT RECEIVED 90 DAYS BEFORE THE DUE DATE OF THE RETURN, IT WILL NOT BE HONORED.

07 Waivers are granted on a case by case basis and are approved at the discretion of the IRS/MCC.

08 If you are required to file on magnetic media but fail to do so, and you do not have an approved waiver on record, you may be subject to a failure to file penalty.

09 If your waiver request is approved, keep it for your records. DO NOT send a copy of the approved waiver to Andover Service Center with your paper returns.

10 An approved waiver from filing information returns on magnetic media does not provide exemption from all filing; you must still file your information returns on acceptable paper forms.

SEC. 8. PROCESSING OF MAGNETIC MEDIA RETURNS

01 All data received at the Martinsburg Computing Center (MCC) for processing will be given the same protection as individual returns (Form 1040), and will be returned to the originator after processing. Please open all returned files as soon as you receive them. In some cases, files are returned due to errors and they must be corrected and returned to MCC within 30 days from the date of notice or you may be subject to a failure to file penalty.

02 Because of the high volume of data received and shipping costs involved, special shipping containers will not be returned to you.

03 Please be sure that your format and coding comply with this revenue procedure, which is to be used for the preparation of your information returns.

04 To distinguish between a correction and a replacement:

          (a) A correction is media submitted by the employer/

01 If a portion of the returns is reported on magnetic media and the remainder is reported on paper forms (e.g., original records filed on magnetic media, but due to the low volume of corrections, you file such returns on paper Form 8027), those returns not submitted on magnetic media must be filed on Form 8027 and forwarded to the Andover Service Center. (See Part A, Sec. 4.03 for the address.)

SEC. 10. CORRECTED RETURNS, SUBSTITUTE FORMS AND COMPUTER- GENERATED FORMS

01 If returns must be corrected or amended, approved magnetic media filers must provide such corrections on tape if you have 250 or more. If your information is filed on magnetic tape, corrected or amended returns are identified by using the "Amended 8027 Indicator" in tape position 370 of the employer record. Form 4804 must accompany the shipment and the box for correction should be marked in Block 1 of the form. (See Part A. Sec. 8.04 for the definition of corrections.)

02 If corrections are not submitted on tape, employers must submit them on official Forms 8027. Substitute forms that have been previously approved by IRS, or computer-generated forms that are exact facsimiles of the official form (except for minor page size or print style deviations), may be submitted without re-obtaining IRS approval before using the form.

03 Employers/establishments may send amended or corrected Forms 8027 to IRS at the address shown in Part A, Sec. 4.03. Code the corrected paper returns with the capital alpha "G" at the top of the Form 8027 above the title of the form.

SEC. 11. HOW TO CONTACT THE IRS MARTINSBURG COMPUTING CENTER

01 Magnetic media covered under this revenue procedure and all requests for IRS magnetic media related publications, information, undue hardship waivers, extensions of time to file or forms must be directed to the following addresses:

If by Postal Service: IRS-Martinsburg Computing Center, Post Office Box 1359, Martinsburg, WV 25401-1359.

If by Land Carrier: IRS-Martinsburg Computing Center, Magnetic Media Reporting Section, Route 9 & Needy Road, Martinsburg, WV 25401.

02 Hours of operation are 8:30 A.M. until 6 P.M. Eastern Time. The telephone number is (304) 263-8700.

Requests for paper returns, publications, or forms not related to magnetic media processing should be requested by calling the toll- free number in your area.

SEC. 12 DEFINITIONS

 ELEMENT

01 Rev. Proc. 86-45 and Publication 1239 (12-86) are superseded.

PART B. MAGNETIC TAPE SPECIFICATIONS

SECTION 1. GENERAL

01 The magnetic tape specifications contained in this part of the procedure define the required format and contents of the records to be included in the file.

02 IRS will be able to process any compatible tape files. Compatible tape files must meet any one set of the following:

          (a) 7-track BCD (Binary Coded Decimal) with:

          (a) Type of Tape -- 1/2 inch mylar base, oxide coated;

(a) The transmitter's name

(b) The five-character TCC

(c) Tape density

(d) Indicate whether tape is labeled or unlabeled

(e) Track (e.g., 7 or 9)

(f) Recording code (e.g., EBCDIC, ASCII, or BCD)

(g) The tax year of the data (e.g., 1989)

(h) Document type (e.g., 8027)

(i) Number of payees (indicate total number of establishments being reported)

(j) A reel number assigned by the transmitter (if applicable)

(k) The sequence of each reel (e.g., 001 of 008, 002 of 008, etc.)

05 This information will assist IRS in processing or locating a specific file. IRS advises that special shipping containers not be used for transmitting data since they will not be returned to you.

SEC. 2. RECORD LENGTH

01 The tape record defined in this procedure may be blocked or unblocked, subject to the following:

          (a) A FIXED RECORD OF 372 POSITIONS IS REQUIRED.

01 For the purposes of this procedure the following conventions must be

HEADER LABEL:

     (a) Employers may use standard headers provided they begin with

     (a) Standard trailer labels may be used provided that they begin

     (a) Special character used to separate blocked records on tape.

     (a) Used to signify the physical end of the recording on tape.