SERVICE ANNOUNCES MAGNETIC MEDIA FILING REQUIREMENTS FOR FORMS 1098, 1099, 5498, AND W-2G.

Rev. Proc. 88-49

NOTE: PLEASE READ THIS PUBLICATION CAREFULLY--UPDATED COPIES ARE PUBLISHED EACH YEAR. THIS REVENUE PROCEDURE MAY BE USED ONLY TO PREPARE 8-INCH MAGNETIC DISKETTE SUBMISSIONS FOR TAX YEAR 1988 RETURNS. PERSONS REQUIRED TO FILE MAY BE SUBJECT TO PENALTIES FOR FAILURE TO FOLLOW THE INSTRUCTIONS IN THIS REVENUE PROCEDURE AND FOR FAILURE TO INCLUDE CORRECT INFORMATION ON A RETURN. A $5 PER RETURN PENALTY MAY BE IMPOSED FOR THE OMISSION OF INFORMATION AS WELL AS FOR THE INCLUSION OF INCORRECT INFORMATION. THE MAXIMUM PENALTY IS $20,000. (THERE IS NO MAXIMUM FOR CERTAIN INTEREST OR DIVIDEND RETURNS OR STATEMENTS.) YOU MAY ALSO BE SUBJECT TO PENALTIES OF $50 PER RETURN FOR EACH DOCUMENT SUBMITTED WITHOUT A TAXPAYER IDENTIFICATION NUMBER (TIN) OR WITH AN INCORRECT TIN. AN ADDITIONAL $50 PENALTY PER RETURN MAY BE IMPOSED FOR EACH RETURN NOT SUBMITTED ON MAGNETIC MEDIA IF YOU ARE REQUIRED TO FILE THIS WAY OR IF YOU FILE LATE. THE MAXIMUM PENALTY IS $100,000 PER CALENDAR YEAR. (THERE IS NO MAXIMUM FOR FORMS 1099-INT, 1099-DIV, 1099-OID, 1099-PATR, 5498 OR IF THE FAILURE TO FILE IS DUE TO INTENTIONAL DISREGARD OF THE FILING AND CORRECT INFORMATION REQUIREMENTS.) IF A $50 PENALTY IS IMPOSED, THE $5 PENALTY WILL NOT BE APPLIED FOR THE SAME RETURN. IRS STRONGLY ENCOURAGES FILERS TO REVIEW THEIR DATA FOR ACCURACY BEFORE SUBMISSION TO PREVENT ISSUANCE OF ERRONEOUS NOTICES TO PERSONS FOR WHOM REPORTS ARE FILED.

TABLE OF CONTENTS

PART A. GENERAL

SECTION 1. PURPOSE

SECTION 2. NATURE OF CHANGES - CURRENT YEAR (TAX YEAR 1988)

SECTION 3. APPLICATION FOR MAGNETIC MEDIA REPORTING AND REQUESTS FOR UNDUE HARDSHIP WAIVERS

SECTION 4. FILING OF MAGNETIC MEDIA REPORTS AND RETENTION REQUIREMENTS

SECTION 5. FILING DATES

SECTION 6. EXTENSIONS OF TIME TO FILE

SECTION 7. PROCESSING OF MAGNETIC MEDIA RETURNS

SECTION 8. HOW TO FILE CORRECTED RETURNS

SECTION 9. TAXPAYER IDENTIFICATION NUMBERS

SECTION 10. EFFECT ON PAPER RETURNS

SECTION 11. HOW TO CONTACT THE IRS NATIONAL COMPUTER CENTER

SECTION 12. COMBINED FEDERAL/STATE FILING

SECTION 13. DEFINITIONS OF TERMS

SECTION 14. STATE ABBREVIATIONS

PART B. SINGLE DENSITY DISKETTE SPECIFICATIONS

SECTION 1. GENERAL

SECTION 2. DISKETTE HEADER LABEL

SECTION 3. PAYER/TRANSMITTER "A" RECORD

SECTION 4. PAYER/TRANSMITTER "A" RECORD - RECORD LAYOUT

SECTION 5. PAYEE "B" RECORD - GENERAL INFORMATION FOR ALL FORMS

SECTION 6. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 THROUGH 4 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 1099-S, 5498 AND SECTOR 1 THROUGH 3 OF FORMS 1099-A, 1099-B, 1099-OID AND W-2G

SECTION 7. PAYEE "B" RECORD - RECORD LAYOUTS FOR SECTOR 1 THROUGH 4 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 5498 AND SECTOR 1 THROUGH 3 OF FORMS 1099-A, 1099-B, 1099-OID AND W-2G

SECTION 8. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-A

SECTION 9. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-B

SECTION 10. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-OID

SECTION 11. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-S

SECTION 12. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM W-2G

SECTION 13. END OF PAYER "C" RECORD

SECTION 14. STATE TOTALS "K" RECORD

SECTION 15. END OF TRANSMISSION "F" RECORD

PART C. DOUBLE DENSITY DISKETTE SPECIFICATIONS

SECTION 1. GENERAL

SECTION 2. PAYER/TRANSMITTER "A" RECORD

SECTION 3. PAYER/TRANSMITTER "A" RECORD - RECORD LAYOUT

SECTION 4. PAYEE "B" RECORD - GENERAL INFORMATION FOR ALL FORMS

SECTION 5. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 AND 2 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 1099-S 5498 AND SECTOR 1 OF FORMS 1099-A, 1099-B, 1099-OID AND W-2G

SECTION 6. PAYEE "B" RECORD - RECORD LAYOUTS FOR SECTOR 1 AND 2 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 1099-S, 5498 AND SECTOR 1 OF FORMS 1099-A, 1099-B, 1099-OID AND W-2G

SECTION 7. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-A

SECTION 8. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-B

SECTION 9. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-OID

SECTION 10. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-S

SECTION 11. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM W-2G

SECTION 12. END OF PAYER "C" RECORD

SECTION 13. STATE TOTALS "K" RECORD

SECTION 14. END OF TRANSMISSION "F" RECORD

PART A.-GENERAL

SECTION 1. PURPOSE

.01 The purpose of this revenue procedure is to provide the requirements and conditions for filing Forms 1098, 1099, 5498, and W-2G on 8-inch magnetic diskette. Publication 1220 provides instructions for filing on magnetic tape, 5 1/4-inch and 3 1/2-inch magnetic diskettes. THIS REVENUE PROCEDURE IS TO BE USED FOR THE PREPARATION OF TAX YEAR 1988 INFORMATION RETURNS ONLY. PLEASE READ THIS PUBLICATION CAREFULLY, BECAUSE IT IS UPDATED YEARLY TO REFLECT NECESSARY CHANGES. Specifications for filing the following forms are contained in this procedure:

(a) Form 1098, Mortgage Interest Statement.

(b) Form 1099-A, Information Return for Acquisition or Abandonment of Secured Property.

(c) Form 1099-B, Statement for Recipients of Proceeds From Broker and Barter Exchange Transactions.

(d) Form 1099-DIV, Statement for Recipients of Dividends and Distributions.

(e) Form 1099-G, Statement for Recipients of Certain Government Payments.

(f) Form 1099-INT, Statement for Recipients of Interest Income.

(g) Form 1099-MISC, Statement for Recipients of Miscellaneous Income.

(h) Form 1099-OID, Statement for Recipients of Original Issue Discount.

(i) Form 1099-PATR, Statement for Recipients (Patrons) of Taxable Distributions Received From Cooperatives.

(j) Form 1099-R, Statement for Recipients of Total Distributions From Profit-Sharing, Retirement Plans, Individual Retirement Arrangements, Insurance Contracts, Etc.

(k) Form 1099-S, Statement for Recipients of Proceeds from Real Estate Transactions.

(l) Form 5498, Individual Retirement Arrangement Information.

(m) Form W-2G, Statement for Recipients of Certain Gambling Winnings.

Specifications for filing Forms 1042S, 6248, 8027, W-2, and W-2P are contained in separate publications.

.02 All filing requirements that follow apply individually to each reporting entity as defined by its separate TIN (Social Security Number (SSN) or Employer Identification Number (EIN)). For example, if you are a corporation with several branches or locations and each uses the same EIN, you must aggregate the total volume of returns to be filed for that EIN and apply the filing requirements for each type of return accordingly.

Section 1.6045-1(l) of the Income Tax Regulations requires brokers and barter exchanges to use magnetic media to report ALL Form 1099-B data to IRS. DO NOT report Real Estate transactions on Form 1099-B, Form 1099-S must be used. Magnetic media filing is required if 250 or more Forms 1099-S are to be filed. THESE REQUIREMENTS APPLY SEPARATELY TO BOTH ORIGINAL AND CORRECTED RETURNS.

Section 6011(e) of the Internal Revenue Code and the regulations thereunder require any person, including corporations, partnerships, individuals, estates and trusts, required to file, or who were required to file for the prior year, more than 50 information returns in the aggregate for payments of interest (Forms 1099-INT and 1099-OID), dividends (Form 1099-DIV), or patronage dividends (Form 1099-PATR), for any calendar year, to file such returns on magnetic media. For example, if you file 30 Forms 1099-DIV and 25 Forms 1099-INT, filing on magnetic media is required. THIS REQUIREMENT APPLIES SEPARATELY TO BOTH ORIGINAL AND CORRECTED RETURNS.

In addition, for returns filed in 1989 (for tax year 1988), magnetic media reporting is required if you file, or were required to file for the prior year, 250 or more of each of the following forms: Forms W-2, W-2P, W-2G, 1098, 1099-A, 1099-G, 1099-MISC, 1099-R, 1099-S, 5498, 1042S, 6248, and 8027. These are stand alone forms and are not to be aggregated. THIS REQUIREMENT APPLIES SEPARATELY TO BOTH ORIGINAL AND CORRECTED RETURNS. For example, if you file 300 1099-MISC returns and later file 50 corrections for Forms 1099-MISC, only the original 300 returns are required to be filed on magnetic media. The 50 corrections could be filed on paper since there are less than 250 to be filed. To determine the number of forms you are required to file on magnetic media, count each type of form separately. For example, if you must file 450 Forms 1098 and 100 Forms 1099-A, the 450 Forms 1098 must be filed on magnetic media; however, you are not required to file the 100 Forms 1099-A on magnetic media. All Forms 1099-B are required to be filed on magnetic media. For 1099-S real estate transactions, magnetic media filing is required if 250 or more returns are to be filed. Forms W-2 and W-2P are filed with the Social Security Administration (SSA), NOT with the Internal Revenue Service (IRS). These requirements shall not apply if you establish undue hardship. Refer to Part A, Sec. 3.

.03 CONTACT THE IRS NATIONAL COMPUTER CENTER (SEE PART A, SECTION 11 FOR THE ADDRESS) WITH QUESTIONS CONCERNING FORMS W-2 OR W-2P ONLY IF THE QUESTIONS PERTAIN TO AN EXTENSION OF TIME TO FILE OR MAGNETIC MEDIA WAIVER REQUESTS. QUESTIONS PERTAINING TO MAGNETIC MEDIA FILING OF FORMS W-2 OR W-2P SHOULD BE DIRECTED TO SSA. TAX LAW QUESTIONS PERTAINING TO FORMS W-2 OR W-2P SHOULD BE DIRECTED TO IRS TAXPAYER SERVICE.

.04 Personnel at the IRS National Computer Center are equipped to answer questions concerning the magnetic media filing of information returns (Forms 1098, 1099, 5498, W-2G, 1042S, 6248 and 8027). Tax law-related questions should be directed to the IRS Taxpayer Service office within your geographical location.

.05 This procedure also provides the requirements and specifications for magnetic media filing under the Combined Federal/State Filing Program. Refer to Part A, Sec. 12.

.06 The following revenue procedures and publications provide more detailed filing procedures for certain information returns:

(a) 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G," provide further information on filing returns with IRS. These instructions are available at IRS offices and are included in the magnetic media reporting packages mailed to filers on this program each year.

(b) Rev. Proc. 84-33, 1984-1 C.B. 502, or other current revenue procedures, regarding the optional method for agents to report and deposit backup withholding.

(c) Publication 1179, Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096, 1098, 1099 Series, 5498, and W-2G.

.07 This publication supersedes Revenue Procedure 87-41, 1987-2 C.B. 515, Publication 1255 (Rev. 8-87) "Requirements and Conditions for filing Information Returns in the Forms 1098, 1099 Series, 5498, and W-2G on 8 inch magnetic diskette."

.08 Refer to Part A, Sec. 13 for definitions of terms used in this publication.

SEC. 2. NATURE OF CHANGES - CURRENT YEAR (TAX YEAR 1988)

.01 Numerous editorial changes have been made. The following changes must be incorporated in your programs for Tax Year 1988.

.02 THE FOLLOWING CHANGES HAVE BEEN MADE TO PART A:

(a) Information returns can no longer be filed on Burroughs mini-disk.

(b) Form 1099-S must be used to report 250 or more real estate transactions. In the past, real estate transactions were reported on Form 1099-B (all Forms 1099-B must be filed on magnetic media).

(c) Clarification on W-2 and W-2P processing was added. Forms W-2 and W-2P magnetic media related questions are handled by SSA. Tax law related questions on Form W-2 and W-2P are handled by IRS Taxpayer Service. Questions on undue hardship waivers and extension of time to file Forms W-2 and W-2P are handled by IRS National Computer Center (see Part A, Section 11 for address).

(d) Form 4419 has been revised for 1988. When completing Form 4419, follow the instructions on the back of the form carefully.

(e) Submit only one Form 4419 even though you may file two different types of magnetic media (see Part A, Sec. 3.05).

(f) A hardcopy print is not an acceptable test file for the Combined Federal/State Program. Test files for the Combined Federal/State Program must be submitted on magnetic media between October 1 and December 15.

(g) The specific types of returns for which a waiver is being requested must be specified on Form 8508.

(h) A separate Form 8508 must be submitted by each payer.

(i) Form 8508 must be filed by the payer only. See Part A, Section 3.08.

(j) If you are an approved filer on magnetic media and you change the name or address of your organization, EIN or person to contact specified on the original Form 4419, notify the IRS National Computer Center in writing.

(k) Magnetic media undue hardship waivers for Forms W-2 and W-2P must be filed at least 90 days prior to the due date of the return.

(l) Forms 4804 and 4802 have been revised for 1988. The revised forms must be used.

(m) Clarification was added to Part A, Section 9.02 concerning the validation of the SSN by using the Name Control.

(n) A payee statement may be perforated to a check for the account reported on the payee statement. See Part A, Section 10.02.

(o) The statement furnished to the payer for royalty payments need not be the official form. See Part A, Section 10.02.

(p) For Form 1098, the message appearing on the payee statement has changed. See Part A, Section 10.02(e).

(q) The message to appear on the payee statement for Form 1099-S was added to Part A, Section 10.02(f).

(r) The address of the IRS National Computer Center has changed. See Part A, Section 11 for new address.

(s) A computer generated Form 6847, Consent for IRS to Release Tax Information, may now be used. See Part A, Section 12.02.

(t) Forms 1099-S cannot be filed under the Combined Federal/State Filing Program.

(u) A definition of a foreign corporation has been added to Part A, Section 13.

(v) The Foreign Country Code Table has been eliminated for 1988. See Part A, Section 14.02.

(w) Time for return of corrected files to NCC has been increased from 30 to 45 days.

.03 THE FOLLOWING CHANGES HAVE BEEN MADE TO THE MAGNETIC MEDIA SPECIFICATIONS IN PART B:

(a) Part B, Section 1, 2 and 3 have undergone extensive changes, these sections should be reviewed carefully.

(b) Substantial changes have been made to Form 5064. See Part B, Section 1.04.

(c) If diskettes are used and the operating system is not MS/DOS, the operating system and hardware information must be provided on Form 5064.

.04 THE FOLLOWING CHANGES HAVE BEEN MADE TO THE PAYER/TRANSMITTER "A" RECORD:

(a) Foreign corporations which are not required to have an EIN may leave the Payer's Federal EIN field in position 8-16 blank. Foreign corporations must set the Foreign Corporation Indicator in position 50 of the "A" Record to 1.

(b) Form 1099-S has been added to the Type of Return field.

(c) The Amount Indicators for Form 1098 have changed. Amount Indicator "2" has been deleted.

(d) Amount Code "1" on Form 1099-B which represented real estate transactions has been deleted.

(e) Amount Code "9" (low income housing credit) has been added to Form 1099-PATR.

(f) Form 1099-R has undergone substantial changes. Amount Code "1" now represents "Gross Distribution." Amount Code "2" represents "Taxable Amount." Amount Code "3" represents "Amount in Box 2 eligible for taxable gain election." Amount Code "8" represents "Other." Amount Code "9" represents "State Income Tax Withheld." IRA and SEP payments are no longer reported in a separate field. They are reported in Amount Codes 1 and 2. Refer to 1988 "Instructions for Forms 1099, 1098, 1096, 5498 and W-2G" for detailed information.

(g) If a total distribution was made from an IRA during the year and no contributions were made for that year, you need not file Form 5498 to reflect that the fair market value on December 31 was zero.

(h) The title of Amount Code "3" on Form 5498 for 1988 is "Life insurance cost included in Code 1."

(i) For Form 1099-S, Gross Proceeds are reported in Amount Code "2."

(j) Numerous changes have been made to the record formats. Please review these formats as you develop your records.

.05 THE FOLLOWING CHANGES HAVE BEEN MADE TO THE PAYEE "B" RECORDS:

(a) An indicator was added to the Document Specific Code for Form 1098 to report mortgages incurred after 1987 for a purpose other than the purchase of a personal residence.

(b) The Document Specific Code was changed to reflect reporting the category of Total Distribution of Form 1099-R.

(c) For Form 1099-R, Percentage of Total Distribution is indicated in position 45-47 of the "B" Record.

(d) See the instructions in the "B" Records section, "Payment Amount Fields," for reporting positive (+) or negative (-) amounts.

(e) A note was added in the Payee City field to clarify the reporting of foreign addresses.

(f) The format of all "B" records following the Payee Zip Code has changed. Refer to the individual field definitions following the Payee Zip Code field.

(g) The Description fields for Forms 1099-A, 1099-B, 1099-OID and 1099-S have been expanded to 39 positions.

(h) For Forms 1099-A, crops forfeited on Commodity Credit Corporation loans are indicated by placing "CCC" in the Description field "B" Record.

(i) For Forms 1099-B, the Date of Sale Indicator has been deleted. Brokers must now use the trade data.

(j) For Forms 1099-B, A Gross Proceeds Indicator has been added to the "B" Record. The Date of Sale Indicator has been eliminated, and Cusip number is now 13 positions.

(k) For Form 1099-S, if the transferor received or will receive property or services as part of the consideration for the property, this is indicated in the Property or Services received field.

(l) Numerous changes have been made to the record formats. Please review these formats as you develop your records.

.06 THE FOLLOWING CHANGE HAS BEEN MADE TO THE STATE TOTALS "K" RECORD:

(a) Clarification was added to specify how the Control Totals are reported in the "K" records. See Part B, Section 14.04 for Single Sided/Single Density diskettes; Section 13.04 for Double Sided/Double Density diskettes.

.07 THE FOLLOWING CHANGE HAS BEEN MADE TO THE "F" RECORD:

(a) The number of diskettes is no longer indicated in position 6-8 of the "F" Record.

SEC. 3 APPLICATION FOR MAGNETIC MEDIA REPORTING AND REQUESTS FOR UNDUE HARDSHIP WAIVERS

FORM 4419, APPLICATION FOR MAGNETIC MEDIA REPORTING OF INFORMATION RETURNS:

.01 For purposes of this revenue procedure, the PAYER includes the person making payments, a recipient of mortgage interest payments, a broker, a barter exchange, a person reporting real estate transactions, a trustee or issuer of an IRA or SEP, or a lender who acquires an interest in secured property or who has reason to know that the property has been abandoned. The TRANSMITTER is the organization submitting the magnetic media file. The payer and transmitter may be the same organization. Payers or their transmitters are required to complete Form 4419, Application for Magnetic Media Reporting of Information Returns. A single Form 4419 should be filed no matter how many types of returns the payer or transmitter will be submitting. For example, if you plan to file Forms 1099-INT and Forms 1099-DIV on magnetic media, submit one Form 4419. If you later wish to file another type of return on magnetic media on Form 1099 series, 1098, 5498, or W-2G, it is not necessary to submit a new Form 4419.

If you plan to file for multiple payers, IRS encourages filers to submit one application and to use one Transmitter Control Code for all payers. Include a list of all payers with their corresponding TINs with the Form 4419. If you file for additional payers 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 payers.

Copies of Revised Form 4419, for your use, are included in this publication. Please read instructions on the back of the form very carefully. Requests for additional forms or other information related to magnetic media processing should be addressed to the IRS National Computer Center. The address is listed in Part A, Sec. 11.

.02 Application (Form 4419) must be filed with the IRS National Computer Center before "test" files are submitted. ("Test" files must be submitted between October 1 and December 15 each year.) IRS will act on an application and notify the applicant, in writing, of authorization to file. A five character alpha/numeric Transmitter Control Code will be assigned and included in an approval letter. Magnetic diskette returns may not be filed with IRS until the application has been approved and a Transmitter Control Code assigned. Do not enter blanks in the "A" Record Transmitter Control Code field; enter the five character alpha/numeric Transmitter Control Code that IRS has assigned to you.

.03 Once approved to file on magnetic media, you need not reapply each year unless:

(a) there are hardware or software changes that would affect the characteristics of the magnetic media submission (e.g., changing from diskette to tape filing or vice versa, or reporting using more than one type of magnetic media), a new Transmitter Control Code may be necessary or,

(b) you discontinue filing on magnetic media for a year (your five character alpha/numeric Transmitter Control Code may be reassigned).

If either of these conditions apply to you, you should contact IRS, in writing, for clarification. In ALL correspondence, refer to your current five character alpha/numeric Transmitter Control Code to assist IRS in locating your files.

.04 If your magnetic media files have been prepared for 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 alpha/numeric Transmitter Control Code by filing an application (Form 4419) as described above. If you file on two types of magnetic media (e.g., tape and 8-inch diskette), only one Form 4419 should be submitted. IRS assigns different Transmitter Control Codes to each type of magnetic media which ensures IRS providing the proper revenue procedure to filers each year.

.05 If you are an approved filer on magnetic media and the name of your organization changes, please notify the IRS National Computer Center, in writing, so that your file may be updated to reflect the correction.

.06 In accordance with section 1.6041-7(b) of the Income Tax Regulations, payments to providers of medical and health care services from separate departments of a health care carrier may be reported as separate returns on magnetic media. In this case, the headquarters office will be considered to be the transmitter, and the individual departments of the company filing reports will be considered to be payers. A single application form covering all the departments that will be filing on magnetic diskette should be submitted. One five character alpha/numeric Transmitter Control Code may be used for all departments.

.07 Approval to file on magnetic media does not imply endorsement by the IRS of the computer software or quality of tax preparation services provided.

TEST FILES

.01 IRS will assist new filers with their initial magnetic diskette submission by reviewing "test" files submitted in advance of the filing season. The "test" data should be actual, not fictitious information, for the "A" Records. Approved payers or transmitters should submit "test" files to the IRS National Computer Center. You MUST submit a "test" file in order to participate in the Combined Federal/State Program; however, you are encouraged to submit "test" files if you are a new filer on magnetic media. All "test" files must be submitted between October 1 and December 15 each year. Do not submit "test" files after December 15. If you are unable to submit your "test" file by this date, you may only send a sample hardcopy printout or diskette dump that shows a sample of each type of record (A, B, C, and F) used to the IRS National Computer Center. A hardcopy print is not an acceptable test file for the Combined Federal/State Program. Refer to Part A, Section 11 for the address. This sample hardcopy printout must be postmarked by January 15, 1989. Clearly mark the hardcopy printout or diskette dump as "TEST DATA," and include identifying information such as name, address, and telephone number of someone familiar with the "test" print or diskette dump who may be contacted to discuss its acceptability. With all "test" data, include a transmittal Form 4804, 4802 or computer generated substitute marked as "TEST DATA" that identifies your five character alpha/numeric Transmitter Control Code, total record, and money amounts. The transmittal Form 4804 and 4802 were updated in tax year 1988. Agencies producing computer generated substitutes must include the additional information required on these forms. The Form 4804 includes a checkbox 1 to indicate the type of file (e.g., original, correction, replacement, test). The "test" data must be coded according to the current revenue procedure.

FORM 8508, REQUEST FOR WAIVER FROM FILING INFORMATION RETURNS ON MAGNETIC MEDIA

.01 Any person required to file original or corrected returns on magnetic media may request a waiver from the 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 the IRS National Computer Center. A SEPARATE FORM 8508 MUST BE SUBMITTED FOR EACH PAYER. DO NOT SUBMIT A LIST OF PAYERS. Specify the type of returns for which the waiver is being requested on the Form 8508 (i.e., 1099-DIV, 1099-R, etc.).

.02 Persons or organizations serving as transmitters only cannot submit Form 8508 for persons or organizations required to file on magnetic media. FORM 8508 MUST BE FILED BY THE PAYER ONLY.

.03 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. Copies of Form 8508 are included in this publication and also may be obtained from the IRS National Computer Center or other IRS offices. See Part A, Section 11 for the address of the IRS National Computer Center.

.04 Section 1.6045-1(1) of the Income Tax Regulations requires brokers and barter exchanges to use magnetic media in reporting to IRS ALL Form 1099-B data. THIS REQUIREMENT APPLIES SEPARATELY TO BOTH ORIGINAL AND CORRECTED RETURNS. Generally NEW brokers and NEW barter exchanges may request an undue hardship exemption by filing a request for waiver on Form 8508 with the IRS National Computer Center by the end of the second month following the month in which they became a broker or barter exchange.

.05 All requests for magnetic media related undue hardship exemptions must be submitted to the IRS National Computer Center at least 90 days before the due date of the return except as stated in Sec. 3.04. All magnetic media related undue hardship requests for Forms W-2 and W-2P are to be filed with the IRS National Computer Center, not SSA, and must be filed 90 days before due date of return. Refer to Part A, Sec. 11 for the address.

.06 If your waiver request is approved, do not send a copy of the approved waiver to the service center where you file your paper returns. Keep the waiver for your records. Paper information returns are read by an optical scanner (OCR) at the service centers; therefore, do not staple, paperclip or use rubberbands on any scannable forms.

.07 Waivers are granted on a case-by-case basis and may be approved at the discretion of the IRS National Computer Center.

.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. Refer to Part A, Sec. 4.02.

.09 A hardship waiver is required for corrected returns if the total number of corrections for a particular tax year exceeds the magnetic media threshold. See Section 8 for more information on corrections.

.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. 4. FILING OF MAGNETIC MEDIA REPORTS AND RETENTION REQUIREMENTS

.01 A Magnetic Media Reporting package, which includes all the necessary transmittals will be mailed to the last known address of all approved filers each year.

.02 If you do not file your returns on time, you may be subject to a $50 per return failure to file penalty. If you file without following the instructions in this revenue procedure, you may also be subject to a $50 per return failure to file penalty. The maximum penalty is $100,000 per calendar year. However, there is no maximum penalty for Forms 1099-INT, 1099-OID, 1099-DIV, 1099-PATR, 5498 or if the failure to file is due to intentional disregard of the filing requirements.

.03 Generally, you are subject to a $50 penalty for EACH failure to include the payee's correct TIN on an information return unless the failure is due to reasonable cause or the payer can demonstrate fulfillment of due diligence requirements.

.04 Form 4804, Transmittal of Information Returns Reported on Magnetic Media, must accompany magnetic diskette submissions. If you file for multiple payers and have the authority to sign the affidavit on Form 4804, you should also submit Form 4802, Transmittal for Multiple Magnetic Media Reporting. DO NOT MAIL THE DISKETTES AND THE TRANSMITTAL DOCUMENTS SEPARATELY--BE SURE THEY ARE INCLUDED WITH YOUR SHIPMENT. Forms 4804 and 4802 have been revised for tax year 1988. IRS encourages the use of a computer generated Form 4804 that includes all necessary information requested on the current form. Magnetic media files covered by this revenue procedure must be sent to the IRS National Computer Center.

Paper information returns must be transmitted to the appropriate service center using Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Do not send information returns filed on paper forms to the IRS National Computer Center.

.05 The affidavit for Form 4804 should be signed by the payer; however, the transmitter, service bureau, paying agent, or disbursing agent (all hereafter referred to as agent), may sign the affidavit on behalf of the payer if the conditions in (a), (b)(i), (b)(ii), and (c) are met:

(a) The agent has the authority to sign the affidavit under an agency agreement (either oral, written, or implied) that is valid under state law.

(b)(i) The agent has the responsibility (either oral, written or implied) conferred on it by the payer to request the TINs of payees (or others for whom information is being reported),

OR

(ii) If the return of more than one payer is included in a single magnetic media submission, covered by a single Form 4804, each payer has attested by affidavit to the agent that the payer has complied with the law in attempting to secure correct TINs.

(c) The agent signs the affidavit and adds the caption "For: (name of payer)."

.06 Although a duly authorized agent signs the affidavit, the payer is held responsible for the accuracy of the Form 4804, and the payer will be liable for penalties for failure to comply with filing requirements.

.07 DO NOT REPORT THE SAME INFORMATION ON PAPER FORMS THAT YOU REPORT ON MAGNETIC MEDIA. IF YOU REPORT PART OF YOUR RETURNS ON PAPER AND PART ON MAGNETIC MEDIA, BE SURE THAT DUPLICATE INFORMATION IS NOT INCLUDED ON BOTH. 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. 8 for requirements and instructions on filing corrected returns.

.08 If reports from different branches or locations for one payer, are submitted on the same file, consolidate each type of information return under one Payer/Transmitter "A" Record. For example, all Forms 1099-INT for the same payer on a single file must be sorted together under one Payer/Transmitter "A" Record followed by the appropriate "B" Records and one "C" Record.

.09 Before 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 payers and have the authority to sign the affidavit on Form 4804.

(c) The magnetic media with an external identifying label as described in Part B, Sec. 1. Be sure to include the proper sequence on this label.

(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 33, 2 of 33, etc.).

(e) If you were granted an extension, include a copy of the approval letter with the magnetic media shipment. See Part A, Sec. 6.01 for information on how to apply for an extension of time to file.

.10 IRS will not pay or accept "Cash-on-Delivery" or "Charge-to-IRS" shipments of reportable tax information that an individual or organization is legally required to submit.

.11 Files may be returned to you due to coding or format errors. These files are to be corrected and returned to IRS within 45 days of date of notice or the payer may be subject to a failure to file penalty. If you are unable to return the file within 45 days, request an extension of time.

.12 Payers are required to retain a copy of the information returns filed with IRS or to have the ability to reconstruct the data for at least three years.

SEC. 5. FILING DATES

.01 The dates prescribed for filing paper returns with IRS also apply to magnetic media filing. Magnetic media reporting to IRS for Forms 1098, 1099, and W-2G must be on a calendar year basis. Form 5498 is used to report amounts contributed during or after the calendar year but not later than April 15.

.02 Information returns filed on magnetic media for Forms 1098, all types of Forms 1099, and W-2G must be submitted to IRS and postmarked by February 28 but not before January 1. The due date for furnishing the required copy or statement to the payee is January 31.

.03 Information returns filed on magnetic media for Form 5498 must be submitted to IRS and postmarked by May 31. Trustees or issuers of IRAs or SEPs must provide participants with a statement of the value of the participant's account by January 31, in any written format. Statements are due to the participants by May 31 for contributions made to IRAs for the prior calendar year. Form 5498 is filed for contributions to be applied to 1988 that are made between January 1, 1988, and April 17, 1989.

SEC. 6. EXTENSIONS OF TIME TO FILE

.01 If a payer or transmitter of returns on magnetic media or paper forms filed with IRS, and with SSA, is unable to submit their information returns by the dates prescribed in Sec. 5, submit a letter requesting an extension of time for a maximum of 60 days as soon as you are aware that an extension will be necessary. In order to be considered, the request MUST be filed before the due date of the return; otherwise, you will be subject to the late filing penalty of $50 per return. The letter should be sent to the attention of the Magnetic Media Reporting Program at the IRS National Computer Center. See Part A, Sec. 11 for the address. The request should include:

(a) The filer's (or transmitter's, if filing for multiple payers) name and address.

(b) The filer's Taxpayer Identification Number (SSN or EIN).

(c) The tax year for which the extension of time is requested: tax year 1988.

(d) The name and telephone number of a person to contact who is familiar with the request.

(e) The specific type of returns and expected volume (e.g., 5000 Forms 1099-INT).

(f) The five character alpha/numeric Transmitter Control Code assigned to the organization or individual requesting the extension (if a number has been assigned).

(g) The reason for the delay and date that you will be able to file.

(h) If you file for multiple payers, the request must include a list of all payers along with their addresses and their TINs (SSN or EIN).

An approved extension for magnetic media filing does not provide additional time for supplying a copy to the payee. If additional time is needed in providing a copy to the payee, contact the District Director of the IRS district in which you reside or in which your business is located.

.02 If an extension of time to file on magnetic media is granted by the IRS National Computer Center, a copy of the approved extension letter MUST be included with the transmittal Form 1096, Form 4804 or computer generated substitute when the file is submitted.

SEC. 7. PROCESSING OF MAGNETIC MEDIA RETURNS

.01 All data received at the IRS National Computer Center 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 which must be corrected and returned to IRS within 45 days of date of notice or you may be subject to a failure to file penalty.

.02 Do not use special shipping containers for transmitting data to the National Computer Center. Because of the high volume of data received and shipping costs involved, IRS will not return such containers.

.03 Files will be returned to you for correction if unprocessable due to format or coding errors, or at the request of the filer. Unprocessable files must be corrected and returned to the IRS National Computer Center within 45 days of date of notice or the payer may be subject to a failure to file penalty. The corrected files will be returned to the filer by the IRS National Computer Center after processing. PLEASE BE SURE THAT YOUR FORMAT AND CODING COMPLY WITH THIS REVENUE PROCEDURE. THIS REVENUE PROCEDURE IS TO BE USED FOR THE PREPARATION OF TAX YEAR 1988 INFORMATION RETURNS ONLY. LEGISLATIVE AND FORMS CHANGES AFFECTING INFORMATION RETURNS MAY OCCUR EACH YEAR. THESE PROCEDURES ARE UPDATED TO REFLECT NECESSARY CHANGES. PLEASE READ THIS PUBLICATION CAREFULLY.

SEC. 8. HOW TO FILE CORRECTED RETURNS

.01 The filing requirement thresholds listed in Part A, Sec. 1 apply separately to both original and corrected returns. If the total number of corrections for a particular tax year exceeds the magnetic media threshold, and you cannot file them on magnetic media, a hardship waiver is required. For example, if 100 Forms 1099-A need correction, they may be filed on paper forms and no waiver is required. However, if 300 Forms 1099-A need correction, they must be filed on magnetic media. If for some reason, you cannot file these corrections on magnetic media, you must request a waiver before you file them on paper or you may be subject to a penalty for filing on paper when you should have filed on magnetic media.

.02 Corrections should be aggregated and filed as soon as possible but not later than October 1 of each year. ALL FIELDS MUST BE COMPLETED WITH THE CORRECT INFORMATION, NOT JUST THE DATA FIELDS NEEDING CORRECTION. Submit corrections only for the returns filed in error, not the entire file. If your complete file is in error, contact the IRS National Computer Center immediately. If you file corrected returns on paper forms, submit Copy A to the appropriate service center. There are numerous types of errors, some of which require more than one transaction to properly correct the initial error. A "G" in diskette position 8 of the "B" Record is used as the corrected return indicator. You are strongly encouraged to read this ENTIRE section before attempting to make ANY correction. If the initial return was filed as an aggregate, you must consider this in filing the corrected return.

.03 Corrected returns submitted to IRS on magnetic media, using a "G" coded Payee "B" Record, may be submitted on the same diskette as those corrections submitted without the "G" code; however, they must be submitted using a separate "A" Record. Corrected returns are to be identified as corrections on the transmittal document (by marking the appropriate checkbox) and on the EXTERNAL affixed label of the file.

.04 The instructions that follow will provide information on how to file corrected returns on magnetic media. The 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G," provide more specific instructions for filing corrections on paper forms and are included in your magnetic media reporting packages each year.

.05 If you are not required to file your corrections on magnetic media and you file them on paper forms, do not submit to the IRS National Computer Center. All paper returns, whether original or corrected, must be filed with the appropriate service center. Corrected returns filed on magnetic media must be filed with the IRS National Computer Center. Refer to Part A, Sec. 11 for the address.

.06 Statements to payees should be identified as "CORRECTED" and should be provided to them as soon as possible.

.07 Use the same name and TIN (SSN or EIN) for the payer on the Forms 4804 and 4802 transmittal and in all related "A" Records that follow.

.08 A transmittal Form 4804 or computer generated substitute is used to transmit magnetic media. A Form 4802 is a continuation sheet for a Form 4804 to be used if you file for multiple payers and are an authorized agent for the payers.

.09 Use the correct tax year's revenue procedures to file information returns with IRS (i.e., do not submit tax year 1988 returns using the 1987 format). Forms and revenue procedures are normally updated each year to include necessary legislative and forms changes.

.10 On magnetic media files, the Payee "B" Record provides space to enter a Payer's Account Number for the Payee. This same account number may be provided on paper forms. If filing a corrected return, this number will help identify the appropriate incorrect return if more than one return was filed for a particular payee. DO NOT ENTER A TIN (SSN OR EIN). A PAYER'S ACCOUNT NUMBER FOR THE PAYEE MAY BE A CHECKING ACCOUNT NUMBER, SAVINGS ACCOUNT NUMBER, SERIAL NUMBER OR ANY OTHER NUMBER ASSIGNED TO THE PAYEE BY THE PAYER THAT WILL DISTINGUISH THE SPECIFIC ACCOUNT. THIS NUMBER MUST APPEAR ON THE INITIAL RETURN AND ON THE CORRECTED RETURN IN ORDER TO IDENTIFY AND PROCESS THE CORRECTION PROPERLY.

.11 REVIEW THE CHART THAT FOLLOWS. The types of errors made normally fall under one of the three categories listed. Next to each type of error made, is a list of instructions telling how to properly file the corrected return for that type of error. READ ALL INSTRUCTIONS LISTED AND FOLLOW CAREFULLY FOR THE TYPE OF ERROR MADE ON THE INITIAL RETURN. IN SOME CASES TWO TRANSACTIONS ARE REQUIRED TO PROPERLY FILE CORRECTIONS. IF THE ORIGINAL RETURN WAS FILED AS AN AGGREGATE, YOU MUST CONSIDER THIS IN FILING CORRECTED RETURNS.

       Guidelines for Filing Corrected Returns on Magnetic Media

.01 Section 6109 of the Internal Revenue Code and the regulations thereunder prescribe that a person whose Taxpayer Identification Number (TIN) is required on an information return must furnish his/her TIN(s) to a person required to file an information return with IRS. The TIN may be either an Employee Identification Number (EIN) or Social Security Number (SSN) and must be furnished to the payer whether or not the payee is required to file a tax return or is covered by social security.

.02 The recipient's TIN is used to associate and verify amounts reported to IRS with corresponding amounts on tax returns. Therefore, it is particularly important that correct social security and employer identification numbers for payees be provided on magnetic media or paper forms submitted to IRS. IRS validates the SSN by using the Name Control of the surname of the individual who has been assigned this number. For this reason, provide the surname in the First Payee Name Line and/or the Name Control of the "B" Record. Failure to provide this information may make it impossible for IRS to validate the SSN. DO NOT ENTER HYPHENS, ALPHA CHARACTERS, ALL 9s OR ALL ZEROS.

.03 Under section 6676 of the Internal Revenue Code, a $50 penalty applies for each failure to furnish a TIN to another person who is required to file an information return, and for each failure to include a TIN on an information return. Except for dividends and interest the penalty applies unless the failure to comply is due to reasonable cause and not willful neglect.

.04 With respect to all payers of interest and dividends, section 6676 of the Internal Revenue Code provides that the payer must self-assess a $50 penalty for each failure to include a payee's TIN or each inclusion of an incorrect TIN on an information return, unless the payer can demonstrate that the payer met the due diligence requirements in attempting to acquire correct TINs for payees. Use Form 8210, Self-Assessed Penalties Return.

A penalty of $5 per return applies to each failure by a payer to include his or her own TIN in any return, statement, or document and for each failure to include correct information on a return or statement.

.05 For certain reportable payments, if the payee fails to provide a TIN to the payer in the manner required, then backup withholding must be instituted for that payee. If the payee has applied for a TIN, the payee may certify to this on Form W-9, Request for Taxpayer Identification Numbers and Certification, by noting "Applied For" in the TIN block (Part 1), and by signing the form. This form then becomes an "awaiting-TIN certificate." If the TIN is not received and certified within 60 days after the payee delivers the "awaiting-TIN certificate" to the payer, the payer must begin withholding at 20% and continue until a TIN is provided. If IRS notifies the payer that the payee's TIN is incorrect, the payee has 30 days to provide a correct TIN to the payer in the manner required or backup withholding must be instituted. As soon as the Payee Receives a new TIN, he/she must submit another W-9 with the new TIN to the payer.

.06 The TIN to be furnished to IRS depends primarily upon the manner in which the account is maintained or set up on the payer's record. The payer and payee names and TINs should be consistent with the names and numbers used on other tax returns. The name and TIN must be those of the owner of the account. If the account is recorded in more than one name, furnish the TIN and name of one of the owners of the account. The TIN provided must be associated with the name of the payee provided in the First Name Line of the Payee "B" Record. For individuals, including sole proprietors, the payee TIN is the payee's social security number. For other entities, the payee TIN is the payee's employer identification number.

.07 Sole proprietors who are payers should show their employer identification number in the Payer/Transmitter "A" Record. However, sole proprietors who are not otherwise required to have an employer identification number should use their social security number.

.08 The following charts will help you determine the TIN to be furnished to IRS for those persons for whom you are reporting information (payees).

            CHART 1. Guidelines for Social Security Numbers

.01 Magnetic diskette reporting of the information returns listed in Part A, Sec. 1 applies only to the original (Copy A).

.02 For payments of dividends or interest (reported on Forms 1099-DIV, 1099-PATR, 1099-INT or 1099-OID) the payer is required to furnish an official Form 1099 to a payee in person or in a "statement mailing" by first-class mail. For payment of royalties, a "statement mailing" is also required, but the statement need not be the official form. These forms may not be combined or mailed with other information furnished to the recipient except Forms W-2, W-2P, W-8, W-9, other Forms 1098, 1099, 5498, a check, a letter explaining why no check is enclosed, a letter limited to an explanation of the tax consequences of the information shown on the payee statement, and a statement of the person's account reflected on the 1099. The outside of the envelope and each check, letter, or account statement must contain the legend, "Important Tax Return Document Enclosed." A payee statement may be perforated to a check with respect to the account reported on the payee statement or to a statement of the payee's specific account if payments on such account are reflected in the payee's statement. The enclosure to which the payee statement is perforated must contain the legend "Important Tax Return Document Attached." No additional enclosures, such as advertising, promotional material, or a quarterly or annual report are permitted. The payer may use substitute Forms 1099 if they utilize the proper language, are substantially similar to the official forms, and if the payer complies with all revenue procedures relating to substitute Forms 1099 in effect at the time (see Publication 1179). The substitute payee statement must contain instructions substantially similar to those on the back of Copy B of the official form. The following messages must appear on the payee's statements:

(a) Forms 5498 and 1099-R - "This information is being furnished to the Internal Revenue Service."

(b) Forms 1099-G and W-2G - "This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and IRS determines that it has not been reported."

(c) Forms 1099-B and 1099-MISC - Same as item (b) above, except change "may" to "will" in the second sentence.

(d) Form 1099-A - "This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction will be imposed on you if taxable income results from this transaction and the IRS determines that it has not been reported."

(e) Form 1098 - (1) This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction will be imposed if IRS determines that an underpayment of tax results because you overstated a deduction for this mortgage interest on your return. (2) The amount shown may not be fully deductible by you on your Federal income tax return. Limitations based on the cost and value of the secured property may apply. In addition, you may only deduct an amount of mortgage interest to the extent it was incurred by you, actually paid by you, and not reimbursed by another person.

(f) Forms 1099-S - This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction will be imposed on you if this item is required to be reported and the IRS determines it has not been reported.

.03 Statements to recipients for Forms 1098, 1099-A, 1099-B, 1099-G, 1099-MISC (except for substitute payments in lieu of dividends and tax-exempt interest), 1099-R, 5498, 1099-S, or W-2G need not be a copy of the paper form filed with IRS. However, it is important that income items be properly classified for Federal tax purposes on the statement the payer gives to recipients. The space provisions on official paper forms do no agree with those used in magnetic media. The amount of space on paper forms is less than that allowed on magnetic media. Filers may wish to seek a substitute form for statements to payees that accommodates the space provisions used in magnetic media. Payers are permitted considerable flexibility in designing statements to payees. The payer may combine the information return data with other statements as long as all required information is present and worded properly and the payee's copy is conducive to proper reporting of income on tax returns. (This does not apply to Forms 1099-INT, 1099-OID, 1099-DIV and 1099-PATR. See Part A, Sec. 10.02, for the requirements for these four forms.)

SEC. 11. HOW TO CONTACT THE IRS NATIONAL COMPUTER CENTER

.01 Magnetic media processing for all service centers is centralized at the IRS National Computer Center. Magnetic media covered under this revenue procedure and all requests for IRS magnetic media related publications, information, undue hardship waivers, extensions of time or forms should be sent to the following addresses:

  If Postal Service:

Requests for paper returns, publications or forms not related to magnetic media processing should be requested by calling the "Forms Only Number" listed in the local telephone directory.

.02 The National Computer Center will process returns filed on magnetic media only. All information returns, including corrections, that are filed on paper forms should be submitted to the appropriate service center, not the IRS National Computer Center. Organizations who file information returns on magnetic media but who submit corrected returns on paper forms please refer to the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" for the service center addresses.

SEC. 12. COMBINED FEDERAL/STATE FILING

.01 The Combined Federal/State Program was established to simplify information returns filing for the taxpayer. IRS will accept, upon prior approval, magnetic diskette files containing state reporting information only for those states listed in Table 1 in this section. FORMS 1098, 1099-A, 1099-B, 1099-S, AND W-2G CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

.02 To request approval to participate in the Combined Federal/State Program, a "test" file, coded for this program, must be submitted by the transmitter to the IRS National Computer Center between October 1 and December 15 using the revenue procedure that will be used for the actual data files. Blanket approval will not be given to software packages. ATTACH A LETTER TO THE FORM 4804 SUBMITTED WITH THE "TEST" FILE WHICH INDICATES THAT YOU WISH TO PARTICIPATE IN THIS PROGRAM. The "test" file is only required for the first year. Once you are approved, you do not need to resubmit "tests" each year, except when notified by IRS. Refer to Part A, Sec. 11 for the address. See Part A, Sec. 3 for general guidelines on submission of "test" files. Each record, both in the "test" file and actual data file, must conform exactly to the revenue procedure for the tax year of the actual data. Combined Federal/State records must be coded using each state's dollar criteria from Table 2 of this section for each type of return.

If the "test file" is acceptable, IRS will return it to the filer along with Form 6847, Consent for IRS to Release Tax Information, which the payer MUST complete, sign, and return to IRS-National Computer Center (See Part A, Sec. 11 for address) before tax information can be released to any of the participating states. BE SURE TO INCLUDE THE FIVE-CHARACTER ALPHA/NUMERIC TRANSMITTER CONTROL CODE. If the Form 6847 is signed by an attorney-in-fact, the written consent from the taxpayer to the attorney-in-fact must be included. This consent, by language and/or scope, must clearly indicate that the attorney-in-fact is empowered to authorize release of the information document returns to the state(s). A separate Form 6847 is required for each payer. A transmitter may not combine payers on one Form 6847 even though acting as attorney-in-fact for several payers. Form 6847 may be photocopied or a computer generated Form 6847 may also be used as long as it includes all information that is on the official Form 6847. If you have filed on this program in the past but did not met these requirements, you must resubmit the Form 6847 with the proper signatures as specified. If you file for multiple payers, code the records for participating states only for those payers who have properly submitted From 6847. Do not submit actual data records coded for the Combined Federal/State Program without prior approval from IRS.

.03 Participating states and corresponding valid state codes are listed in Table 1 of this section. If the state that you wish information released to does not participate in the program, do not code your records for that state. If the state participates, if you have received prior approval, and if all other conditions are met, IRS will forward the tax information to the participating state at no charge to the filer. Once approved, you need not reapply each year.

.04 IRS WILL NOT TRANSMIT CORRECTED RETURNS TO THE STATES; IF CORRECTIONS MUST BE MADE, THIS IS THE RESPONSIBILITY OF THE FILER.

.05 Approval to participate in the Combined Federal/State Program will be revoked if files are submitted that do not totally conform to the specifications in this revenue procedure. Further, no attempt will be made to process files with any deviation.

.06 Some participating states require separate notification that you are filing in this manner. Since IRS acts as a forwarding agent ONLY, it is your responsibility to contact the appropriate states for further information.

.07 The appropriate state code should be entered for those documents which meet that state's filing requirements. It is the filer's responsibility to determine the state code to be used and to obtain the filing requirements from the appropriate state(s).

.08 If you meet all of the requirements for this program, you must provide the state totals from the "K" Record on a separate Form 4804, Transmittal of Information Returns on Magnetic Media (or Form 4802, Transmittal For Multiple Magnetic Media Reporting) or computer generated substitute for each state, or you must include a listing which identifies each state and the "K" Record totals for each.

.09 If you have met ALL of the above conditions:

(a) You must submit all records which indicate the appropriate coding related to this program.

(b) The "C" Record must be followed by a "K" Record for each state. The "K" Record indicates the number of payees being reported to each particular state.

(c) Payment amount totals and the valid participating state code must be included in the state totals "K" Record. Refer to Part B, Sec. 14 or Part C, Sec. 13 for a description of the "K" Record.

(d) The "K" Record is followed by an "A" Record or an end of transmission "F" Record (if this is the last record of the entire file).

.10 Only those states listed in Table 1 will receive information from IRS. It is the filer's responsibility to file information returns with states that do not participate in this program.

             TABLE 1. PARTICIPATING STATES AND THEIR CODES

                       TABLE 2. DOLLAR CRITERIA

 Element                 Description

.01 You MUST use the following state abbreviations when developing the state code portion of address fields. (This table provides state abbreviations only and does not represent those states participating in the Combined Federal/State Program. For a list of states that participate in the Combined Federal/State Program, refer to Part A, Sec. 12.10.)

 State                                                           Code

SECTION 1. GENERAL

.01 The specifications contained in this part of the revenue procedure define the required format and contents of the records to be included in a single density diskette file. These specifications must be adhered to unless deviations have been specifically granted by IRS.

.02 To be compatible, a single density diskette file must meet the following specifications in total:

(a) 8 inches in diameter.

(b) recorded in EBCDIC.

(c) contain 77 tracks of which:

(1) Track 0 is the index track (the operating system reserves track 0 for the directory information and writes the file name and location in the directory; data cannot be written in track 0).

(2) Tracks 1 through 73 are data tracks.

(3) Track 74 is unused.

(4) Tracks 75 and 76 are alternate data tracks.

(d) each Track must contain 26 sectors.

(e) each Sector must contain 128 bytes.

(f) data must be recorded on only one side of the diskette.

(g) IRS can process single sided, single density, soft sectored diskettes as well as double sided, double density, soft sectored diskettes. Part C provides specifications for double density diskettes which have sectors of 256 bytes.

(h) an IBM 5360 compatible diskette would meet the above specifications. Hard sectored diskettes are not compatible.

(i) A diskette should be clearly marked as to which type of data (single sided/single density or double sided/double density) is on each diskette, and preferably, the entire file should consist of either all single sided/single density or all double sided/double density diskettes.

.03 Payers who can substantially conform to these specifications, but who require some minor deviations, MUST contact the IRS National Computer Center. Under no circumstances may diskettes deviating from the specifications in this revenue procedure be submitted without prior approval from IRS. If you file under the Combined Federal/State Program, your files must conform totally to this revenue procedure.

.04 Form 5064, Media Label, must be affixed to each diskette submitted for processing. The following information is needed:

(a) The transmitter's name.

(b) The five character alpha/numeric Transmitter Control Code.

(c) Operating system/hardware

(d) The tax year of the data (e.g., 1988).

(e) Document types (e.g., 1099-INT).

(f) The total number of "B" Records after each "A" Record (this figure is taken from the "C" Records).

(g) An in-house number assigned by the transmitter to the diskette, if applicable.

(h) The sequence of each diskette (e.g., 001 of 008).

The Form 5064, was updated for tax year 1988. You must use the updated label. This information will assist IRS in processing the file, or in locating a file should the transmitter request its return due to errors. IRS advises that special shipping containers not be used for transmitting data since they will not be returned.

SEC. 2. DISKETTE HEADER LABEL

The following header label format applies to both single and double density diskettes.

The header label on the diskette must be located in track 0, sector 8 and must be formatted as shown in the following layout. If your system automatically creates a header label, this is not necessary. If the file will consist of multiple diskettes, the Multi-Volume indicator in the diskette header label must contain a "C".

[Editor's note: Pictorial Record Layouts depicting specifications discussed in Part B have been omitted. These illustrations are not suitable for electronic reproduction.]

SEC. 3. PAYER/TRANSMITTER "A" RECORD

.01 Identifies the payer and transmitter of the diskette and provides parameters for the succeeding Payee "B" Records. IRS computer programs rely on the absolute relationship between the parameters and data fields in the "A" Record and the data fields in the "B" Records to which they apply.

.02 The number of "A" Records appearing on a diskette will depend on the number of payers and the different types of returns being reported. The payment amounts for one payer for one type of return must be consolidated under one "A" Record if submitted on the same file. Do not submit separate "A" Records for each payment amount being reported. For example, if you are filing Form 1099-DIV to report Amount Codes 1, 2, and 3, all three amount codes must be reported under one "A" Record, not three separate "A" Records. For Payee "B" Records that do not contain payment amounts for all three amount codes, enter zeros for those which have no payment to be reported. After the header label on the diskette, the first record appearing in the file must be an "A" Record. When a single density diskette is used each "A" Record will consist of at least 2 sectors of 128 positions each; however, if you are transmitting for someone other than yourself, 4 sectors are required. A transmitter may include Payee "B" Records for more than one payer on a diskette; however, each GROUP of Payee "B" Records must be preceded by an "A" Record. A single diskette may also contain different types of returns, but the returns MUST not be intermingled. A separate "A" Record is required for each payer and each type of return being reported. An "A" Record may be blocked with "B" Records; however, the initial record on a file must be an "A" Record. IRS will accept an "A" Record after a "C" Record.

.03 All alpha characters entered in the "A" Record should be uppercase.

.04 WHEN REPORTING FORM 1098, MORTGAGE INTEREST STATEMENT, THE "A" RECORD WILL REFLECT THE NAME OF THE RECIPIENT OF THE INTEREST (THE FILER). THE "B" RECORD WILL REFLECT THE INDIVIDUAL PAYING THE INTEREST (BORROWER/PAYER OF RECORD) AND THE AMOUNT PAID.

               RECORD NAME: PAYER/TRANSMITTER "A" RECORD

[Editor's note: These record layouts are graphic representations of the file specifications described above. They have been omitted because they provide no additional information and are not suitable for clear on-screen presentation.]

SEC. 5. PAYEE "B" RECORDS - GENERAL INFORMATION FOR ALL FORMS

.01 This section contains the general information concerning the Payee "B" Record for all information returns. For a detailed description of the record refer to the following in Part B:

(a) Sec. 6. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 THROUGH 4 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 5498 AND SECTOR 1 THROUGH 3 OF FORMS 1099-A, 1099-B, 1099-OID, 1099-S, AND W-2G.

(b) Sec. 7. PAYEE "B" RECORD LAYOUTS FOR SECTOR 1 THROUGH 4 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 1099-S, 5498 AND SECTOR 1 THROUGH 3 OF FORMS 1099-A, 1099-B, 1099-OID, AND W-2G.

(c) Sec. 8. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-A.

(d) Sec. 9. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-B.

(e) Sec. 10. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-OID.

(f) Sec. 11. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-S.

(g) Sec. 12. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM W-2G.

For tax year 1988 data, all "B" Records will consist of at least 3 sectors of 128 positions each. If you are not a Combined Federal/State filer or if you are not utilizing the Special Data Entries field, Sector 4 can be eliminated for Forms 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, and 5498. The "B" Record will always consist of 4 Sectors for Forms 1099-A, 1099-B, 1099-OID, 1099-S, AND W-2G. In the "A" Record, the Amount Indicator Codes that appear in diskette positions 24 through 32 of Sector 1 will be left-justified and blank filled. In the "B" Record, allow for all nine payment amount fields and for those not used, enter zeros. For example, if you are reporting on Form 1099-PATR, enter a "7" in diskette position 23 of Sector 1 of the "A" Record, Type of Return Indicator field. If you are reporting payments for Amount Codes 2, 4, and 7, then diskette positions 24 through 32 of Sector 1 of the "A" Record will be "247bbbbbb". In the Payee "B" Record, positions 52 through 61 of Sector 1 for Payment Amount 1 will be zeros. Positions 62-71 of Sector 1 will reflect the actual payment amount to be reported for "Nonpatronage distributions." Positions 72-81 of Sector 1 for Payment Amount 3 will be zeros. Positions 82-91 of Sector 1 will reflect the actual payment amount to be reported for "Federal income tax withheld." Positions 92-111 of Sector 1 for Payment Amounts 5 and 6 will be zeros. Positions 112-121 of Sector 1 will reflect the actual payment amount to be reported for "Energy investment credit." Positions 3-22 of Sector 2 for Payment Amounts 8 and 9 will be zeros. The First Payee Name Line will always appear in positions 44-83 of Sector 2 of the "B" Record.

02. The record layout for Sector 1, 2, and 3 will be the same for all "B" records. Sector 4, however, will be different for Forms 1099-A, 1099-B, 1099-OID, 1099-S, and W-2G. Refer to Part B, Sec. 8, 9, 10, 11, or 12, respectively for the layout of Sector 4 of these records.

.03 IRS must be able to identify the surname associated with the TIN (SSN or EIN) furnished on a statement. The specifications below include a field in the payee records called "Name Control" in which the first four alphabetic characters of the payee's surname or last name are to be entered by the payers. The surname or last name should appear first in the First Payee Name Line of all Payee "B" Records; however, if your records have been developed using the first name first, IRS programs will accept this but a blank must appear between the first and last name.

.04 If payers are unable to provide the first four characters of the surname, the Name Control Field may be left blank; however, compliance with the following will facilitate IRS computer programs in generating the Name Control.

(a) The surname of the payee whose TIN (SSN or EIN) is shown in the Payee "B" Record should always appear first. If, however, you enter the first name first, you must leave a blank space between the first and last name.

(b) In the case of multiple payees, only the surname of the payee whose TIN (SSN or EIN) is shown in the Payee "B" Record must be present in the First Payee Name Line. Surnames of any other payees in the record must be entered in the Second Payee Name Line.

.05 A field is also provided in these specifications for Special Data Entries. This field may be used to record information required by state or local governments or for the filer's own personal use. IRS does not use the data provided in the Special Data Entries field.

.06 For those filers participating in the Combined Federal/State Filing Program, positions 70 and 71 of Sector 4 in the Payee "B" Record must contain the appropriate state code for the state to receive the information. The file should also meet the money criteria described in Part A, Sec. 12.11. Do not code for the states unless prior approval to participate has been granted by IRS. See Part A, Sec. 12.10 for a list of the valid participating state codes. FORMS 1098, 1099-A, 1099-B, 1099-S, AND W-2G CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM. Your files must meet all of the requirements specified in Part A, Sec. 12 in order to participate in this program.

.07 All alpha characters entered in the "B" Record should be upper-case.

.08 Do not use decimal points (.) to indicate dollars and cents on magnetic media.

.09 IRS STRONGLY ENCOURAGES FILERS TO REVIEW THEIR DATA FOR ACCURACY BEFORE SUBMISSION TO PREVENT ISSUANCE OF ERRONEOUS NOTICES TO PERSONS FOR WHOM REPORTS ARE FILED. FILERS SHOULD BE ESPECIALLY CAREFUL THAT THEIR TAXPAYER NAMES, SOCIAL SECURITY NUMBERS (SSNs), ACCOUNT NUMBERS, TYPES OF INCOME, AND INCOME AMOUNTS ARE CORRECT.

.10 WHEN REPORTING FORM 1098, MORTGAGE INTEREST STATEMENT, THE "A" RECORD WILL REFLECT THE NAME OF THE RECIPIENT OF THE INTEREST (THE FILER). THE "B" RECORD WILL REFLECT THE INDIVIDUAL PAYING THE INTEREST (THE BORROWER/PAYER OF RECORD) AND THE AMOUNT PAID.

SEC. 6. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 THROUGH 4 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, 1099-S, 1099-PATR, 1099-R, 5498 AND SECTOR 1 THRU 3 OF FORMS 1099-A, 1099-B, 1099-S, AND W-2G.

.01 For Forms 1099-A, 1099-B, 1099-OID, and W-2G, see Part B, Sec. 8, 9, 10, 11, or 12 respectively for the field descriptions and record layouts for sector 4 of these records.

                     RECORD NAME: PAYEE "B" RECORD

[Editor's note: These record layouts are graphic representations of the file specifications described above. They have been omitted because they provide no additional information and are not suitable for clear on-screen presentation.]

SEC. 8. PAYEE "B" RECORDS -- FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 4 OF FORM 1099-A

.01 This section contains information pertaining to Sector 4 of Form 1099-A. For detailed explanations of the 1099-A fields see the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" included in your reporting packages.

.02 See Part B. Sec. 6 for field descriptions of Sector 1, 2, and 3 of the Payee "B" Record for Forms 1099-A.

.03 FORM 1099-A CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

      RECORD NAME: PAYEE "B" RECORD FORM 1099-A -- SECTOR 4 ONLY

.01 This section contains the general payment information for Sector 4 of Form 1099-B. For detailed explanations of the 1099-B fields see the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" included in your reporting package."

.02 See Part B, Sec. 6 for field descriptions for Sector 1, 2, and 3 of the Payee "B" Record for Forms 1099-B.

.03 FORM 1099-B CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

      RECORD NAME: PAYEE "B" RECORD FORM 1099-B -- SECTOR 4 ONLY

.01 This section contains information pertaining to Sector 4 of Form 1099-OID. For detailed explanations of the 1099-OID fields see the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" included in your reporting packages.

.02 See Part B. Sec. 6 for field descriptions of Sector 1, 2, and 3 of the Payee "B" Record for Forms 1099-OID.

      RECORD NAME: PAYEE "B" RECORD FORM 1099-OID - SECTOR 4 ONLY

.01 This section contains the general payment information for Sector 4 of Form 1099-S. For detailed explanations of the 1099-S fields see the 1988 "Instructions for Forms 1099, 1998, 5498, 1096, and W-2G."

.02 See Part B. Sec. 6 for field descriptions for Sector 1, 2, and 3 of the Payee "B" Record for Forms 1099-S.

.03 FORM 1099-S CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

       RECORD NAME: PAYEE "B" RECORD FORM 1099-S - SECTOR 4 ONLY

.01 This section contains the general payment information for Sector 4 of Form W-2G. For detailed explanations of the W-2G fields see the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" included in your reporting packages.

.02 See Part B. Sec. 6 for field descriptions for Sector 1, 2, and 3 of the Payee "B" Record for Forms W-2G.

.03 FORM W-2G CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

        RECORD NAME: PAYEE "B" RECORD FORM W-2G - SECTOR 4 ONLY

.01 The "C" Record consists of 2 Sectors of 128 positions each. The Control Total fields are each 15 positions in length.

.02 The End of Payer "C" Record is a summary record for a type of return for a given payer.

.03 The "C" Record will contain the total number of payees and the totals of the payment amount fields filed by a given payer. The "C" Record must be written after the last Payee "B" Record for each type of return for a given payer. For each "A" Record and group of "B" Records on the file, there must be a corresponding "C" Record.

.04 In developing the "C" Record, for example, if you used Amount Codes 1, 3 and 6 in the "A" Record, the totals from the "B" Records will appear in Control Totals 1, 3 and 6 of the "C" Record. In this example, positions 27-41, 57-86, and 102-116 of Sector 1 and positions 3-32 of Sector 2 would be zero filled.

.05 Payers/Transmitters must verify the accuracy of the totals in the "C" Record and must enter the totals on the transmittal, Form 4804, 4802 or computer generated substitute, which will accompany the shipment. The lines used on Forms 4804 and 4802 to record payment amounts correspond with the Amount Codes used in the "A" Record.

                 RECORD NAME: END OF PAYER "C" RECORD

.01 The "K" Record consists of 2 Sectors of 128 positions each. The Control Total fields are each 15 positions in length.

.02 The State Totals "K" Record is a summary for a given payer and a given state in the Combined Federal/State Filing Program, used ONLY when state reporting approval has been granted.

.03 The "K" Record will contain the total number of payees and the totals of the payment amount fields filed by a given payer for a given state. The "K" Record(s) must be written after the "C" Record for the related "A" Record.

.04 In developing the "K" Record, for example, if you used Amount Codes 1, 3, and 6 in the "A" Record, the totals from the "B" Records coded for this state will appear in Control Totals 1, 3, and 6 of the "K" Record.

.05 There MUST be a separate "K" Record for each state being reported.

.06 Refer to Part A, Sec. 12 for the requirements and conditions that MUST be met to file on this program.

                 RECORD NAME: END OF PAYER "K" RECORD

.01 The "F" Record consists of one 128-position Sector. The "F" Record is a summary of the number of payers and diskettes in the entire file.

.02 This record should be written after the last "C" Record (or "K" Record, when applicable) of the entire file.

              RECORD NAME: END OF TRANSMISSION "F" RECORD

SECTION 1. GENERAL

.01 The specifications contained in this part of the revenue procedure describe the required format and contents of the records to be included in a double density diskette file. These specifications must be adhered to unless deviations have been specifically granted by IRS.

.02 To be compatible, a double density diskette file must meet the following specifications in total:

(a) 8 inches in diameter.

(b) Recorded in EBCDIC.

(c) Contains 77 cylinders (A cylinder refers to both of the tracks available to the read/write heads at any of the 77 locations on the double sided, double density diskette).

(1) Cylinder 00 is the index cylinder (the operating system reserves cylinder 00 for the directory information and writes the file name and location in the directory; data cannot be written in cylinder 00).

(2) Cylinders 1-74 are the primary data cylinders.

(3) Cylinders 75 and 76 are reserved for alternative cylinder assignment.

(d) Each Track contains 26 sectors; therefore, each cylinder contains 52 sectors.

(e) Each sector must contain 256 bytes.

(f) Data may be recorded on both sides of the diskette.

(g) IRS can process single sided, single density, soft sectored diskettes as well as double sided, double density, soft sectored diskettes. Part B provides specifications for single density diskettes which have sectors of 128 bytes.

(h) An IBM 5360 compatible diskette would meet the above specifications. If using other processors, data should be recorded in the Basic Data Exchange (EBCDIC) format. Hard sectored diskettes are not compatible.

.03 Refer to Part B. Sec. 1.03 through Sec. 2 for further information concerning diskette requirements which apply to both single and double density diskettes.

SEC. 2. PAYER/TRANSMITTER "A" RECORD

.01 Identifies the payer and transmitter of the diskette and provides parameters for the succeeding Payee "B" Records. IRS computer programs rely on the absolute relationship between the parameters and data fields in the "A" Record and the data fields in the "B" Records to which they apply.

.02 The number of "A" Records appearing on a diskette will depend on the number of payers and the different types of returns being reported. The payment amounts for one payer for one type of return must be consolidated under one "A" Record if submitted on the same file. Do not submit separate "A" Records for each payment amount being reported. For example, if you are filing Form 1099-DIV to report Amount Codes 1, 2, and 3, all three amount codes must be reported under one "A" Record, not three separate "A" Records. For Payee "B" Records which do not contain payment amounts for all three amount codes, enter zeros for those which have no payment to be reported. After the header label on the diskette (See Part B, Sec. 2, for format of the header label), the first record appearing in the file must be an "A" Record. When a double density diskette is used, each "A" Record will consist of at least one 256 position sector; however, if you are transmitting for someone other than yourself, 2 sectors are required. A transmitter may include Payee "B" Records for more than one payer on a diskette; however, each GROUP of Payee "B" Records must be preceded by an "A" Record. A single diskette may also contain different types of returns, but the returns MUST not be intermingled. A separate "A" Record is required for each payer and each type of return being reported. An "A" Record may be blocked with "B" records; however, the initial record on a file must be an "A" Record. IRS will accept an "A" Record after a "C" Record.

.03 All alpha characters entered in the "A" Record should be upper-case.

.04 WHEN REPORTING FORM 1098, MORTGAGE INTEREST STATEMENT, THE "A" RECORD WILL REFLECT THE NAME OF THE RECIPIENT OF THE INTEREST (THE FILER). THE "B" RECORD WILL REFLECT THE INDIVIDUAL PAYING THE INTEREST (BORROWER/PAYER OF RECORD) AND THE AMOUNT PAID.

               RECORD NAME: PAYER/TRANSMITTER "A" RECORD

[Editor's note: These record layouts are graphic representations of the file specifications described above. They have been omitted because they provide no additional information and are not suitable for clear on-screen presentation.]

SEC. 4. PAYEE "B" RECORDS - GENERAL INFORMATION FOR ALL FORMS

.01 This section contains the general information concerning the Payee "B" Record for all information returns filed on double sided/double density soft sectored diskettes. For a detailed description of the record refer to the following in Part C:

(a) Sec. 5. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 AND 2 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 5498 AND SECTOR 1 OF FORMS 1099-A, 1099-B, 1099-OID, 1099-S, AND W-2G. (See Part C, Sec. 7, 8, 9, 10, or 11 for field descriptions for Sector 2 of Forms 1099-A, 1099-B, 1099-OID, 1099-S and W-2G.)

(b) Sec. 6. PAYEE "B" RECORD LAYOUTS FOR SECTOR 1 AND 2 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 5498 AND SECTOR 1 OF FORMS 1099-A, 1099-B, 1099-OID, 1099-S, AND W-2G.

(c) Sec. 7. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-A.

(d) Sec. 8. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-B.

(e) Sec. 9. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-OID.

(f) Sec. 10. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-S.

(g) Sec. 11. PAYEE "B" RECORD - FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM W-2G.

For tax year 1988 data, all "B" Records will consist of two sectors of 256 positions each. In the "A" Record, the Amount Indicator Codes that appear in diskette positions 24 through 32 of Sector 1 will be left-justified and blank filled. In the "B" Record, you will allow for all nine payment amount fields and for those not used, enter zeros. For example, if you are reporting on Form 1099-PATR, you will enter a "7" in diskette position 23 of Sector 1 of the "A" Record, Type of Return Indicator field. If you are reporting payments for Amount Codes 2, 4, and 7, then diskette positions 24 through 32 of Sector 1 of the "A" Record will be "247bbbbbb". In the Payee "B" Record, positions 52 through 61 of Sector 1 for Payment Amount 1 will be zeros. Positions 62-71 of Sector 1 will reflect the actual payment amount to be reported for "Non-patronage distributions." Positions 72-81 of Sector 1 for Payment Amount 3 will be zeros. Positions 82-91 of Sector 1 will reflect the actual payment amount to be reported for "Federal income tax withheld." Positions 92-111 of Sector 1 for Payment Amounts 5 and 6 will be zeros. Positions 112-121 of Sector 1 will reflect the actual payment amount to be reported for "Energy investment credit." Positions 122-141 of Sector 1 for Payment Amounts 8 and 9 will be zeros. The First Payee Name Line will always appear in positions 163-202 of Sector 1 of the "B" Record.

02. The record layout for Sector 1 will be the same for all "B" records. Sector 2, however, will be different for Forms 1099-A, 1099-B, 1099-OID, 1099-S, and W-2G. Refer to Part C, Sec. 7, 8, 9, 10, or 11 respectively for the record layouts for Sector 2 of these records.

.03 IRS must be able to identify the surname associated with the TIN (SSN or EIN) furnished on a statement. The specifications below include a field in the payee records called "Name Control" in which the first four alphabetic characters of the payee's surname or last name are to be entered by the payers. The surname or last name should appear first in the First Payee Name Line of all Payee "B" Records; however, if your records have been developed using the first name first, IRS programs will accept this but a blank must appear between the first and last name.

.04 If payers are unable to provide the first four characters of the surname, the Name Control Field may be left blank; however, compliance with the following will facilitate IRS computer programs in generating the Name Control.

(a) The surname of the payee whose TIN (SSN or EIN) is shown in the Payee "B" Record should always appear first. If, however, you enter the first name first, you must leave a blank space between the first and last name.

(b) In the case of multiple payees, only the surname of the payee whose TIN (SSN or EIN) is shown in the Payee "B" Record, must be present in the First Payee Name Line. Surnames of any other payees in the record must be entered in the Second Payee Name Line.

.05 A field is also provided in these specifications for Special Data Entries. This field may be used to record information required by state or local governments or for the filer's own personal use. IRS does not use the data provided in the Special Data Entries field.

.06 For those filers participating in the Combined Federal/State Filing Program, positions 180 and 181 of Sector 2 in the Payee "B" Record must contain the appropriate state code for the state to receive the information. The file should also meet the money criteria described in Part A, Sec. 12.11. Do not code for the states unless prior approval to participate has been granted by IRS. See Part A, Sec. 12. 10 for a list of the valid participating state codes. FORMS 1098, 1099-A, 1099-B, 1099-S, AND W-2G CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM. Your files must meet all of the requirements specified in Part A. Sec. 12 in order to participate in this program.

.07 All alpha characters entered in the "B" Record should be upper-case.

.08 Do not use decimal points (.) to indicate dollars and cents on magnetic media.

.09 IRS STRONGLY ENCOURAGES FILERS TO REVIEW THEIR DATA FOR ACCURACY BEFORE SUBMISSION TO PREVENT ISSUANCE OF ERRONEOUS NOTICES TO PERSONS FOR WHOM REPORTS ARE FILED. FILERS SHOULD BE ESPECIALLY CAREFUL THAT THEIR TAXPAYER NAMES, SOCIAL SECURITY NUMBERS (SSNs), ACCOUNT NUMBERS, TYPES OF INCOME, AND INCOME AMOUNTS ARE CORRECT.

.10 WHEN REPORTING FORM 1098, MORTGAGE INTEREST STATEMENT, THE "A" RECORD WILL REFLECT THE NAME OF THE RECIPIENT OF THE INTEREST (THE FILER). THE "B" RECORD WILL REFLECT THE INDIVIDUAL PAYING THE INTEREST (BORROWER/PAYER OF RECORD) AND THE AMOUNT PAID.

SEC. 5. PAYEE "B" RECORD - FIELD DESCRIPTIONS FOR SECTOR 1 AND 2 OF FORMS 1098, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-PATR, 1099-R, 5498 AND SECTOR 1 OF FORMS 1099-A, 1099-B, 1099-OID, 1099-S, AND W-2G.

.01 For Forms 1099-A, 1099-B, 1099-OID, 1099-S, and W-2G, see Part C, Sec 7, 8, 9, 10, or 11 respectively for the field descriptions and record layouts for sector 2 of these records.

                     RECORD NAME: PAYEE "B" RECORD

.01 See Part C, Sec. 7, 8, 9, 10, or 11 for the field descriptions and record layouts for Sector 2 of Form 1099-A, 1099-B, 1099-OID, 1099-S, and W-2G.

[Editor's note: These record layouts are graphic representations of the file specifications described above. They have been omitted because they provide no additional information and are not suitable for clear on-screen presentation.]

SEC. 7. PAYEE "B" RECORDS -- FIELD DESCRIPTIONS AND RECORD LAYOUT FOR SECTOR 2 OF FORM 1099-A

.01 This section contains information pertaining to Sector 2 of Form 1099-A. For detailed explanations of the 1099-A fields see the 1988 "Instructions for Forms 1099, 1098, 5498, 1096, and W-2G" included in your reporting packages.

.02 See Part C, Sec. 5 for field descriptions for Sector 1 of the Payee "B" Record for Forms 1099-A.

.03 FORM 1099-A CANNOT BE FILED UNDER THE COMBINED FEDERAL/STATE FILING PROGRAM.

                     RECORD NAME: PAYEE "B" RECORD