Internal Revenue Bulletin: 2003-30

July 28, 2003

Highlights of This Issue

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Announcement 2003-46 Announcement 2003-46

This announcement informs the public that the Service is currently reviewing information regarding test procedures and results that have been presented as evidence that fuel underwent a significant chemical change. Until the review is complete, rulings on the question of significant chemical change will be suspended for requests relying on the procedures and results being reviewed.

INCOME TAX

Rev. Rul. 2003-81 Rev. Rul. 2003-81

Depreciation of assets. This ruling provides guidance as to the proper asset class under Rev. Proc. 87-56, 1987-2 C.B. 674, to depreciate assets owned by a utility that are used in the business operations of the utility. Rev. Proc. 2002-9 modified and amplified.

Rev. Rul. 2003-82 Rev. Rul. 2003-82

Tertiary injectant expenses. This ruling clarifies whether only the costs of acquiring tertiary injectants are eligible for the enhanced oil recovery credit provided in section 43 of the Code or whether the costs of using tertiary injectants also are eligible for the credit.

Notice 2003-47 Notice 2003-47

This notice announces the Service's position regarding certain transactions involving the transfer of nonstatutory stock options to a related person in exchange for a long-term, unsecured deferred payment obligation. The notice provides that the transfer will not constitute an arm's length transaction for purposes of regulations section 1.83-7, and that the receipt of the deferred payment obligation will not result in a deferral of the recognition of income arising from the transfer.

EMPLOYEE PLANS

Rev. Rul. 2003-83 Rev. Rul. 2003-83

Minimum funding; entry age normal; reasonableness. This ruling addresses two situations where the aggregate entry age normal method of funding is not a reasonable funding method within the meaning of section 412(c)(3) of the Code and section 1.412(c)(3)-1 of the regulations.

Notice 2003-48 Notice 2003-48

Weighted average interest rate update. The weighted average interest rate for July 2003 and the resulting permissible range of interest rates used to calculate current liability for purposes of the full funding limitation of section 412(c)(7) of the Code are set forth.

ADMINISTRATIVE

Rev. Proc. 2003-52 Rev. Proc. 2003-52

Magnetic media; electronic filing; 2003 form specifications. Specifications are set forth for the magnetic or electronic filing of 2003 Forms 1098, 1099, 5498, and W-2G. Rev. Proc. 2002-34 superseded.

Preface

The IRS Mission

Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury's Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The first Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the first Bulletin of the succeeding semiannual period, respectively.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Rev. Rul. 2003-82

Tertiary injectant expenses. This ruling clarifies whether only the costs of acquiring tertiary injectants are eligible for the enhanced oil recovery credit provided in section 43 of the Code or whether the costs of using tertiary injectants also are eligible for the credit.

ISSUE

For purposes of § 43(c)(1)(C) of the Internal Revenue Code, what expenditures are included in the term “qualified tertiary injectant expenses” under § 193(b)?

FACTS

X, a domestic producer of oil, owns operating interests in numerous mineral properties located within the United States. Subsequent to December 31, 1990, X began the injection of liquids and gases into oil reservoirs in connection with enhanced oil recovery (EOR) projects X had implemented with respect to the mineral properties. All of the EOR projects that had been implemented by X qualify for the enhanced oil recovery credit provided in § 43.

In some cases, X purchased liquids and gases to inject into the reservoirs in connection with the EOR projects. In other cases, X produced tertiary injectants (for example, X burned natural gas to fuel boilers that produced steam for use as an injectant) rather than purchasing them.

X paid or incurred costs either to acquire or produce the liquids and gases used as tertiary injectants in X’s EOR projects. In addition to the costs of acquiring or producing the tertiary injectants, X also incurred costs to inject, recover, and reinject the purchased and produced tertiary injectants.

LAW AND ANALYSIS

Section 43(a) provides that, for purposes of § 38, the enhanced oil recovery credit for any taxable year is an amount equal to 15 percent of the taxpayer’s qualified enhanced oil recovery costs for the taxable year.

Section 43(c)(1) provides that the term “qualified enhanced oil recovery costs” means any of the following:

(A) Any amount paid or incurred during the taxable year for tangible property

(i) which is an integral part of a qualified enhanced oil recovery project, and

(ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable under chapter 1;

(B) Any intangible drilling and development costs

(i) which are paid or incurred in connection with a qualified enhanced oil recovery project, and

(ii) with respect to which the taxpayer may make an election under § 263(c) for the taxable year.

(C) Any qualified tertiary injectant expenses (as defined in § 193(b)) which are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable for the taxable year.

Section 193(a) allows as a deduction for the taxable year an amount equal to the qualified tertiary injectant expenses of the taxpayer for tertiary injectants injected during the taxable year.

Section 193(b)(1) provides that the term “qualified tertiary injectant expenses” means any cost paid or incurred (whether or not chargeable to capital account) for any tertiary injectant (other than a hydrocarbon injectant which is recoverable) which is used as a part of a tertiary recovery method.

Section 193(c) provides that no deduction shall be allowed under § 193(a) with respect to any expenditure

(1) with respect to which the taxpayer has made an election under § 263(c), or

(2) with respect to which a deduction is allowed or allowable to the taxpayer under any other provision of chapter 1.

Section 43 was enacted as part of the Omnibus Revenue Reconciliation Act of 1990, Pub. L. 101-508, 104 Stat. 1388. As it was originally enacted, § 43(c)(1)(C) defined the term “qualified enhanced oil recovery costs” to include any qualified tertiary injectant expenses that are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable under § 193 for the taxable year.

Section 317(a)(1)-(2) of the Community Renewal Tax Relief Act of 2000, Pub. L. 106-554, 114 Stat. 2673A-587, amended § 43(c)(1)(C) to provide that the term “qualified enhanced oil recovery costs” means any qualified tertiary injectant expenses (as defined in § 193(b)) that are paid or incurred in connection with a qualified enhanced oil recovery project and for which a deduction is allowable for the taxable year. The amendment was to take effect as if included in § 43 as it was originally enacted under the Revenue Reconciliation Act of 1990.

Consequently, the term “qualified tertiary injectant expenses” for purposes of § 43(c)(1)(C), as amended, has the same meaning as that term has for purposes of § 193(b).

The legislative history underlying § 193 indicates that tertiary injectant expenses include costs related to the use of a tertiary injectant, for example, “costs related to injecting a substance with a transitory effect on production” and “costs of producing and reinjecting gas or hydrocarbon liquids utilized in a recycling process.” See S. Rep. No. 394, 96th Cong., 1st Sess. 97 (1979), 1980-3 C.B. 131, 215. The legislative history further states that the purpose of § 193 is “to encourage the use of expensive tertiary enhanced oil recovery processes.” Id. 1980-3 C.B. 131, 216. Neither § 193 nor its legislative history, however, indicates that the term “qualified tertiary injectant expenses” was intended to include costs a taxpayer would have paid or incurred in the development or operation of a mineral property if an enhanced oil recovery project had not been implemented with respect to the property, for example, costs paid or incurred to plug and abandon wells.

Accordingly, for purposes of § 43(c)(1)(C), X’s costs paid or incurred to either acquire or produce the liquids and gases used as tertiary injectants in X’s EOR projects are “qualified tertiary injectant expenses” as defined in § 193(b). The term “qualified tertiary injectant expenses” also includes X’s costs to inject, recover, and reinject the purchased and produced tertiary injectants.

HOLDING

For purposes of § 43(c)(1)(C), the definition of the term “qualified tertiary injectant expenses” includes expenditures related to the use of a tertiary injectant as well as expenditures related to the acquisition (whether produced or acquired by purchase) of the tertiary injectant. The term “qualified tertiary injectant expenses”, however, does not include costs a taxpayer would have paid or incurred in the development or operation of a mineral property if an enhanced oil recovery project had not been implemented with respect to the property. Costs that are related to the use of a tertiary injectant and that also are related to other activities (for example, primary or secondary recovery) must be reasonably allocated among the tertiary injectant and the other activities to determine the amount of tertiary injectant expenses paid or incurred by the taxpayer for the taxable year.

DRAFTING INFORMATION

The principal author of this revenue ruling is Jaime C. Park of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Ms. Park at (202) 622-3120 (not a toll-free call).

Rev. Rul. 2003-81

Depreciation of assets. This ruling provides guidance as to the proper asset class under Rev. Proc. 87-56, 1987-2 C.B. 674, to depreciate assets owned by a utility that are used in the business operations of the utility. Rev. Proc. 2002-9 modified and amplified.

ISSUE

What is the proper asset guideline class under Rev. Proc. 87-56, 1987-2 C.B. 674, as clarified and modified by Rev. Proc. 88-22, 1988-1 C.B. 785, for the depreciation of assets owned by a utility that are used in the general business operations of the utility?

FACTS

U, a utility, owns a steam production plant and engages in the production of electricity for sale (production of electricity). U purchases a work bench for the maintenance garage and uses the work bench to help repair various plant machinery and equipment that are damaged during the production of electricity. U also purchases a bookcase and uses the bookcase to hold training manuals and operation protocols in the plant supervisor’s office. Additionally, U constructs a new parking lot outside the plant facility (parking lot A) for use by U’s plant employees. Finally, U constructs a new parking lot adjacent to its corporate headquarters (parking lot B), located 100 miles from the plant, for use by U’s corporate headquarters employees.

For regulatory accounting purposes, U includes certain assets that are used in its general business operations in various general plant accounts under the Uniform System of Accounts prescribed for public utilities by the Federal Energy Regulatory Commission (FERC). Specifically, U includes the work bench in FERC account 394 (Tools, shop, and garage equipment), the bookcase in FERC account 391 (Office furniture and equipment), and both parking lots in FERC account 390 (Structures and improvements).

LAW AND ANALYSIS

Section 167(a) of the Internal Revenue Code provides that there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear of property used in a trade or business or held for the production of income. The depreciation deduction provided by § 167(a) for tangible property placed in service after 1986 generally is determined under § 168. This section prescribes two methods of accounting for determining depreciation allowances: (1) the general depreciation system in § 168(a); and (2) the alternative depreciation system in § 168(g). Under either depreciation system, the depreciation deduction is computed by using a prescribed depreciation method, recovery period, and convention.

For purposes of either § 168(a) or § 168(g), the applicable recovery period is determined by reference to class life or by statute. See, for example, § 168(e). Section 168(i)(1) provides that the term “class life” means the class life (if any) that would be applicable with respect to any property as of January 1, 1986, under former § 167(m) as if it were in effect and the taxpayer had made an election under that section. Prior to its revocation, § 167(m) provided that in the case of a taxpayer who elected the asset depreciation range system of depreciation, the depreciation deduction would be computed based on the class life prescribed by the Secretary that reasonably reflects the anticipated useful life of that class of property to the industry or other group.

Section 1.167(a)-11(b)(4)(iii)(b) of the Income Tax Regulations provides rules for classifying property under former § 167(m). Property is included in the asset guideline class for the activity in which the property is primarily used. Property is classified according to primary use even though the use is insubstantial in relation to all of the taxpayer's activities.

Rev. Proc. 87-56 sets forth the class lives of property that are necessary to compute the depreciation allowances under § 168. Rev. Proc. 87-56 establishes two categories of depreciable assets: (1) asset classes 00.11 through 00.4, which consist of specific assets used in all business activities (asset categories); and (2) asset classes 01.1 through 80.0, which consist of assets used in specific business activities (activity categories) based on broadly defined industry classifications. The same item of depreciable property may be described in both an asset category and an activity category, in which case the item is classified in the asset category unless specifically excluded from the asset category or specifically included in the activity category. See Norwest Corporation & Subsidiaries v. Commissioner, 111 T.C. 105 (1998) (item included in both an asset category and an activity category (furniture and fixtures) should be placed in the asset category). The asset classes described below are set forth in Rev. Proc. 87-56.

Asset class 00.11, Office Furniture, Fixtures, and Equipment, includes furniture and fixtures that are not a structural component of a building. This asset class includes assets such as desks, files, safes, and communications equipment. Assets in this class have a recovery period of 7 years for purposes of § 168(a) and 10 years for purposes of § 168(g).

Asset class 00.3, Land Improvements, includes improvements directly to or added to land, whether the improvements are section 1245 property or section 1250 property, provided the improvements are depreciable. Examples of the assets might include sidewalks, roads, canals, waterways, drainage facilities, sewers (not including municipal sewers in Class 51), wharves and docks, bridges, fences, landscaping, shrubbery, or radio and television transmitting towers. Asset class 00.3 does not include land improvements that are explicitly included in any other class, and buildings and structural components as defined in § 1.48-1(e) of the regulations. Assets in this class have a recovery period of 15 years for purposes of § 168(a) and 20 years for purposes of § 168(g).

Asset class 49.13, Electric Utility Steam Production Plant, includes assets used in the steam power production of electricity for sale, combustion turbines operated in a combined cycle with a conventional steam unit and related land improvements. This asset class also includes package boilers, electric generators and related assets such as electricity and steam distribution systems as used by a waste reduction and resource recovery plant if the steam or electricity is normally for sale to others. Assets in this class have a recovery period of 20 years for purposes of § 168(a) and 28 years for purposes of § 168(g).

Rev. Proc. 87-56 is an extension and modification of Rev. Proc. 62-21, 1962-2 C.B. 418. Rev. Proc. 62-21 abandoned the asset by asset approach of depreciation. Instead, all assets used in a particular industry classification (business activity), regardless of their nature, were grouped into a single class. See also The Adoption of the Asset Depreciation Range (ADR) System, Announcement 71-76, 1971-2 C.B. 503, 507. Rev. Proc. 62-21 included, in addition to assets grouped by broad industrial classifications, certain broad general asset classifications.

Non-tax categorizations such as FERC account practices generally are not controlling for purposes of asset classification for federal income tax depreciation. The number of federal income tax depreciation activity categories for the utility services industry is significantly smaller than the number of FERC accounts. The limited number of utility services activity categories does not mean that the assets listed in FERC accounts, but not specifically mentioned in the utility services activity categories, are excluded from the utility services activity categories. Instead, the utility services activity categories for federal income tax depreciation purposes (subclasses of asset class 49) are broad and include many activities and assets that are separately described in greater detail in FERC accounts.

The work bench that U includes in FERC account 394 is used to help repair various plant machinery and equipment items that are damaged during the production of electricity. The work bench helps keep U’s business activity running smoothly and efficiently and is used in connection with U’s business activity of producing electricity that is described in asset class 49.13. Because the work bench is used in connection with U’s business activity of producing electricity, and is not described in an asset category, the work bench is classified in asset class 49.13.

The bookcase that U includes in FERC account 391 is used to hold training manuals and operation protocols. The bookcase is used in connection with U’s business activity of producing electricity and therefore is included in asset class 49.13, an activity category. The bookcase is also included in asset class 00.11, an asset category. An asset that is included in both an asset category and an activity category is placed in the asset category unless it is specifically excluded from the asset category or specifically included in the activity category. See Norwest. Because the bookcase is included in both asset class 00.11 and asset class 49.13, and not specifically excluded from asset class 00.11 or specifically included in asset class 49.13, the bookcase is classified in asset class 00.11.

U includes both parking lots in FERC account 390. Both parking lot A and parking lot B are used in connection with U’s business activity of producing electricity that is described in asset class 49.13, an activity category, and both are also described in asset class 00.3, an asset category. An asset that is included in both an asset category and an activity category is placed in the asset category unless it is specifically excluded from the asset category or specifically included in the activity category. Asset class 00.3 specifically excludes land improvements that are explicitly included in any other class. Asset class 49.13 specifically includes land improvements that are related to assets used in the steam power production of electricity for sale. Thus, any land improvements used in connection with U’s business activity of producing electricity and related to assets used in the steam power production of electricity for sale are classified in U’s activity category, asset class 49.13. Parking lot A, located outside the plant facility, is considered a “related land improvement” under asset class 49.13 because parking lot A is related to the plant that produces the electricity. Conversely, parking lot B, located adjacent to U’s corporate headquarters 100 miles from the plant, is not considered a “related land improvement” under asset class 49.13 because parking lot B is not related to the plant that produces the electricity. Accordingly, U’s parking lot A is classified in asset class 49.13; U’s parking lot B is classified in asset class 00.3.

HOLDINGS

Based on the facts described above, the workbench is classified in asset class 49.13; the bookcase is classified in asset class 00.11; parking lot A (located outside the plant facility) is classified in asset class 49.13; and parking lot B (adjacent to U’s corporate headquarters located 100 miles from the plant) is classified in asset class 00.3.

CHANGE IN METHOD OF ACCOUNTING

A change in a taxpayer’s treatment of depreciable property to conform with this revenue ruling is a change in method of accounting to which the provisions of §§ 446(e) and 481 and the regulations thereunder apply.

A taxpayer wanting to change the method of accounting for depreciable property that is owned by the taxpayer at the beginning of the year of change and for which the taxpayer has used an impermissible method of accounting for two or more consecutive taxable years immediately preceding the year of change, to conform with this revenue ruling must follow the automatic change in method of accounting provisions in Rev. Proc. 2002-9, 2002-3 C.B. 327 (as modified and amplified by Rev. Proc. 2002-19, 2002-13 C.B. 696, as amplified, clarified, and modified by Rev. Proc. 2002-54, 2002-35 I.R.B. 432, and as modified and clarified by Announcement 2002-17, 2002-8 C.B. 561) or any successor, with the following modifications:

(1) The scope limitations in section 4.02 of Rev. Proc. 2002-9 do not apply to a taxpayer that wants to change its method of accounting for the cost of depreciable property to conform with this revenue ruling for either its first or second taxable year ending after December 31, 2001, provided the taxpayer’s method of accounting for the cost of depreciable property is not an issue under consideration (within the meaning of section 3.09 of Rev. Proc. 2002-9) for taxable years under examination, before an appeals office, or before a federal court at the time the Form 3115 is filed with the national office; and

(2) To assist the Internal Revenue Service in processing changes in method of accounting under this revenue ruling, and to ensure proper handling, section 6.02(4)(a) of Rev. Proc. 2002-9 is modified to require that a Form 3115 filed under this revenue procedure include the statement: “Automatic Change Filed Under Rev. Rul. 2003-81.” This statement should be legibly printed or typed on the appropriate line on the Form 3115.

AUDIT PROTECTION

A utility taxpayer, which owns a steam production plant and engages in the production of electricity for sale, may continue to use its present method of treating the cost of depreciable property described in an asset category (asset classes 00.11 through 00.4) or a specific utility services activity class (asset classes 49.11 through 49.4) that was placed in service during any taxable year ending on or before June 27, 2003, if use of such method results in a longer recovery period than would be required by this revenue ruling.

EFFECT ON OTHER DOCUMENTS

Rev. Proc. 2002-9 is modified and amplified to include this change in method of accounting under section 2 of the APPENDIX.

DRAFTING INFORMATION

The principal author of this revenue ruling is Alan Cooper of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact John Huffman at (202) 622-3110 (not a toll-free call).

Rev. Rul. 2003-83

Minimum funding; entry age normal; reasonableness. This ruling addresses two situations where the aggregate entry age normal method of funding is not a reasonable funding method within the meaning of section 412(c)(3) of the Code and section 1.412(c)(3)-1 of the regulations.

ISSUE

Does the aggregate entry age normal funding method constitute a reasonable funding method within the meaning of § 412(c)(3) of the Internal Revenue Code and § 1.412(c)(3)-1 of the Income Tax Regulations?

FACTS

Situation 1. Plan M uses the following version of the aggregate entry age normal funding method. The normal cost under Plan M equals the product of the normal cost per participant and the number of active participants under the latest assumed retirement age. The normal cost per participant is equal to A divided by B, where A is the sum, for all active participants under the latest assumed retirement age, of the present value (as of each participant's entry age) of the participant's projected benefits and B is the sum, for all active participants under the latest assumed retirement age, of the present value (as of each participant's entry age) of a level annuity of 1 per year payable from the participant's entry age until the participant's retirement age. The accrued liability for the plan as of any valuation date is equal to the excess of C over D, where C is the sum, for all participants, of the present value (as of the participant's attained age) of the participant's projected benefits and D is the present value of future normal costs. The present value of future normal costs is equal to the product of the normal cost per participant and the present value of future lives. The present value of future lives is the sum, for all active participants under the latest assumed retirement age, of the present values (determined as of each participant's attained age) of an annuity of 1 per year payable from the participant's attained age until the participant's retirement age. The valuation date for Plan M for each plan year is January 1, the first day of the plan year, and the actuarial value of the assets is determined as the fair market value of the assets.

Situation 2. Plan N uses the following version of the aggregate entry age normal funding method. The normal cost under Plan N equals the product of the normal cost accrual rate and the total current compensation of all active participants under the latest assumed retirement age. The normal cost accrual rate is equal to A divided by B, where A is the sum, for all active participants under the latest assumed retirement age, of the present value (as of each participant's entry age) of the participant's projected benefits and B is the sum, for all active participants under the latest assumed retirement age, of the present value (as of each participant's entry age) of each participant's compensation beginning with the assumed compensation as of the participant's entry age (determined by retroactively applying the pay increase factor to the participant's current compensation) until the participant's retirement age. The accrued liability for the plan as of any valuation date is equal to the excess of C over D, where C is the sum, for all participants, of the present value (as of each participant's attained age) of the participant's projected benefits and D is the present value of future normal costs. The present value of future normal costs is equal to the product of the normal cost accrual rate and the present value of future compensation. The present value of future compensation is defined as the sum, for all active participants under the latest assumed retirement age, of the present value (determined as of each participant's attained age) of the participant's future compensation from the participant's attained age until the participant's retirement age. The valuation date for Plan N for each plan year is January 1, the first day of the plan year, and the actuarial value of the assets is determined as the fair market value of the assets.

APPLICABLE LAW

Section 412(c)(3) of the Internal Revenue Code requires that all costs and liabilities of a pension plan be determined on the basis of assumptions and methods that are reasonable. Section 1.412(c)(3)-1 of the Income Tax Regulations prescribes rules for determining whether or not, in the case of an ongoing plan, a funding method is reasonable for purposes of § 412(c)(3). Section 1.412(c)(3)-1(c)(2) provides that a funding method is reasonable only if it produces no experience gains and losses when each actuarial assumption is exactly realized.

Rev. Rul. 81-213, 1981-2 C.B. 101, provides guidelines for the determination of experience gains and losses, including separate rules for immediate gain type funding methods and spread gain type funding methods. Under section 2.02 of Rev. Rul. 81-213, an immediate-gain type funding method is a funding method that directly calculates an accrued liability.

Rev. Rul. 81-13, 1981-1 C.B. 229, provides that an accrued liability can be directly calculated under the funding method used for the plan if the following three conditions are met: (1) the accrued liability may be determined solely from the computations with respect to the liabilities (without reference to plan assets); (2) the accrued liability is an integral part of the funding method used; and (3) the accrued liability satisfies the definition of section 3(29) of the Employee Retirement Income Security Act of 1974 (ERISA). In order for the accrued liability to be an integral part of the funding method used for the plan, such accrued liability or both the present value of future benefits and the present value of future normal costs must be calculated as part of the funding method and must be used to determine plan costs. In order to satisfy the definition of section 3(29) of ERISA, the accrued liability must be equal to the present value of future benefits less the present value of future normal costs. The normal costs that are so used are the plan's anticipated future normal costs under the funding method as of the valuation date.

Section 5.01 of Rev. Rul. 81-213 provides that the “actual unfunded liability” as of any valuation date is the excess, if any, of the accrued liability over the actuarial value of assets as of that date. Section 6.01 of Rev. Rul. 81-213 provides that, in general, for an immediate gain type funding method, there is an experience gain if the expected unfunded liability as of a valuation date exceeds the actual unfunded liability as of that date. Conversely, there is an experience loss if the actual unfunded liability at a valuation date exceeds the expected unfunded liability as of that date. Section 6.02 of Rev. Rul. 81-213 generally defines the “expected unfunded liability” for an immediate-gain type funding method as (1) the actual unfunded liability as of the prior valuation date, plus (2) the normal cost, minus (3) contributions, all adjusted with interest to the valuation date.

ANALYSIS

In Situation 1, the accrued liability under Plan M's version of the aggregate entry age normal funding method is determined solely from the computations with respect to the liabilities under Plan M, without reference to plan assets. In addition, the accrued liability is an integral part of Plan M's funding method (i.e., the accrued liability is calculated as part of the funding method and is used to determine plan costs). Furthermore, the accrued liability under Plan M's funding method satisfies the definition of section 3(29) of ERISA (i.e., the accrued liability is equal to the present value of future benefits less the present value of the plan's anticipated future normal costs determined under the funding method). Therefore, Plan M's version of the aggregate entry age normal funding method directly calculates an accrued liability. Accordingly, Plan M's version of the aggregate entry age normal funding method is an immediate gain method for purposes of applying the rules of Rev. Rul. 81-213 for computing experience gains and losses.

In Plan M's version of the aggregate entry age normal funding method, both the numerator and the denominator of the fraction used to determine the normal cost per participant are equal to the sum of several present values, with each present value being determined as of a given participant's entry age. For participants with different entry ages, these present values are calculated as of different points in time and this inconsistency will cause the normal cost under Plan M to follow a pattern over time that is different than the pattern of the expected number of active plan participants (i.e., the normal cost per participant will not remain level over subsequent valuation dates). In turn, this failure of the normal cost per participant to remain level will cause the method to produce experience gains or losses even if all actuarial assumptions are exactly realized. This phenomenon is illustrated by the following simplified example. The actuarial assumptions used in this example were chosen to simplify the illustration and are not necessarily reasonable actuarial assumptions for an actual plan.

As of January 1, 2003, (the valuation date for the plan year beginning January 1, 2003), a plan using the method described in situation 1 has 20 active participants, 10 of whom are age 35, and 10 of whom are age 55. There are no inactive participants. The participants who are age 35 all entered the plan at age 35 and have projected annual retirement benefits of $12,000. The participants who are age 55 all entered the plan at age 30 and have projected annual retirement benefits of $10,000. The expected retirement age for all participants is 65. Under the actuarial assumptions used by the plan, the present value as of age 65 of an annual retirement benefit of 1 is 10.000. The pre-retirement interest rate is 7%. There are no pre-retirement decrements other than at age 35 (for which the probability of remaining an active participant until age 36 is 50%), and there are no benefits payable under the plan on account of a decrement at age 35. For funding purposes, the plan sets the value of assets equal to their fair market value. As of January 1, 2003, the value of the plan's assets is $450,000.

The actuarial valuation results for the 2003 plan year are as follows:

The sum, for all active participants, of the present value (as of each participant's entry age) of the participant's projected benefits is $125,651.72. The sum, for all active participants, of the present value (as of each participant's entry age) of a level annuity of 1 per year payable from the participant's entry age until the participant's retirement age is 166.1594. Accordingly, the normal cost per participant is $756.21 ($125,651.72 divided by 166.1594), and the normal cost for the plan is $756.21 × 20 (the number of participants), or $15,124.24.

The present value of projected benefits (as of January 1, 2003) is $587,169.50 and the present value of future lives is 146.5407. Therefore, the present value of future normal costs (as of January 1, 2003) is $110,815.82 (equal to $756.21 × 146.5407) and the accrued liability as of the valuation date is $476,353.69.

The actual unfunded liability for the current year is $26,353.69 (equal to the excess of the accrued liability over the asset value of $450,000). Assuming the employer makes a single contribution of $20,000 at the end of the year, the expected unfunded liability at the next valuation is $24,381.39 (equal to $26,353.69 × 1.07 + $15,124.24 × 1.07 - $20,000).

During 2003, all actuarial assumptions are exactly realized and there are no new hires. Thus, all 10 of the participants aged 55 remain active participants at age 56, 5 of the participants aged 35 remain active participants at age 36 and the value of assets on January 1, 2004, is equal to $501,500 ($450,000 × 1.07 + $20,000).

As of January 1, 2004, the actuarial valuation results are as follows:

The sum, for all active participants, of the present value (as of each participant's entry age) of the participant's projected benefits is $86,241.59. The sum, for all active participants, of the present value (as of each participant's entry age) of a level annuity of 1 per year payable from the participant's entry age until the participant's retirement age is 130.4652. Accordingly, the normal cost per participant is $661.03 ($86,241.59 divided by 130.4652), and the normal cost for the plan is $661.03 × 15 (the number of participants), or $9,915.47.

The present value of projected benefits (as of January 1, 2004) is $628,271.38 and the present value of future lives is 135.3986. Accordingly, the present value of future normal costs (as of January 1, 2004) is $89,502.70 (which is equal to $661.03 × 135.3986) and the accrued liability is $538,768.69.

The actual unfunded liability as of January 1, 2004, is $37,268.69 (equal to the excess of the accrued liability over the asset value of $501,500).

As noted above, the expected unfunded liability as of January 1, 2004, is equal to $24,381.38, but the actual unfunded liability as of that date is $37,268.69. Thus, despite the fact the actuarial assumptions were exactly realized during 2003, the plan has experienced an actuarial loss for 2003 of $12,887.31 (equal to the difference between the actual unfunded liability and the expected unfunded liability).

In Situation 2, the funding method used by Plan N is similar to that used by Plan M in Situation 1, in that both the numerator and the denominator of the fraction used to determine the normal cost accrual rate (which is analogous to the normal cost per participant in Situation 1) are equal to the sum of several present values, with each present value calculated as of the respective participants' entry ages. For participants with different entry ages, these present values are calculated as of different points in time and this inconsistency will cause the normal cost under Plan M to follow a different pattern over time than the expected aggregate compensation of active plan participants (i.e., the normal cost accrual rate will not remain level over time). In turn, this failure of the normal cost to remain level as a percent of compensation will cause the method to produce experience gains or losses even if all actuarial assumptions are exactly realized.

HOLDING

Because it can create experience gains or losses even if all actuarial assumptions are exactly realized, the aggregate entry age normal funding method that determines the normal cost per plan participant by dividing the sum of the present values (determined as of each participant's entry age) of each participant's projected benefits by the sum of the present values (determined as of each participant's entry age) of an annuity for each participant equal to 1 per year payable from the participant's entry age until the participant's retirement age does not constitute a reasonable funding method within the meaning of § 1.412(c)(3)-1 of the regulations.

Because it can create experience gains or losses even if all actuarial assumptions are exactly realized, the aggregate entry age normal funding method that determines the normal cost accrual rate by dividing the sum of the present values (determined as of each participant's entry age) of each participant's projected benefits by the sum of the present values (determined as of each participant's entry age) of future compensation from the participant's entry age until the participant's retirement age does not constitute a reasonable funding method within the meaning of § 1.412(c)(3)-1 of the regulations.

EFFECTIVE DATE AND TRANSITION RULE

This ruling will be effective for valuations performed for plan years beginning after December 31, 2003. For plans that are currently using a funding method as described in this revenue ruling, the funding method may be changed to a reasonable funding method by following the procedures set forth in Rev. Proc. 2000-40, 2000-2 C.B. 357 or Rev. Proc. 2000-41, 2000-2 C.B. 371.

DRAFTING INFORMATION

The principal author of this revenue ruling is James E. Holland, Jr. of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this revenue ruling, contact the Employee Plans taxpayer assistance telephone service between the hours of 8:00 a.m. and 6:30 p.m. Eastern Time, Monday through Friday, by calling (877) 829-5500 (a toll-free number). Mr. Holland may be reached at (202) 283-9699 (not a toll-free number).

Part III. Administrative, Procedural, and Miscellaneous

Notice 2003-47

Transfers of Compensatory Stock Options to Related Persons

This notice addresses a transaction being promoted to and used by taxpayers to avoid or evade federal income and employment taxes related to compensatory stock options. This notice alerts taxpayers and their representatives that the tax benefits purportedly generated by these transactions are not allowable for federal income tax purposes. This notice also identifies some of these transactions as listed transactions and alerts taxpayers and their representatives to certain responsibilities that may arise from participating in these transactions.

Concurrent with this notice, Treasury and the IRS are issuing temporary and proposed regulations providing prospectively that, for purposes of § 83 of the Internal Revenue Code and § 1.83-7, a sale or other disposition of a nonstatutory compensatory stock option[1] to a related person will not be treated as a transaction that closes the application of § 83 with respect to the option.

I. The Transaction

The transaction involves an individual, generally an employee, who has been granted a nonstatutory compensatory stock option. The individual transfers the option to a related person. The related person may be a family member or an entity in which the individual or members of the individual’s family hold a substantial interest. But, for purposes of this notice, a related person does not include (1) a person who is related to the individual by being the service recipient with respect to the option or (2) the grantor of the option. As part of the transfer, the related person pays an amount purportedly equal to the option’s value. The payment often is in the form of a long-term (e.g., 30-year), unsecured and non-negotiable note, calling for a balloon payment of the purchase price at the end of the note’s term. Other payment forms may include other deferred payment obligations, cash or combinations of these types of payments. The related person often is a thinly capitalized entity, with no operating business, and the terms of the note (e.g., the rate of interest and the extent of any security) often fail to reflect the associated risk of nonpayment.

Promoters contend that the options should be treated as sold or otherwise disposed of in an arm’s length transaction for purposes of § 1.83-7, with the result that the individual will not recognize compensation income when the related person exercises the stock option. Furthermore, if the related person pays for the option with a note or other deferred payment obligation, promoters argue that the individual does not recognize compensation income for the purchase price until the related person pays the amounts due under the note or other deferred payment obligation.

II. Intent to Challenge Transaction

The IRS intends to challenge the purported tax benefits for the above-described transaction on a number of grounds, including, in appropriate cases:

A. Characterization of Transfer as an Arm’s Length Transaction

Although the recipient of a compensatory stock option receives a valuable right, the recipient historically has not recognized income at the time of the option grant unless the option had a readily ascertainable fair market value. See Comm. v. LoBue, 351 U.S. 243 (1956); § 1.421-6.[2] This treatment of compensatory stock options generally was continued with the enactment of § 83 and the promulgation of § 1.83-7, which currently govern the taxation of the grant of a nonstatutory compensatory stock option. Section 83(e)(3) provides that § 83 does not apply to require the recognition of income when an option is granted unless the option has a readily ascertainable fair market value. Section 1.83-7(b) defines when an option will be considered to have a readily ascertainable fair market value at grant. This standard is met where the option is actively traded on an established market. Section 1.83-7(b)(1). Otherwise, an option has a readily ascertainable fair market value only if it can be shown that its fair market value can be measured with reasonable accuracy, including a demonstration that the fair market value of the option privilege is readily ascertainable. Section 1.83-7(b)(2). Options that are not taxed at grant generally result in compensation income at the time of exercise, in an amount equal to the excess of the fair market value of the stock purchased over the amount paid by the option recipient.

Section 1.83-7(a) provides an exception to this treatment if the recipient of an option that does not have a readily ascertainable fair market value at the time of grant sells or otherwise disposes of the option in an arm’s length transaction. The transactions described in Section I of this notice rarely, if ever, reflect terms that would be agreed to between unrelated parties dealing at arm’s length. Accordingly, the Service will challenge the transactions described in Section I as not satisfying the exception under § 1.83-7(a) for arm’s length transactions.

B. Treatment of the Deferred Payment Obligation

In any case in which the transaction includes a disposition of an option without a readily ascertainable fair market value at the time of grant and the individual receives a deferred payment obligation, the IRS intends to challenge any deferral of income with respect to the deferred payment obligation. The preceding sentence applies regardless of whether the transaction is treated as an arm’s length transaction or a non-arm’s length transaction for purposes of § 1.83-7.[3] Thus, in any such case, the IRS will argue that the option recipient recognizes income to the extent that the amount of the deferred payment obligation transferred to the option recipient, plus any cash or other property received by the individual, exceeds the amount, if any, the option recipient paid for the option.

Employers and other service recipients are reminded that, under § 83(h), a service recipient is entitled to a deduction for the compensation attributable to the transfer of the option only when the person who performed the services includes an amount in income under § 83(a). Accordingly, the Service will seek to ensure that there is no mismatch of income and deduction between the person who performed the services and the service recipient.

III. Other Bases for Challenge

When appropriate, the Service will not respect the transaction or certain aspects of the transaction, and nothing in this notice is intended to imply otherwise. Accordingly, where the related entity to whom the option is sold or disposed of is not bona fide, lacks substance, or lacks a business purpose, the use of the entity will be treated accordingly. Where the transfer of the option is not bona fide, lacks substance, or lacks a business purpose, the transfer will also be treated accordingly. Finally, where the deferred payment obligation lacks substance, the obligation will be treated accordingly.

IV. Listed Transactions

The following transactions, and any transaction that is substantially similar to the following transactions, are identified as “listed transactions” for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations and § 301.6111-2(b)(2) and § 301.6112-1(b)(2) of the Procedure and Administration Regulations. Transactions in which an individual purports to sell or otherwise dispose of an option described in § 83(e)(3) to a related person are listed transactions with respect to the individual and the related person if the purported sale or other disposition is in exchange for an amount that includes any deferred payment of money or property.

It should be noted that, independent of any classification as “listed transactions” for purposes of §§ 1.6011-4(b)(2), 301.6111-2(b)(2), and 301.6112-1(b)(2) of the regulations, transactions that are the same as, or substantially similar to, the transactions described in this notice may already be subject to the disclosure requirements of § 6011, the tax shelter registration requirements of § 6111 or the list maintenance requirements of § 6112 (§§ 1.6011-4, 301.6111-1T, 301.6111-2, and 301.6112-1).

Persons who are required to satisfy the registration requirement of § 6111 with respect to the transactions described in this notice and who fail to do so may be subject to the penalty under § 6707(a). Persons who are required to satisfy the list-keeping requirement of § 6112 with respect to the transactions and who fail to do so may be subject to the penalty under § 6708(a). In addition, the Service may impose penalties on participants in this transaction or substantially similar transactions, or, as applicable, on persons who participate in the reporting of this transaction or substantially similar transactions, including the accuracy-related penalty under § 6662 and the return preparer penalty under § 6694.

V. Temporary and Proposed Regulations

Treasury and the IRS are issuing temporary regulations and proposed regulations concurrent with this notice providing that a stock option sale or other disposition to a related person will not be treated as a transaction that closes the application of § 83 with respect to the option for purposes of § 1.83-7.

VI. Drafting Information

The principal author of this notice is Stephen Tackney of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), though other officials from the Office of Chief Counsel and Treasury participated in its development. For further information regarding this notice, contact Stephen Tackney at (202) 622-6030 (not a toll-free call).


[1] A nonstatutory compensatory stock option refers to a stock option granted in connection with the performance of services that does not qualify as an incentive stock option described in § 422 or an option granted under an employee stock purchase plan described in § 423.

[2] Except as provided in the transition rules under § 1.83-8(b), § 1.421-6 does not apply to options granted on or after July 1, 1969. See § 1.421-6(a)(2).

[3] Compare § 1.83-1(a) (transferor of substantially nonvested property in a non-arm’s length transaction must include in income the sum of any money and the fair market value of any substantially vested property received in such disposition).

Notice 2003-48

Weighted Average Interest Rate Update

Sections 412(b)(5)(B) and 412(l)(7)(C) (i) of the Internal Revenue Code provide that the interest rates used to calculate current liability for purposes of determining the full funding limitation under § 412(c)(7) and the required contribution under § 412(l) must be within a permissible range around the weighted average of the rates of interest on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year.

Notice 88-73, 1988-2 C.B. 383, provides guidelines for determining the weighted average interest rate and the resulting permissible range of interest rates used to calculate current liability for the purpose of the full funding limitation of § 412(c)(7) of the Code.

Section 417(e)(3)(A)(ii)(II) defines the applicable interest rate, which must be used for purposes of determining the minimum present value of a participant’s benefit under § 417(e)(1) and (2), as the annual rate of interest on 30-year Treasury securities for the month before the date of distribution or such other time as the Secretary may by regulations prescribe. Section 1.417(e)-1(d)(3) of the Income Tax Regulations provides that the applicable interest rate for a month is the annual interest rate on 30-year Treasury securities as specified by the Commissioner for that month in revenue rulings, notices or other guidance published in the Internal Revenue Bulletin.

The rate of interest on 30-year Treasury Securities for June 2003 is 4.37 percent. Pursuant to Notice 2002-26, 2002-1 C.B. 743, the Service has determined this rate as the monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2031.

Section 405 of the Job Creation and Worker Assistance Act of 2002 amended § 412(l)(7)(C) of the Code to provide that for plan years beginning in 2002 and 2003 the permissible range is extended to 120 percent.

The following rates were determined for the plan years beginning in the month shown below.

Month Year Weighted Average 90% to 110% Permissible Range 90% to 120% Permissible Range
July 2003 5.34 4.81 to 5.87 4.81 to 6.41

DRAFTING INFORMATION

The principal authors of this notice are Paul Stern and Tony Montanaro of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact the Employee Plans’ taxpayer assistance telephone service at 1-877-829-5500 (a toll-free number), between the hours of 8:00 a.m. and 6:30 p.m. Eastern time, Monday through Friday. Mr. Stern may be reached at 1-202-283-9703. Mr. Montanaro may be reached at 1-202-283-9714. The telephone numbers in the preceding two sentences are not toll-free.

Rev. Proc. 2003-52

Specifications for Filing Forms 1098, 5498, and W-2G Electronically or Magnetically

PART A. GENERAL

Revenue Procedures are generally revised annually to reflect legislative and form changes. Comments concerning this Revenue Procedure, or suggestions for making it more helpful, can be addressed to:

Internal Revenue Service
Martinsburg Computing Center
Attn: Information Reporting Program
230 Murall Drive
Kearneysville, WV 25430

Use this Revenue Procedure to prepare Tax Year 2003 and prior year information returns for submission to Internal Revenue Service (IRS) using any of the following.

- Electronic Filing
- Tape Cartridge
- 3-Inch Diskette

Caution to filers:
Please read this publication carefully. Persons or businesses required to file information returns electronically or magnetically may be subject to penalties for failure to file or include correct information if they do not follow the instructions in this Revenue Procedure.
IMPORTANT NOTES:
IRS/MCC no longer accepts 8mm, 4mm, and Quarter-Inch Cartridges (QIC) for filing information returns. See Part A, Sec. 2.02.
The FIRE System will be down from Dec. 24, 2003, through Jan. 5, 2004, for upgrading. It is not operational during this time for submissions.

Sec. 1. Purpose

.01 The purpose of this Revenue Procedure is to provide the specifications for filing Forms 1098, 1099, 5498, and W-2G with IRS electronically through the IRS FIRE System or magnetically, using IBM 3480, 3490, 3490E, 3590, 3590E, or AS400 compatible tape cartridges or 3-inch diskettes. IRS/MCC no longer accepts 8mm, 4mm, or Quarter-Inch Cartridges (QIC) for the processing of information returns . This Revenue Procedure must be used for the preparation of Tax Year 2003 information returns and information returns for tax years prior to 2003 filed beginning January 1, 2004, and postmarked by December 1, 2004 . Specifications for filing the following forms are contained in this Revenue Procedure.

  1. Form 1098, Mortgage Interest Statement

  2. Form 1098-E, Student Loan Interest Statement

  3. Form 1098-T, Tuition Statement

  4. Form 1099-A, Acquisition or Abandonment of Secured Property

  5. Form 1099-B, Proceeds From Broker and Barter Exchange Transactions

  6. Form 1099-C, Cancellation of Debt

  7. Form 1099-CAP, Changes in Corporate Control and Capital Structure

  8. Form 1099-DIV, Dividends and Distributions

  9. Form 1099-G, Certain Government Payments

  10. Form 1099-H, Health Insurance Advance Payments

  11. Form 1099-INT, Interest Income

  12. Form 1099-LTC, Long-Term Care and Accelerated Death Benefits

  13. Form 1099-MISC, Miscellaneous Income

  14. Form 1099-MSA, Distributions From an Archer MSA or Medicare+Choice MSA

  15. Form 1099-OID, Original Issue Discount

  16. Form 1099-PATR, Taxable Distributions Received From Cooperatives

  17. Form 1099-Q, Qualified Tuition Program Payments (Under Section 529)

  18. Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  19. Form 1099-S, Proceeds From Real Estate Transactions

  20. Form 5498, IRA Contribution Information

  21. Form 5498-ESA, Coverdell ESA Contribution Information

  22. Form 5498-MSA, Archer MSA or Medicare+Choice MSA Information

  23. Form W-2G, Certain Gambling Winnings

.02 All data received at IRS/MCC for processing will be given the same protection as individual income tax returns (Form 1040). IRS/MCC will process the data and determine if the records are formatted and coded according to this Revenue Procedure.

.03 Specifications for filing Forms W-2, Wage and Tax Statements, magnetically/electronically are only available from the Social Security Administration (SSA). Filers can call 1-800-SSA-6270 to obtain the telephone number of the SSA Employer Service Liaison Officer for their area.

.04 IRS/MCC does not process Forms W-2. Paper and/or magnetic media for Forms W-2 must be sent to SSA. IRS/MCC does, however, process waiver requests (Form 8508) and extension of time to file requests (Form 8809) for Forms W-2 and requests for an extension of time to provide the employee copies of Forms W-2.

.05 Generally, the box numbers on the paper forms correspond with the amount codes used to file electronically/magnetically; however, if discrepancies occur, the instructions in this Revenue Procedure govern.

.06 This Revenue Procedure also provides the requirements and specifications for electronic or magnetic media filing under the Combined Federal/State Filing Program.

.07 The following Revenue Procedures and publications provide more detailed filing procedures for certain information returns:

  1. 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G and individual form instructions.

  2. Publication 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099, 5498, and W-2G

  3. Publication 1239, Specifications for Filing Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, Magnetically or Electronically

  4. Publication 1187, Specifications for Filing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, Magnetically or Electronically

  5. Publication 1245, Specifications for Filing Form W-4, Employee's Withholding Allowance Certificate, Magnetically or Electronically.

.08 This Revenue Procedure supersedes Rev. Proc. 2002-34 published as Publication 1220 (Rev. 7-2002), Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically or Magnetically.

Sec. 2. Nature of Changes—Current Year (Tax Year 2003)

.01 In this publication, all pertinent changes for Tax Year 2003 are emphasized by the use of italics. Portions of text that require special attention are in boldface text. Filers are always encouraged to read the publication in its entirety.

.02 Programming Changes

a. General

  1. IRS/MCC no longer accepts 8mm, 4mm, and Quarter-Inch Cartridges (QIC).

  2. The state of Ohio has joined the Combined Federal/State Filing Program. Their state code is 39. See Part A, Sec. 13.

  3. It is recommended that test data be postmarked no later than December 1 in order for media to arrive by December 15 for processing.

b. Programming Changes — Transmitter “T” Record

  1. For all forms, Payment Year, Field Positions 2-5, must be incremented to update the four-digit report year (2002 to 2003), unless reporting prior year data.

  2. The processing of current year data (2003) ends during December 2004. Media postmarked December 1, 2004, or later must have the Prior Year Data Indicator coded with a “P” in position 6 of the Transmitter “T” Record.

  3. A new field, Vendor Foreign Entity Indicator, in position 740 was added. Use this indicator when the Vendor is a foreign entity with a foreign address. When this indicator is used, the Vendor address, city, state and ZIP fields may be free formatted to accommodate a foreign address.

c. Programming Changes — Payer “A” Record

  1. For all forms, Payment Year, Field Positions 2-5, must be incremented to update the four-digit report year (2002 to 2003), unless reporting prior year data.

  2. The Amount Codes field was expanded to positions 28-41. Two new Amount Codes, “D” and “E” were added. Amount Code “D” is used for 1099-H and Amount Codes “D” and “E” are for 1099-DIV.

  3. A new Form 1099-CAP, Changes in Corporate and Capital Structure, was added to the list of Type of Return, Field Position 27, and was given a code of “P”.

  4. The Amount Codes, Field Positions 28-41, for 1099-CAP are 3 (three), Cash Received, 4 (four), Federal Income Tax Withheld, 8 (eight), Fair Market Value of Stock Received and 9 (nine), Fair Market Value of Other Property Received.

  5. A new Form 1099-H, Health Insurance Advance Payments, was added to the list of Type of Return, Field Position 27, and was given a code of “J”.

  6. The Amount Codes, Field Positions 28-41, for 1099-H are 1 (one), Gross amount of health insurance advance payments, 2 (two), Amount of advance payment for January, 3 (three), Amount of advance payment for February, 4 (four), Amount of advance payment for March, 5 (five), Amount of advance payment for April, 6 (six), Amount of advance payment for May, 7 (seven), Amount of advance payment for June, 8 (eight), Amount of advance payment for July, 9 (nine), Amount of advance payment for August, A, Amount of advance payment for September, B, Amount of advance payment for October, C, Amount of advance payment for November, and D, Amount of advance payment for December.

  7. A new Form 5498-ESA, Coverdell ESA Contribution Information, was added to the list of Type of Return, Field Position 27, and was given a code of “V”.

  8. The Amount Codes, Field Positions 28-41, for 5498-ESA are 1 (one), Coverdell ESA contributions, and 2 (two), Rollover contributions.

  9. Two additional Amount Codes, Field Positions 28-41, were added for Form 1099-B. Amount Code A is for Post - 05/05/2003 profit or (loss) realized, and B is for Post - 05/05/2003 aggregate profit or (loss).

  10. Form 1099-DIV, Dividends and Distributions, was revised extensively. Descriptions for Amount Codes are totally different from previous years. See Part D, Sec. 5 for details on the changes.

  11. For Form 1098-T, Amount Codes were rewritten to correspond more closely to the paper Form 1098-T.

d. Programming Changes — Payee “B” Record

  1. For all forms, Payment Year, Field Positions 2-5, must be incremented to update the four-digit report year (2002 to 2003), unless reporting prior year data.

  2. Payer's Account Number For Payee is now a required field. This information is critical in the correction process, especially when more than one information return is filed for a payee.

  3. Additional Payment Amount Fields D and E were created in Field Positions 199-210 and 211-222. This is to accommodate the fourteen Amount Codes for the revised Form 1099-DIV.

  4. For Form 1099-H, Field Positions 547-548, Number of Months Eligible, was created to report total number of months of insurance advance payments for the year.

  5. For Form 1099-CAP, Field Positions 544-750, provide specific formatting for the following information: Second TIN Notice, Gross Proceeds Indicator, Date of Exchange, CUSIP Number, Description, Number of Shares Exchanged, Class of Stock, and Filed By Broker Indicator.

  6. For Form 1099-R, Distribution Code M and H were deleted from the table of acceptable distribution codes. The combination of distribution codes “2” and “L” are no longer valid. A new distribution code of “Q”, for early distributions from Roth IRA, was added. Other code descriptions and combinations have changed. Please review all information pertaining to 1099-R Distribution Codes carefully.

  7. For Form 5498, the Coverdell ESA Indicator was deleted in Field Position 552. This information is now reported on the new Form 5498-ESA. A new indicator was added in position 551 for reporting required minimum distributions (RMD) from an IRA.

  8. For Form 1099-Q, Type of Tuition Payment, Field Position 548, an additional indicator of 3 was added for ESA contributions.

e. Programming Changes — End of Payer “C” Record

  1. An additional Control Total D field, positions 232-249, was added to accommodate new Payment Amount Field D.

  2. An additional Control Total E field, positions 250-267, was added to accommodate new Payment Amount Field E.

f. Programming Changes — State Totals “K” Record

  1. An additional Control Total D field, positions 232-249, was added to accommodate new Payment Amount Field D.

  2. An additional Control Total E field, positions 250-267, was added to accommodate new Payment Amount Field E.

.03 Editorial Changes

  1. Form 5498 was renamed IRA Contribution Information

  2. Form 1098-T was renamed Tuition Statement

Sec. 3. Where To File and How to Contact the IRS, Martinsburg Computing Center

.01 All information returns filed electronically or magnetically are processed at IRS/MCC. Files containing information returns and requests for IRS electronic and magnetic media filing information should be sent to the following address:

IRS-Martinsburg Computing Center
Information Reporting Program
230 Murall Drive
Kearneysville, WV 25430

.02 All requests for an extension of time to file information returns with IRS/MCC or to the recipients and requests for undue hardship waivers filed on Form 8508 should be sent to the following address:

IRS-Martinsburg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430

.03 The telephone numbers for magnetic media inquiries or electronic submissions are:

CUSTOMER SERVICE SECTION
TOLL-FREE 1-866-455-7438 or outside the U.S. 1-304-263-8700
email at mccirp@irs.gov
304-267-3367 — TDD
(Telecommunication Device for the Deaf)
304-264-5602 — Fax Machine
Electronic Filing — FIRE system
304-262-2400
TO OBTAIN FORMS:
1-800-TAX-FORM (1-800-829-3676)
www.irs.gov — IRS Website access to forms (See Note.)

Note: Because the IRS processes paper forms by machine (optical character recognition equipment), you cannot file the IRS Form 1096 or Copy A of Forms 1098, 1099, 5498, or W-2G printed from the IRS Website.

.04 The 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G and the individual form instructions have been included in the Publication 1220 for your convenience. Form 1096 is used only to transmit Copy A of paper Forms 1099, 1098, 5498, and W-2G. If filing paper returns, follow the mailing instructions on Form 1096 and submit the paper returns to the appropriate IRS Service Center.

.05 Make requests for paper Forms 1096, 1098, 1099, 5498, and W-2G, and publications related to electronic/magnetic filing by calling the IRS toll-free number 1-800-TAX-FORM (1-800-829-3676) or on the IRS Website at www.irs.gov.

.06 Questions pertaining to magnetic media filing of Forms W-2 must be directed to the Social Security Administration (SSA). Filers can call 1-800-772-6270 to obtain the phone number of the SSA Employer Service Liaison Officer for their area.

.07 Payers should not contact IRS/MCC if they have received a penalty notice and need additional information or are requesting an abatement of the penalty. A penalty notice contains an IRS representative's name and/or telephone number for contact purposes; or, the payer may be instructed to respond in writing to the address provided. IRS/MCC does not issue penalty notices and does not have the authority to abate penalties. For penalty information, refer to the Penalties section of the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.

.08 A taxpayer or authorized representative may request a copy of a tax return, including Form W-2 filed with a return, by submitting Form 4506, Request for Copy or Transcript of Tax Form, to IRS. This form may be obtained by calling 1-800-TAX-FORM (1-800-829-3676). For any questions regarding this form, call 1-800-829-1040.

.09 The Information Reporting Program Customer Service Section (IRP/CSS), located at IRS/MCC, answers electronic/magnetic media, paper filing, and tax law questions from the payer community relating to the filing of business information returns (Forms 1096, 1098, 1099, 5498, 8027, W-2G, and W-4). IRP/CSS also answers questions relating to the electronic/magnetic media filing of Forms 1042-S and to the tax law criteria and paper filing instructions for Forms W-2 and W-3. Inquiries dealing with backup withholding and reasonable cause requirements due to missing and incorrect taxpayer identification numbers are also addressed by IRP/CSS. Assistance is available year-round to payers, transmitters, and employers nationwide, Monday through Friday, 8:30 a.m. to 4:30 p.m. Eastern time, by calling toll-free 1-866-455-7438 or via email at mccirp@irs.gov . Do not include SSNs or EINs on emails since this is not a secure line . The Telecommunications Device for the Deaf (TDD) toll number is 304-267-3367. Call as soon as questions arise to avoid the busy filing seasons at the end of January and February. Recipients of information returns (payees) should continue to contact 1-800-829-1040 with any questions on how to report the information returns data on their tax returns.

.10 Form 4419, Application for Filing Information Returns Electronically/Magnetically, Form 8809, Request for Extension of Time to File Information Returns, and Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media may be faxed to IRS/MCC at 304-264-5602. Form 4804, Transmittal of Information Returns Filed Magnetically must always be included with media shipments.

Sec. 4. Filing Requirements

.01 The regulations under section 6011(e)(2)(A) of the Internal Revenue Code provide that any person, including a corporation, partnership, individual, estate, and trust, who is required to file 250 or more information returns must file such returns electronically/magnetically. The 250* or more requirement applies separately for each type of return and separately to each type of corrected return.

  • *Even though filers may submit up to 249 information returns on paper, IRS encourages filers to transmit those information returns electronically or magnetically.

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

.03 Payers who are required to submit their information returns on magnetic media may choose to submit their documents by electronic filing. Payers, who submit their information returns electronically by March 31, 2004, are considered to have satisfied the magnetic media filing requirements.

.04 IRS/MCC has one method for filing information returns electronically; see Part B.

.05 The following requirements apply separately to both originals and corrections filed electronically/magnetically:

1098 250 or more of any of these forms require magnetic media filing with IRS. Filing electronically will also meet this requirement. These are stand-alone documents and are not to be aggregated for purposes of determining the 250 threshold. For example, if you must file 100 Forms 1099-B and 300 Forms 1099-INT, Forms 1099-B need not be filed electronically or magnetically since they do not meet the threshold of 250. However, Forms 1099-INT must be filed electronically or magnetically since they meet the threshold of 250.
1098-E
1098-T
1099-A
1099-B
1099-C
1099-CAP
1099-DIV
1099-G
1099-H
1099-INT
1099-LTC
1099-MISC
1099-MSA
1099-OID
1099-PATR
1099-Q
1099-R
1099-S
5498
5498-ESA
5498-MSA
W-2G

.06 The above requirements do not apply if the payer establishes undue hardship (See Part E, Sec. 5).

Sec. 5. Vendor List

.01 IRS/MCC prepares a list of vendors who support electronic or magnetic media filing. The Vendor List (Pub. 1582) contains the names of service bureaus that will produce files via electronic filing or on the prescribed types of magnetic media. It also contains the names of vendors who provide software packages for payers who wish to produce electronic files or magnetic media on their own computer systems. This list is compiled as a courtesy and in no way implies IRS/MCC approval or endorsement.

.02 If filers meeting the filing requirements engage a service bureau to prepare media on their behalf, the filers should be careful not to report duplicate data, which may cause penalty notices to be generated.

.03 The Vendor List, Publication 1582, may be updated in print every other year. The most recently printed copy will be available by contacting IRS/MCC at our toll-free number 1-866-455-7438 or by letter (See Part A, Sec. 3). The Vendor List is also available on the IRS Website at www.irs.gov.

.04 A vendor, who offers a software package, or has the capability to electronically file information returns, or has the ability to produce magnetic media for customers, and who would like to be included on the list, must submit a letter or email to IRS/MCC. The request should include:

  1. Company name

  2. Address (include city, state, and ZIP code)

  3. Telephone and FAX number (include area code)

  4. Email address

  5. Contact person

  6. Type(s) of service provided (e.g., service bureau and/or software)

  7. Type(s) of media offered (e.g., tape cartridge, 3-inch diskette, or electronic filing)

  8. Type(s) of return(s)

Sec. 6. Form 4419, Application for Filing Information Returns Electronically/Magnetically

.01 Transmitters are required to submit Form 4419, Application for Filing Information Returns Electronically/Magnetically, to request authorization to file information returns with IRS/MCC. A single Form 4419 should be filed no matter how many types of returns the transmitter will be submitting electronically/magnetically. For example, if a transmitter plans to file Forms 1099-INT, one Form 4419 should be submitted. If, at a later date, another type of form (Forms 1098, 1099, 5498 and W-2G) is to be filed, the transmitter does not need to submit a new Form 4419.

Note

Note: EXCEPTIONS — An additional Form 4419 is required for filing each of the following types of returns: Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, and Form W-4, Employee’s Withholding Allowance Certificate. See the back of Form 4419 for detailed instructions.

.02 Tape cartridge, diskette, and electronically filed returns may not be submitted to IRS/MCC until the application has been approved. Please read the instructions on the back of Form 4419 carefully. Form 4419 is included in the Publication 1220 for the filer’s use. This form may be photocopied. Additional forms may be obtained by calling 1-800-TAX-FORM (1-800-829-3676). The form is also available on the IRS Website at www.irs.gov.

.03 Upon approval, a five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and included in an approval letter. The TCC must be coded in the Transmitter “T” Record. IRS/MCC uses the TCC to identify payer/transmitters and to track their files through the processing system. The same TCC can be used regardless of the method of filing. For example, a payer may send their production data on a tape cartridge and then later file a correction file electronically. The same TCC can be used for each filing.

.04 IRS/MCC encourages transmitters who file for multiple payers to submit one application and to use the assigned TCC for all payers. While not encouraged, multiple TCCs can be issued to payers with multiple TINs. If a transmitter uses more than one TCC to file, each TCC must be reported in separate transmissions if filing electronically or on separate media if filing magnetically.

.05 If a payer's files are prepared by a service bureau, the payer may not need to submit an application to obtain a TCC. Some service bureaus will produce files, code their own TCC in the file, and send it to IRS/MCC for the payer. Other service bureaus will prepare the file and return the file to the payer for submission to IRS/MCC. These service bureaus may require the payer to obtain a TCC, which is coded in the Transmitter “T” Record. Payers should contact their service bureaus for further information.

.06 Form 4419 may be submitted anytime during the year; however, it must be submitted to IRS/MCC at least 30 days before the due date of the return(s) for current year processing. This will allow IRS/MCC the minimum amount of time necessary to process and respond to applications. In the event that computer equipment or software is not compatible with IRS/MCC, a waiver may be requested to file returns on paper documents (See Part E, Sec. 5).

.07 Once a transmitter is approved to file electronically/magnetically, it is not necessary to reapply unless:

  1. The payer has discontinued filing electronically or magnetically for two consecutive years. The payer's TCC may have been reassigned by IRS/MCC. Payers who are aware the TCC assigned will no longer be used are requested to notify IRS/MCC so these numbers may be reassigned.

  2. The payer's files were transmitted in the past by a service bureau using the service bureau's TCC, but now the payer has computer equipment compatible with that of IRS/MCC and wishes to prepare his or her own files. The payer must request a TCC by filing Form 4419.

.08 In accordance with Regulations Section 1.6041-7(b), payments by separate departments of a health care carrier to providers of medical and health care services may be reported on separate returns filed electronically or magnetically. In this case, the headquarters will be considered the transmitter, and the individual departments of the company filing reports will be considered payers. A single Form 4419 covering all departments filing electronically/magnetically should be submitted. One TCC may be used for all departments.

.09 Annually, a Publication 1220 containing the current Revenue Procedure, forms, and instructions will be sent to the attention of the contact person indicated on Form 4419. Additional copies can be obtained by downloading from the IRS Website at www.irs.gov or by calling 1-800-829-3676.

.10 If any of the information (name, TIN or address) on Form 4419 changes, please notify IRS/MCC in writing so the IRS/MCC database can be updated. You may use our email address, mccirp@irs.gov, for basic name and address changes. IRS/MCC does not recommend sending TIN information via email. A change in the method by which information returns are submitted is not information that needs to be updated (e.g., diskette to electronic). The transmitter should include the TCC in all correspondence.

.11 Approval to file does not imply endorsement by IRS/MCC of any computer software or of the quality of tax preparation services provided by a service bureau or software vendor.

Sec. 7. Test Files

.01 IRS/MCC encourages first time electronic or magnetic media filers to submit a test. Test files are required for filers wishing to participate in the Combined Federal/State Filing Program. See Part A, Sec. 13, for further information on the Combined Federal/State Filing Program.

.02 The test file must consist of a sample of each type of record:

  1. Transmitter “T” Record (all fields marked required must include transmitter information)

  2. Payer “A” Record (must not be fictitious data)

  3. Multiple Payee “B” Records (at least 11 “B” Records per each “A” Record)

  4. End of Payer “C” Record

  5. State Totals “K” Record, if participating in the Combined Federal/State Filing Program

  6. End of Transmission “F” Record(See Part D for record formats.)

.03 Use the Test Indicator “T” in Field Position 28 of the “T” Record to show this is a test file.

.04 IRS/MCC will check the file to ensure it meets the specifications of this Revenue Procedure. For current filers, sending a test file will provide the opportunity to ensure their software reflects any programming changes.

.05 Electronic tests may be submitted November 1, 2003, through February 15, 2004. See Part B, Sec. 4.03, for information on electronic test results.

.06 Tests submitted on magnetic media should be postmarked no earlier than October 1, 2003, and no later than December 1, 2003. Tests must be received at MCC by December 15 in order to be processed. Test processing will not begin until November 1. For tests filed on tape cartridge, and 3-inch diskette, the transmitter must include the signed Form 4804 in the same package with the corresponding magnetic media. The “TEST” box in Block 1 on Form 4804 must be marked and the external media label must denote “TEST”.

.07 IRS/MCC will send a letter of acknowledgment to indicate the magnetic media test results. Unacceptable magnetic media test filers will receive a letter and/or documentation identifying the errors. Resubmission of magnetic media test files must be received by IRS/MCC no later than December 15, 2003.

TESTING PERIODS
MAGNETIC MEDIA ELECTRONIC FILES
November 1, 2003, through December 15, 2003** Postmark media by Dec.1 in order for media to be received at MCC by December 15 November 1, 2003, through February 15, 2004

Sec. 8. Filing of Information Returns Magnetically and Retention Requirements

.01 Form 4804, Transmittal of Information Returns Reported Magnetically, or a computer-generated substitute, must accompany all magnetic media shipments except for replacements, when Form 4804 is not always necessary (See Part A, Sec. 10).

.02 IRS/MCC allows for the use of computer-generated substitutes for Form 4804. The substitutes must contain all information requested on the original forms including the affidavit and signature line. Photocopies are acceptable, however, an original signature is required. When using computer-generated forms, be sure to clearly mark the tax year being reported. This will eliminate a telephone communication from IRS/MCC to question the tax year.

.03 Form 4804 may be signed by the payer or the transmitter, service bureau, paying agent, or disbursing agent (all hereafter referred to as agent) on behalf of the payer. Failure to sign the affidavit on Form 4804 may delay processing or could result in the files being unprocessed. An agent may sign Form 4804 if the agent has the authority to sign the affidavit under an agency agreement (either oral, written, or implied) that is valid under state law and adds the caption “FOR: (name of payer).”

.04 Although an authorized agent may sign the affidavit, the payer is responsible for the accuracy of Form 4804 and the returns filed. The payer will be liable for penalties for failure to comply with filing requirements.

.05 Multiple types of media may be submitted in a shipment. However, a separate Form 4804 must be submitted for each type of media.

.06 Current and prior year data may be submitted in the same shipment; however, each tax year must be on separate media, and a separate Form 4804 must be prepared to clearly indicate each tax year.

.07 Filers who have prepared their information returns in advance of the due date are encouraged to submit this information to IRS/MCC no earlier than January 1 of the year the returns are due.

.08 Do not report duplicate information. If a filer submits returns electronically/magnetically, identical paper documents must not be filed. This may result in erroneous penalty notices.

.09 A self-adhesive external media label, created by the filer, must be affixed to each piece of magnetic media. For instructions on how to prepare an external media label, refer to Notice 210 in the forms section of this publication. If diskettes are used, be certain that only MS-DOS compatible operating systems were used to prepare the diskettes. Non MS-DOS diskettes are no longer acceptable at IRS/MCC.

.10 When submitting files include the following:

  1. A signed Form 4804

  2. External media label (created by filer) affixed to magnetic media

  3. IRB Box of labeled on outside of each package

.11 IRS/MCC will not return media after successful processing. Therefore, if the transmitter wants proof that IRS/MCC received a shipment, the transmitter should select a service with tracking capabilities or one that will provide proof of delivery. Do not use special shipping containers for mailing media to IRS/MCC. Shipping containers will not be returned.

.12 IRS/MCC will not pay for or accept “Cash-on-Delivery” or “Charge to IRS” shipments of tax information that an individual or organization is legally required to submit.

.13 Payers should retain a copy of the information returns filed with IRS or have the ability to reconstruct the data for at least 3 years from the reporting due date, with the exception of:

  1. A 4-year retention period is required for all information returns when backup withholding is imposed.

  2. A financial entity must retain a copy of Form 1099-C, Cancellation of Debt, or have the ability to reconstruct the data required to be included on the return, for at least 4 years from the date such return is required to be filed.

Sec. 9. Due Dates

.01 The due dates for filing paper returns with IRS also apply to magnetic media. Filing of information returns is on a calendar year basis, except for Forms 5498 and 5498-MSA, which are used to report amounts contributed during or after the calendar year (but not later than April 15). The following due dates will apply to Tax Year 2003:

Due Dates
Electronic Filing Magnetic Filing (See Note.)
Forms 1098, 1099, and W-2G Forms 1098, 1099, and W-2G
Recipient Copy — February 2, 2004 Recipient Copy — February 2, 2004
IRS Copy — March 31, 2004 IRS Copy — March 1, 2004
Electronic/Magnetic Filing
Forms 5498*, 5498-MSA* and 5498-ESA**
IRS Copy — June 1, 2004
Participant Copy — June 1, 2004*
Participant Copy - April 30, 2004**
* Participants’ copies of Forms 5498 and 5498-MSA to furnish fair market value information — February 2, 2004

.02 If any due date falls on a Saturday, Sunday, or legal holiday, the return or statement is considered timely if filed or furnished on the next day that is not a Saturday, Sunday, or legal holiday.

.03 Magnetic media returns postmarked by the United States Postal Service (USPS) on or before March 1, 2004, and delivered by United States mail to the IRS/MCC after the due date, are treated as timely under the “timely mailing as timely filing” rule. Refer to the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G, When to File, located in the back of this publication for more detailed information. Notice 97-26, 1997-1 C.B. 413, provides rules for determining the date that is treated as the postmark date. For items delivered by a non-designated Private Delivery Service (PDS), the actual date of receipt by IRS/MCC will be used as the filing date. For items delivered by a designated PDS, but through a type of service not designated in Notice 99-41, the actual date of receipt by IRS/MCC will be used as the filing date. The timely mailing rule also applies to furnishing statements to recipients and participants.

Note

Note: Due to security regulations at MCC, the Internal Revenue police officers will only accept media from PDSs or couriers from 7:00 a.m. to 5:00 p.m., Monday through Friday.

.04 Use this Revenue Procedure to prepare information returns filed electronically or magnetically beginning January 1, 2004, and postmarked no later than December 1, 2004.

.05 Media postmarked December 2, 2004, or later must have the Prior Year Data Indicator coded with a “P” in position 6 of the Transmitter “T” Record.

Sec. 10. Replacement Magnetic Media

Note

Note: Replacement Electronic files is detailed in Part B, Sec. 5.

.01 A replacement is an information return file sent by the filer at the request of IRS/MCC because of errors encountered while processing the filer’s original file or correction file. After the necessary changes have been made, the entire file must be returned for processing along with the Media Tracking Slip (Form 9267) which was included in the correspondence from IRS/MCC. (See Note.)

Note: Filers should never send anything to IRS/MCC marked “Replacement” unless IRS/MCC has requested a replacement file in writing or via the FIRE System.

.02 Magnetic Media filers will receive a Media Tracking Slip (Form 9267), listing, and letter detailing the reason(s) their media could not be processed. It is imperative that filers maintain backup copies and/or recreate capabilities for their information return files. Open all correspondence from IRS/MCC immediately.

.03 When possible, sample records identifying errors encountered will be provided with the returned information. It is the responsibility of the transmitter to check the entire file for similar errors.

.04 Before sending replacement media, make certain the following items are in place:

  1. Make the required changes noted in the enclosed correspondence and check entire file for other errors.

  2. Code Transmitter “T” record, in positions 21-22 for replacement. See Part D, Sec. 3.

  3. Code Payer “A” record in position 49 with “1” for replacement file. See Part D, Sec. 4.

  4. Enclose Form 9267, Media Tracking Slip, with your replacement media.

  5. Label your Media “Replacement Data” and indicate the appropriate Tax Year.

  6. Complete a new Form 4804 if any of your information has changed.

.05 Replacement files must be corrected and returned to IRS/MCC within 45 days from the date of the letter. Refer to Part B, Sec. 5 .05, for procedures for files submitted electronically. A penalty for failure to return a replacement file by the due date will be assessed if the files are not corrected and returned within the 45 days or if filers are notified by IRS/MCC of the need for a replacement file more than two times. A penalty for intentional disregard of filing requirements will be assessed if a replacement file is not received. (For penalty information, refer to the Penalty section of the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.)

Sec. 11. Corrected Returns

  • A correction is an information return submitted by the transmitter to correct an information return that was previously submitted to and processed by IRS/MCC, but contained erroneous information.

  • While we encourage you to file your corrections electronically/magnetically, you may file up to 249 paper corrections even though your originals were filed electronically or magnetically.

  • DO NOT SEND YOUR ENTIRE FILE AGAIN. Only send the information returns in need of correction.

  • Information returns omitted from the original file must not be coded as corrections. Submit them under a separate Payer “A” Record as original returns.

  • Be sure to use the same Payee Account Number that was used on the original submission. The account number is used to match a correction record to the original information return.

  • Before creating your correction file, review the following guidelines chart carefully.

.01 The magnetic media filing requirement of information returns of 250 or more applies separately to both original and corrected returns.

E
X
A
M
P
L
E

If a payer has 100 Forms 1099-A to be corrected, they can be filed on paper because they fall under the 250 threshold. However, if the payer has 300 Forms 1099-B to be corrected, they must be filed electronically or magnetically because they meet the 250 threshold. If for some reason a payer cannot file the 300 corrections electronically or magnetically, to avoid penalties, a request for a waiver must be submitted before filing on paper. If a waiver is approved for original documents, any corrections for the same type of return will be covered under this waiver.

.02 Corrections should be filed as soon as possible. Corrections filed after August 1 may be subject to the maximum penalty of $50 per return. Corrections filed by August 1 may be subject to a lesser penalty. (For information on penalties, refer to the Penalties section of the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.) However, if payers discover errors after August 1, they should file corrections, as prompt correction is a factor considered in determining whether the intentional disregard penalty should be assessed or whether a waiver of the penalty for reasonable cause may be granted. 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. Furnish corrected statements to recipients as soon as possible.

Note

Note: Do NOT resubmit your entire file as corrections. This will result in duplicate filing and erroneous notices may be sent to payees. Submit only those returns which need to be corrected.

.03 There are numerous types of errors, and in some cases, more than one transaction may be required to correct the initial error. If the original return was filed as an aggregate, the filers must consider this in filing corrected returns.

.04 The payee's account number must be included on all correction records. This is especially important when more than one information return of the same type is reported for a payee. The account number is used to determine which information return is being corrected. It is vital that each information return reported for a payee have a unique account number. See Part D, Sec. 6, Payer's Account Number For Payee.

.05 Corrected returns may be included on the same media as original returns; however, separate “A” Records are required. Corrected returns must be identified on Form 4804 and the external media label by indicating “Correction.” If filers discover that certain information returns were omitted on their original file, they must not code these documents as corrections. The file must be coded and submitted as originals.

.06 If a payer realizes duplicate reporting has occurred, IRS/MCC should be contacted immediately for instructions on how to avoid notices. The standard correction process will not resolve duplicate reporting.

.07 If a payer discovers errors that affect a large number of payees, in addition to sending IRS the corrected returns and notifying the payees, a letter containing the following information should be sent to IRS/MCC:

  1. Name and address of payer

  2. Type of error (please explain clearly)

  3. Tax year

  4. Payer TIN

  5. TCC

  6. Type of Return

  7. Number of Payees

  8. Filing method, paper, electronic, or magnetic media

This information will be forwarded to the appropriate office in an attempt to prevent erroneous notices from being sent to the payees. The corrections must be submitted on actual information return documents or filed electronically/magnetically. Form 4804 must be submitted with corrected files submitted magnetically. If filing magnetically, provide the correct tax year in Block 2 of Form 4804 and on the external media label. All references to Form 4804 in the guidelines apply only to files submitted magnetically. Form 4804 is not required for electronic filing.

.08 Prior year data, original and corrected, must be filed according to the requirements of this Revenue Procedure. If submitting prior year corrections, use the record format for the current year and submit on separate media. However, use the actual year designation of the correction in Field Positions 2-5 of the “T”, “A”, and “B” Records. If filing electronically, a separate transmission must be made for each tax year.

.09 In general, filers should submit corrections for returns filed within the last 3 calendar years (4 years if the payment is a reportable payment subject to backup withholding under section 3406 of the Code and also for Form 1099-C, Cancellation of Debt).

.10 All paper returns, whether original or corrected, must be filed with the appropriate service center.

.11 The “B” Record provides a 20-position field for a unique Payer's Account Number for the Payee. If a payee has more than one reporting of the same document type, it is vital that each reporting have a unique account number. This number will help identify the appropriate incorrect return if more than one return is filed for a particular payee. Do not enter a TIN in this field. 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 should appear on the initial return and on the corrected return in order to identify and process the correction properly.

.12 The record sequence for filing corrections is the same as for original returns.

.13 Review the chart that follows. Errors normally fall under one of the two categories listed. Next to each type of error is a list of instructions on how to file the corrected return.

Guidelines for Filing Corrected Returns Electronically/Magnetically
Error Made on the Original Return How To File the Corrected Return
Note: References to Form 4804 apply to magnetically filed media only. Form 4804 is not required for files submitted electronically through the FIRE System.
One transaction is required to make the following corrections properly. (See Note 3.)
1. Original return was filed with one or more of the following errors: (a) Incorrect payment amount codes in the Payer “A” Record (b) Incorrect payment amounts in the Payee “B” Record (c) Incorrect code in the distribution code field in the Payee “B” Record (d) Incorrect payee address (e) Incorrect Direct sales indicator A. Prepare a new Form 4804 that includes information relating to this new file.
B. Mark “Correction” in Block 1 of Form 4804.
C. Prepare a new file. The first record on the file will be the Transmitter “T” Record.
D. Make a separate “A” Record for each type of return and each payer being reported. Information in the “A” Record may be the same as it was in the original submission. However, remove the “1” (one) in Field Position 48 and set the Correction File Indicator (Field Position 50), to “1” (one).
E. The Payee “B” Records must show the correct record information as well as a Corrected Return Indicator Code of “G” in Field Position 6.
F. Corrected returns submitted to IRS/MCC using “G” coded “B” Records may be on the same file as those returns submitted without the “G” coded “B” Records; however, separate “A” Records are required.
G. Prepare a separate “C” Record for each type of return and each payer being reported.
H. The last record on the file will be the End of Transmission “F” Record.
I. Indicate “Correction” on the external media label.

File layout one step corrections

Transmitter “T” Record Payer “A” Record “G” coded Payee “B” Record “G” coded Payee “B” Record End of Payer “C” Record End of Transmission “F” Record

Guidelines for Filing Corrected Returns Electronically/Magnetically (Continued)
Error Made on the Original Return How To File the Corrected Return
Two (2) separate transactions are required to make the following corrections properly. Follow the directions for both Transactions 1 and 2. (See Note 2.) DO NOT use the two step correction process to correct money amounts.
2. Original return was filed with one or more of the following errors: Transaction 1: Identify incorrect returns.
(a) No payee TIN (SSN, ITIN, ATIN or EIN) (b) Incorrect payee TIN (c) Incorrect payee name (d) Wrong type of return indicator A. Prepare a new Form 4804 that includes information related to this new file.
B. Mark “Correction” in Block 1 of Form 4804.
C. Prepare a new file. The first record on the file will be the Transmitter “T” Record.
D. Make a separate “A” Record for each type of return and each payer being reported. The information in the “A” Record will be exactly the same as it was in the original submission with one exception; remove the “1” from Field Position 48, and set the Correction File Indicator (Field Position 50) to “1” (one). (See Note 1.)
E. The Payee “B” Records must contain exactly the same information as submitted previously, except, insert a Corrected Return Indicator Code of “G” in Field Position 6 of the “B” Records, and enter “0” (zeros) in all payment amounts. (See Note 1.)
F. Corrected returns submitted to IRS/MCC using “G” coded “B” Records may be on the same file as those returns submitted with a “C” code; however, separate “A” Records are required.
G. Prepare a separate “C” Record for each type of return and each payer being reported.
H. Continue with Transaction 2 to complete the correction.
Transaction 2: Report the correct information.
A. Make a separate “A” Record for each type of return and each payer being reported. Remove the “1” in Field Position 48 and set the Correction File Indicator (Field Position 50), to “1” (one).
B. The Payee “B” Records must show the correct information as well as a Corrected Return Indicator Code of “C” in Field Position 6.
C. Corrected returns submitted to IRS/MCC using “C” coded “B” Records may be on the same file as those returns submitted with “G” codes; however, separate “A” Records are required.
D. Prepare a separate “C” Record for each type of return and each payer being reported.
E. The last record on the file will be the End of Transmission “F” Record.
F. Indicate “Correction” on the external media label.
Note 1: The Record Sequence Number will be different since this is a counter number and is unique to each file. For 1099-R corrections, if the corrected amounts are zeros, certain indicators will not be used.
Note 2: See the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G for additional information on regulations affecting corrections and related penalties.

File layout two step corrections

Transmitter “T” Record Payer “A” Record “G” coded Payee “B” Record “G” coded Payee “B” Record End of Payer “C” Record Payer “A” Record

“C” coded Payee “B” Record “C” coded Payee “B” Record End of Payer “C” Record End of Transmission “F” Record

Note 3: If a filer is correcting the name and/or TIN in addition to any errors listed in item 2 of the chart, two transactions will be required. If a filer is reporting “G” coded, “C” coded, and/or “Non-coded” (original) returns on the same media, each category must be reported under separate “A” Records.

Sec. 12. Effect on Paper Returns and Statements to Recipients

.01 Electronic/Magnetic reporting of information returns eliminates the need to submit paper documents to the IRS. CAUTION: Do not send Copy A of the paper forms to IRS/MCC for any forms filed electronically or magnetically. This will result in duplicate filing; therefore, erroneous notices could be generated.

.02 Payers are responsible for providing statements to the payees as outlined in the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G. Refer to those instructions for filing information returns on paper with the IRS and furnishing statements to recipients.

.03 Statements to recipients should be clear and legible. If the official IRS form is not used, the filer must adhere to the specifications and guidelines in Publication 1179, Rules and Specifications for Private Printing of Substitute Forms 1096, 1098, 1099, 5498, and W-2G.

Sec. 13. Combined Federal/State Filing Program

  • Through the Combined Federal/State Filing (CF/SF) Program, IRS/MCC will forward original and corrected information returns filed electronically or magnetically to participating states for approved filers.

  • For approval, the filer must submit a test file coded for this program. See Part A, Sec. 7, Test Files.

  • For magnetic media test files, attach a letter to Form 4804 requesting approval to participate in the CF/SF Program. Form 4804 or letter is not required for tests sent electronically.

  • Approved filers are sent Form 6847, Consent for Internal Revenue Service to Release Tax Information, which must be completed and returned to IRS/MCC. A separate form is required for each payer.

.01 The Combined Federal/State Filing (CF/SF) Program was established to simplify information returns filing for the taxpayer. IRS/MCC will forward this information to participating states free of charge for approved filers. Separate reporting to those states is not necessary. The following information returns may be filed under the Combined Federal/State Filing Program:

  • Form 1099-DIV—Dividends and Distributions

  • Form 1099-G—Certain Government Payments

  • Form 1099-INT—Interest Income

  • Form 1099-MISC—Miscellaneous Income

  • Form 1099-OID—Original Issue Discount

  • Form 1099-PATR—Taxable Distributions Received From Cooperatives

  • Form 1099-R—Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  • Form 5498—IRA and Coverdell ESA Contribution Information

.02 To request approval to participate, a magnetic media test file coded for this program must be submitted to IRS/MCC between November l, 2003, and December 15, 2003. Media must be postmarked no later than December 1, 2003 in order to be received at MCC by December 15 for processing. Electronic test files coded for this program must be submitted between November 1, 2003, and February 15, 2004.

.03 Attach a letter to Form 4804 submitted with the test file to indicate a desire to participate in the Combined Federal/State Filing Program. Test files sent electronically do not require Form 4804 or letter. If the test file is coded for the Combined Federal/State Filing Program and is acceptable, an approval letter and Form 6847, Consent For Internal Revenue Service to Release Tax Information, will be sent to the filer.

.04 A test file is only required for the first year when you apply to participate in the Program. Each record, both in the test and the actual data file, must conform to this Revenue Procedure.

.05 If the test file is acceptable, IRS/MCC will send the filer an approval letter, and Form 6847, Consent for Internal Revenue Service to Release Tax Information, which the payer must complete, sign, and return to IRS/MCC before any tax information can be released to the state. Filers must write their TCC on Form 6847.

.06 If the test file is not acceptable, IRS/MCC will send magnetic media filers information indicating the problems. Electronic filers must dial back to the FIRE System within two business days to check the acceptability of their test file. The new test file must be postmarked no later than December 1, 2003 for magnetic media, or February 15, 2004, for an electronically filed test.

.07 A separate Form 6847 is required for each payer. A transmitter may not combine payers on one Form 6847 even if acting as Attorney-in-Fact for several payers. Form 6847 may be computer-generated as long as it includes all information that is on the original form or it may be photocopied. If Form 6847 is signed by an Attorney-in-Fact, the written consent from the payer must clearly indicate that the Attorney-in-Fact is empowered to authorize release of the information.

.08 Only code the records for participating states and for those payers who have submitted Form 6847.

.09 If a payee has a reporting requirement for more than one state, separate “B” records must be created for each state. Allocate the gross payment of the reporting according to each state's filing requirement. Do not report the total amount to each state. This will cause duplicate reporting.

.10 Some participating states require separate notification that the payer is filing in this manner. Since IRS/MCC acts as a forwarding agent only, it is the payer's responsibility to contact the appropriate states for further information.

.11 All corrections properly coded for the Combined Federal/State Filing Program will be forwarded to the participating states.

.12 Participating states and corresponding valid state codes are listed in Table 1 of this section. The appropriate state code must be entered for those documents that meet the state filing requirements; do not use state abbreviations.

.13 Each state's filing requirements are subject to change by the state. It is the payer's responsibility to contact the participating states to verify their criteria.

.14 Upon submission of the actual files, the transmitter must be sure of the following:

  1. All records are coded exactly as required by this Revenue Procedure.

  2. A State Total “K” Record(s) for each state(s) being reported follows the “C” Record.

  3. Payment amount totals and the valid participating state code are included in the State Totals “K” Record(s).

  4. The last “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).

Table 1. Participating States and Their Codes*
State Code State Code State Code
Alabama 01 Indiana 18 Nebraska 31
Arizona 04 Iowa 19 New Jersey 34
Arkansas 05 Kansas 20 New Mexico 35
California 06 Louisiana 22 North Carolina 37
Colorado 07 Maine 23 North Dakota 38
Connecticut 08 Maryland 24 Ohio 39
Delaware 10 Massachusetts 25 South Carolina 45
District of Columbia 11 Minnesota 27 Virginia 51
Georgia 13 Mississippi 28 Wisconsin 55
Hawaii 15 Missouri 29
Idaho 16 Montana 30
* The codes listed above are correct for the IRS Combined Federal/State Filing Program and may not correspond to the state codes of other Agencies or programs.
Sample File Layout for Combined Federal/State Filer
Transmitter “T” Payer “A” Payee “B” Payee “B” Payee “B” End of Payer
Record Record coded with 1 in position 26 Record with state code 15 in position 747-748 Record with state code 06 in position 747-748 Record no state code “C” Record
State Total “K” Record for “B” records coded 15. State Total “K” Record for “B” records coded 06. End of Transmission “F” Record
“K” record coded 15 in positions 747-748. “K” record coded 06 in positions 747-748.

Sec. 14. Penalties Associated With Information Returns

.01 The following penalties generally apply to the person required to file information returns. The penalties apply to electronic/magnetic media filers as well as to paper filers.

.02 Failure To File Correct Information Returns by the Due Date (Section 6721). If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file on magnetic media, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable.

The amount of the penalty is based on when you file the correct information return. The penalty is:

  • $15 per information return if you correctly file within 30 days of the due date of the return (See Part A, Sec. 9 .01); maximum penalty $75,000 per year ($25,000 for small businesses).

  • $30 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $150,000 per year ($50,000 for small businesses).

  • $50 per information return if you file after August 1 or you do not file required information returns; maximum penalty $250,000 per year ($100,000 for small businesses).

.03 A late filing penalty may be assessed for a replacement file which is not returned by the required date. Files which require replacement more than two times will also be subject to penalty. See Part A, Sec. 10, for more information on replacement files.

.04 Intentional disregard of filing requirements. If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $100 per information return with no maximum penalty.

.05 Failure To Furnish Correct Payee Statements (Section 6722). For information regarding penalties which may apply to failure to furnish correct payee statements, see 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.

Sec. 15. State Abbreviations

.01 The following state and U.S. territory abbreviations are to be used when developing the state code portion of address fields. This table provides state and territory abbreviations only, and does not represent those states participating in the Combined Federal/State Filing Program.

State Code State Code State Code
Alabama AL Kentucky KY No. Mariana Islands MP
Alaska AK Louisiana LA Ohio OH
American Samoa AS Maine ME Oklahoma OK
Arizona AZ Marshall Islands MH Oregon OR
Arkansas AR Maryland MD Pennsylvania PA
California CA Massachusetts MA Puerto Rico PR
Colorado CO Michigan MI Rhode Island RI
Connecticut CT Minnesota MN South Carolina SC
Delaware DE Mississippi MS South Dakota SD
District of Columbia DC Missouri MO Tennessee TN
Federated States of Micronesia FM Montana MT Texas TX
Florida FL Nebraska NE Utah UT
Georgia GA Nevada NV Vermont VT
Guam GU New Hampshire NH Virginia VA
Hawaii HI New Jersey NJ (U.S.) Virgin Islands VI
Idaho ID New Mexico NM Washington WA
Illinois IL New York NY West Virginia WV
Indiana IN North Carolina NC Wisconsin WI
Iowa IA North Dakota ND Wyoming WY
Kansas KS

.02 Filers must adhere to the city, state, and ZIP Code format for U.S. addresses in the “B” Record. This also includes American Samoa, Federated States of Micronesia, Guam, Marshall Islands, Northern Mariana Islands, Puerto Rico, and the U. S. Virgin Islands.

.03 For foreign country addresses, filers may use a 51 position free format which should include city, province or state, postal code, and name of country in this order. This is allowable only if a “1” (one) appears in the Foreign Country Indicator, Field Position 247, of the “B” Record.

.04 When reporting APO/FPO addresses, use the following format:

EXAMPLE:
Payee Name PVT Willard J. Doe
Mailing Address Company F, PSC Box 100 167 Infantry REGT
Payee City APO (or FPO)
Payee State AE, AA, or AP*
Payee ZIP Code 098010100
*AE is the designation for ZIPs beginning with 090-098, AA for ZIP 340, and AP for ZIPs 962-966.

Sec. 16. Major Problems Encountered

IRS/MCC encourages filers to verify the format and content of each type of record to ensure the accuracy of the data. This may eliminate the need for IRS/MCC to request replacement files. This may be important for those payers who have either had their files prepared by a service bureau or who have purchased preprogrammed software packages.

Filers who engage a service bureau to prepare media on their behalf should be careful not to report duplicate data, which may generate penalty notices.

The Major Problems Encountered lists some of the most frequently encountered problems with electronic/magnetic files submitted to IRS/MCC. These problems may result in IRS/MCC requesting replacement files. Some of the problems resulted from not referring to this publication for instructions.

1. Incorrect Format
• Multiple Files on diskettes — Each diskette must contain only ONE file, named IRSTAX . A file consists of one Transmitter “T” Record followed by a Payer “A” Record, Payee “B” Records, End of Payer “C” Record, State Totals “K” Record (if applicable for CF/SF Program), and the End of Transmission “F” Record. A file can contain multiple Payer “A” Records, but, only one Transmitter “T” Record. See Part D, Sec. 10, for file layout diagram.
• Invalid record length — ALL Records must be 750 Positions in length.
• Prior tax year data must be formatted in the current tax year format. Be sure to use the current Revenue Procedure (Publication 1220) for formatting prior tax year data.
2. Unable to read tape cartridge.
Please review all tape cartridge specifications carefully (See Part C, Sections 1 and 2.)
3. No Form 4804, Transmittal of Information Returns Reported Magnetically
Each shipment of media sent to IRS/MCC must include a signed Form 4804. More than one type of media may be sent in the same shipment, (i.e., diskette, and tape cartridge) but must have a separate Form 4804 to accompany each type of media.
4. Discrepancy Between IRS/MCC Totals and Totals in Payer “C” Records
The “C” Record is a summary record for a type of return for a given payer. IRS compares the total number of payees and payment amounts in the “B” records with totals in the “C” Records. The two totals must agree. Do NOT enter negative amounts except when reporting Forms 1099-B or 1099-Q. Money amounts must be all numeric, right-justified and zero (0) filled. Do Not Use Blanks.
5. The Payment Amount Fields in the “B” Record Do Not Correspond to the Amount Codes in the “A” Record
The Amount Codes used in the “A” record MUST correspond with the payment amount fields used in the “B” records. The amount codes must be left-justified, in ascending order with the unused positions blank. For Example: If the “B” records show payment amounts in payment amount fields 2, 4, and 7, then the “A” record must correspond with 2, 4, and 7 in the amount codes field.
6. Incorrect TIN in Payer “A” Record
The Payer’s TIN reported in positions 12-20 of the “A” record must be nine numeric characters only. (Do Not Enter Hyphen.) The TIN and the First Payer Name Line provided in the “A” record must correspond.
7. Incorrect Tax Year in the Transmitter “T” Record, Payer “A” Record and the Payee “B” Records
The tax year in the transmitter, payer and payee records should reflect the tax year of the information return being reported. For prior tax year data, there must be a “P” in position 6 of the Transmitter “T” record. Media postmarked December 2, 2004, or later must have the Prior Year Data Indicator coded with a “P” in position 6 of the Transmitter “T” Record. This position must be blank for current tax year data.
8. Incorrect Reporting of Form W-2 Information to IRS
Form W-2 information is submitted to SSA and not to IRS/MCC. Any media received at IRS/MCC that contains W-2 information will be forwarded to SSA. The filer will be notified of this action by letter. To inquire about filing Form W-2 information magnetically/electronically, call 1-800-SSA-6270.
9. Incorrect use of Test Indicator
When sending a test file, position 28 of the Transmitter “T” record must contain a “T”, otherwise blank fill.
10. Incorrect Format for TINs in the Payee “B” Record
TINs entered in position 12-20 of the Payee “B” record must consist of nine numerics only. (Do Not Enter Hyphens.) Incorrect formatting of TINs may result in a penalty.
Payers/Transmitters who submit data with missing TINs, and have taken the required steps to obtain this information are encouraged to attach a letter of explanation to the required Form 4804. This letter, however, will not prevent backup withholding notices (CP2100 and CP2100A Notices) or proposed penalties (Notice 972CG) for missing or incorrect TINs. For penalty information, refer to the Penalties section of the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.
11. Distribution Codes for Form 1099-R Reported Incorrectly
For Forms 1099-R, there must be valid Distribution Code(s) in position 545-546 of the Payee “B” record. For valid codes (and combinations), see Guide to Distribution Codes in Part D. If only one distribution code is required, it must be entered in position 545 and position 546 must be blank. A blank in position 545 is not acceptable.
12. Incorrect Record Totals Listed on Form 4804
The Combined Total Payee Records listed on Form 4804 (Block 6) are used in the verification process of information returns. The figure in this block must be the total number of payee “B” records contained on each individual piece of media submitted. A separate Form 4804 should be sent for each piece of media that contains a file.
13. Missing Correction Indicator in Payee “B” Record
When a file is submitted as a correction file, there must be a correction indicator, “G” or “C” in position 6 of the Payee “B” record. See Part A, Sec. 11.

PART B. ELECTRONIC FILING SPECIFICATIONS

Sec. 1. General

.01 Electronic filing of Forms 1098, 1099, 5498, and W-2G information returns, originals, corrections, and replacements is offered as an alternative to magnetic media (tape cartridge or diskette) or paper filing. Filing electronically will fulfill the magnetic media requirements for those payers who are required to file magnetically. Payers who are under the filing threshold requirement, are encouraged to file electronically. If the original file was sent magnetically, but IRS/MCC has requested a replacement file, the replacement may be transmitted electronically. Also, if the original file was submitted via magnetic media, any corrections may be transmitted electronically.

.02 All electronic filing of information returns are received at IRS/MCC via the FIRE (Filing Information Returns Electronically) System. The FIRE System can be accessed via analog and ISDN BRI connections. The system is designed to support the electronic filing of information returns only. The telephone number for electronic filing is (304-262-2400).

.03 The electronic filing of information returns is not affiliated with any other IRS electronic filing program. Filers must obtain separate approval to participate in each of them. Only inquiries concerning electronic filing of information returns should be directed to IRS/MCC.

.04 Files submitted to IRS/MCC electronically must be in standard ASCII code. Do not send magnetic media or paper forms with the same information as the electronically submitted files. This would create duplicate reporting resulting in penalty notices.

.05 The record formats of the “T”, “A”, “B”, “C”, “K”, and “F” records are the same for both electronically or magnetically filed records. See Part D, Record Format Specifications and Record Layouts.

Sec. 2. Advantages of Filing Electronically

Some of the advantages of filing electronically are:

  1. Paperless, no Form 4804 requirements.

  2. Results available within 1-2 workdays regarding the acceptability of the data transmitted. It is the filer's responsibility to dial back in and check results.

  3. Later due date than magnetic media or paper for electronically filed Forms 1098, 1099, and W-2G (refer to Part A, Sec. 9.01).

  4. Allows more attempts than magnetic media filing to replace bad files within a specific time frame before imposing penalties (refer to Part B, Sec. 5.05).

  5. Better customer service due to on-line availability of transmitter's files for research purposes.

  6. Extended period to test electronic files: November 1, 2003 to February 15, 2004.

Sec. 3. Electronic Filing Approval Procedure

.01 Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Filers who currently have a TCC for magnetic media filing may use their assigned TCC for electronic filing. Refer to Part A, Sec. 6, for information on how to obtain a TCC.

.02 Once a TCC is obtained, electronic filers assign their own logon name, password and PIN (Personal Identification Number) and do not need prior or special approval. See Part B, Sec. 6, for more information on the PIN.

.03 If a filer is submitting files for more than one TCC, it is not necessary to create a separate logon and password for each TCC.

.04 For all passwords, it is the user's responsibility to remember the password and not allow the password to be compromised. Passwords are user assigned at first logon and must be 8 alpha/numerics containing at least 1 uppercase, 1 lowercase, and 1 numeric. However, filers forget their password or PIN, call toll-free 1-866-455-7438 for assistance. The FIRE System requires users to change their passwords on a yearly basis.

Sec. 4. Test Files

.01 Filers are not required to submit a test file; however, the submission of a test file is encouraged for all new electronic filers to test hardware and software. If filers wish to submit an electronic test file for Tax Year 2003 (returns to be filed in 2004), it must be submitted to IRS/MCC no earlier than November 1, 2003, and no later than February 15, 2004.

.02 Filers who encounter problems while transmitting the electronic test file can contact IRS/MCC toll-free at 1-866-455-7438 for assistance.

.03 Filers must verify the status of the transmitted test data by connecting to the FIRE System at 304-262-2400. This information will be available within 1-2 workdays after the transmission is received by IRS/MCC.

.04 Form 4804 is not required for test files submitted electronically. See Part B, Sec. 6.

.05 A test file is required from filers who want approval for the Combined Federal/State Filing Program. See Part A, Sec. 13, for further details.

Sec. 5. Electronic Submissions

.01 Electronically filed information may be submitted to IRS/MCC 24 hours a day, 7 days a week. Technical assistance will be available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern time by calling toll-free at 1-866-455-7438.

.02 The FIRE System will be down from December 24, 2003, through January 5, 2004. This allows IRS/MCC to update its system to reflect current year changes.

.03 Data compression is encouraged when submitting information returns electronically. WinZip and PKZip are acceptable compression packages. UNIX COMPRESS may be acceptable; however, a test file is recommended to verify compatibility. IRS/MCC cannot accept self-extracting zip files or compressed files containing multiple files.

The time required to transmit information returns electronically will vary depending on the modem speed and the type of data compression used, if any. The time required to transmit a file can be reduced by as much as 95 percent by using compression.

The following are transmission rates achieved in test uploads at MCC using compressed files. The transmission rates will vary depending on the modem speeds.

Transmission Speed in bps 1000 Records 10,000 Records 100,000 Records
19.2K 34 Sec. 6 Min. 60 Min.
56K 20 Sec. 3 Min. 33 Min.
128K (ISDN) 8 Sec. 1 Min. 10 Min.

.04 Files submitted electronically will be assigned a unique filename by the FIRE System (the users may name files anything they choose from their end). The filename assigned by the FIRE System will consist of submission type (TEST, ORIG [original], CORR [correction], and REPL [replacement]), the filer's TCC and a four-digit number sequence. The sequence number will be incremented for every file sent. For example, if it is your first original file for the calendar year and your TCC is 44444, the IRS assigned filename would be ORIG.44444.0001. Record the filename. This information will be needed by MCC to identify the file, if assistance is required.

.05 If a file was submitted timely and is bad, the filer will have up to 60 days from the day the file was transmitted or 4 replacement attempts within that 60 day period, whichever comes first, to transmit an acceptable file. If an acceptable file is not received within 60 days or within 4 replacement attempts, then the payer could be subject to late filing penalties. This only applies to files originally submitted electronically.

.06 The following definitions have been provided to help distinguish between a correction and a replacement:

  • A correction is an information return submitted by the transmitter to correct an information return that was previously submitted to and processed by IRS/MCC, but contained erroneous information. (See Note.)

Note

Note: Corrections should only be made to records that have been submitted incorrectly, not the entire file.

  • A replacement is an information return file sent by the filer because FILE STATUS on the FIRE System indicated the original file was bad. After the necessary changes have been made, the file must be transmitted through the FIRE System. ( See Note.)

Note: Filers should never transmit anything to IRS/MCC as a “Replacement” file unless FILE STATUS on the FIRE System indicates the file is bad.

.07 The TCC in the Transmitter “T” Record must be the TCC used to transmit the file; otherwise, the file will be considered an error.

.08 The volume of filers accessing the FIRE System peaks during the last weeks and days of February and March. If you wait to download your files until these peak times, you may receive a busy signal. If you do, please keep trying and make sure you have dialed the correct number, 304-262-2400, and used the proper number to access an outside line (e.g. 8 or 9). Also, some companies require an access code for long distance dialing. Contacting the Customer Service Section will not expedite your access to the FIRE System. We encourage you to prepare and download your files during less busy times in February and March.

Sec. 6. PIN Requirements

.01 Form 4804 is not required for electronic files. Instead, the user will be prompted to create a PIN consisting of 10 numerics when establishing their initial logon name and password.

.02 The PIN is required each time a file is sent electronically and is permission to release the file. An authorized agent may enter their PIN, however, the payer is responsible for the accuracy of the returns. The payer will be liable for penalties for failure to comply with filing requirements. If you forget your PIN, please call toll-free 1-866-455-7438 for assistance.

.03 If the file is good, it is released for mainline processing after 10 calendar days from receipt. Contact us toll-free 1-866-455-7438 within this 10-day period if there is a reason the file should not be released for further processing. If the file is bad, follow normal replacement procedures.

Sec. 7. Electronic Filing Specifications

.01 The FIRE System is designed exclusively for the filing of Forms 1042-S, 1098, 1099, 5498, 8027, W-2G and Questionable W-4.

.02 A transmitter must have a TCC (see Part A, Sec. 6) before a file can be transmitted. A TCC assigned for magnetic media filing should also be used for electronic filing.

.03 The results of the electronic transmission will be available in the File Status area of the FIRE System within 1-2 business days. It is the filer's responsibility to dial back to verify the acceptability of files submitted by checking the file status area of the system. Forms 1042-S, 8027 and Questionable W-4 require a longer processing time.

.04 Connect to the FIRE System by dialing 304-262-2400. This number supports analog connections from 1200bps to 56Kbps or ISDN BRI 128Kbps. The system can be accessed via Dial-up network/web browser (see Part B, Sec. 8) or communications software such as HyperTerminal, Procomm, PCAnywhere or other VT100 emulation products (see Part B, Sec. 9). The Dial-up network/web browser (point-to-point) will provide an Internet-like look, however, it is not the Internet.

Sec. 8. Dial-up Network/Browser Specifications (Web Interface)

.01 Dial-up network settings for Windows 2000 and XP — Disable the LCP extension and Software Compression by going to your Dial-up Networking Properties, Networking and Settings.

.02 When running Norton Internet Security or similar software, you may need to disable this feature if your file transfer does not complete properly.

.03 Before dialing, have your TCC and EIN available.

.04 Due to the large number of communication products available, it is impossible to provide specific information on all software/hardware configurations. However, since most filers use Windows software, the following instructions are based upon Windows 2000. Other versions may vary slightly.

Web-like Interface
Select Programs
Accessories
Communications
Network and Dial-Up Connections

First time connecting with Dial-Up Network (If you have logged on previously, skip to Subsequent Dial-up Network Connections.)
Select “Make new connection”.
Click “Next”.
Select “Dial-Up a private Network”.
Click “Next”.
Enter area code 304 and telephone number 262-2400 and any other special dialing codes you require.
Click “Next”.
Type the name you want to use for this connection.
Click “Finish”.
Normally, a user name and password is not required at this time unless local procedures call for it, therefore, enter blanks.
Click “Properties”.
Click “Networking”.
Click “Settings”.
Disable “LCP extensions” and “Software Compression”.
Click “OK”.
Click “OK”.
Click “Dial”.
When you receive the message that you have connected to our system, launch your Web Browser (remember, you are not connecting via the Internet — this is a point-to-point connection).
In the URL Address enter http://10.225.224.2 and press ENTER.

Subsequent Dial-Up Network connections
Click “Dial”.
If prompted for user name and password, leave blank unless local procedures require otherwise; click “OK”.
When you receive “Connection Complete”, click “OK”.
Click on your Web Browser (remember, you are not connecting via the Internet).
In the URL Address enter http://10.225.224.2 and press ENTER.

First time connection to The FIRE System (If you have logged on previously, skip to Subsequent Connections to the FIRE System.)
Click “Create New Account”.
Fill out the registration form and click “Submit”.
Enter your logon name (most users logon with their first and last name).
Enter your password (the password is user assigned and must be 8 alpha/numerics, containing at least 1 uppercase, 1 lowercase and 1 numeric). FIRE will force you to change the password once a year.
Complete the online survey by choosing one of the options.
Click “Create”.
If you receive the message “account created”, click “OK”.
Enter your 10 digit self-assigned PIN (Personal Identification Number) and verify.
Click “Submit”.
If you receive the message “Your PIN has been successfully created!”, click “OK”.
Read the bulletin(s) and/or click “Start the FIRE application”.

Subsequent connections to The FIRE System
Click “Log On”.
Enter your logon name (most users logon with their first and last name).
Enter your password (the password is user assigned and is case sensitive).
At Menu Options:
Click “Information Returns”
Enter your TCC:
Enter your EIN:
Click “Submit”.
The system will then display the company name, address, city, state, ZIP code and phone number. This information will be used to contact or send correspondence (if necessary) regarding this transmission. Update as appropriate and/or Click “Accept”.
Click one of the following:
Original File
Correction File
Test File
Replacement File (if you select this option, select one of the following):
FIRE Replacement (file was originally transmitted on this system)
Click file to be replaced.
Magnetic Media Replacement File
Enter the alpha character from Form 9267, Media Tracking Slip, that was sent with the request for replacement file.
Click “Submit”.
Enter your 10 digit PIN.
Click “Submit”.
Enter the drive/path/filename of the file you want to upload or click “Browse” to locate the file.
Click “Upload”.
When the upload is complete, the screen will display the total bytes received and tell you the name of the file you just uploaded.
If you have more files to upload for that TCC:
Click “File Another?”; otherwise,
Click “Main Menu”.

It is your responsibility to check the acceptability of your file; therefore, be sure to dial back into the system in 1-2 business days.

At the Main Menu:
Click “File Stats”.
Enter your TCC:
Enter your EIN:
Click “Search”.
If “Results” indicate:
“Good, Not Released” and you agree with the “Count of Payees”, you are finished with this file. The file will automatically be released after 10 calendar days unless you contact us within this timeframe.
“File Released” — File has been released to our mainline processing.
“File Bad” — Correct the errors and timely resubmit the file as a “replacement”.
“Not Yet Processed” — File has been received, but we do not have results available yet. Please check back in a few days.
Click on the desired file for a detailed report of your transmission.
When you are finished, click on Main Menu.
Click “Logoff”.
Close your Web Browser.

IMPORTANT
Go back into your Dial-Up Network and click “hang-up”; otherwise, you may stay connected and incur unnecessary phone charges.

Sec. 9. Communications Software Specifications (Text Interface)

.01 Communications software settings must be:

-No parity
-Eight data bits
-One stop bit

.02 Terminal Emulation must be VT100.

.03 Before dialing, have your TCC and EIN available.

.04 Due to the large number of communication products available, it is impossible to provide specific information on all software/hardware configurations. However, since most filers use Windows software, the following instructions are based on Windows 2000. Other versions may vary slightly.

Text Interface
Select Programs
Accessories
Communications
HyperTerminal
A box will appear titled “New Connection”.
Enter a name and choose an icon for the connection:
Country Code: United States of America
Area Code: 304
Phone Number: 262-2400
Click “OK”.
(If you need to modify the phone number, click modify, remove the “✓” from use country/region code and area code. Enter the area code, phone numbers and/or any special access codes in the phone number box.)
Click “OK”.
Click “Dial”.
A “Connect” box will appear to show the status.
Once you have connected to The FIRE System, if you do not get a menu within a few seconds, press the ENTER key one time.
Press “1” to connect to the system.
Read the information notice and/or press ENTER to continue.

First Time Logon
When you have connected to the system, enter “new” to create your logon name and password.
Complete the registration information and enter “y” to create account.

Logon Name and Password
Logon Name: Enter a logon name. Most users enter their first and last name as the logon name.
Password: Enter a password (the password is user assigned and must be 8 alpha/numerics, containing at least 1 uppercase, 1 lowercase and 1 numeric). FIRE will force you to change the password once a year.
After entering the password and completing the survey, press ENTER.
Enter your 10 digit self-assigned PIN (Personal Identification Number) and verify. Enter “y” to create the PIN. If successful, you will receive a message that the PIN creation has been completed. Press ENTER.
Read the information notice and/or press ENTER.

Transferring Your Electronic File
From the Main Menu:
Enter “A” for Electronic Filing.
Enter “A” for Forms 1098, 1099, 5498, W-2G, 1042-S, 8027 and Questionable Forms W-4.
Press the Tab key to advance to TCC box; otherwise, enter “E” to exit.
Enter your TCC:
Enter your EIN:
The system will then display the company name, address, city, state, ZIP code and phone number. This information will be used to contact or send correspondence (if necessary) regarding this transmission. If you need to update, enter “n” to correct; otherwise, enter “y” to accept.
Select one of the following:
“A” for an Original file
“B” for a Replacement file
“C” for a Correction file
“D” for a Test file

If you selected “B” for a replacement file, select one of the following:

“A” Replacement Files For This System
This option is to replace an original/correction file that was submitted electronically on this system, but was bad and needs to be replaced. Select the file needing replaced.
“B” Magnetic Media Replacement Files
Enter the alpha character from Form 9267, Media Tracking Slip, that was sent with the request for replacement file.
Press ENTER to continue or “e” to exit.
Enter your 10-digit PIN and press ENTER
Choose one of the following protocols (HyperTerminal is normally set to Zmodem by default. Do not use Zmodem with crash recovery.):
X — Xmodem
Y — Ymodem
Z — Zmodem (Zmodem will normally give you the fastest transfer rate.)
At this point, you must start the upload from your PC.
To send a file:
Go to the HyperTerminal menu bar.
Click on “Transfer”.
Click on “Send File”. (Be sure the protocol selected matches the protocol selected earlier. If Zmodem was selected, set to Zmodem not Zmodem with crash recovery.)
A box will appear titled “Send File”.
Enter the drive/path/filename or click on “Browse” to locate your file.
Click on “Send”.
When the upload is complete, the screen will display the total bytes received and the name IRS assigned to your file.
Press ENTER to continue.
If you have more files to send for the same TCC/EIN, enter “y”; otherwise, enter “n”.

It is your responsibility to check the acceptability of your file; therefore, be sure to dial back into the system in 1-2 business days.

At the Main Menu:
Enter “B” for file status.
Press the Tab key to advance to TCC box; otherwise, enter “E” to exit.
Enter your TCC:
Enter your EIN:
Enter “B” for the current year file results.
Tab to the appropriate file and press ENTER.
If “Results” indicate:
“Good, Not Released” and you agree with the “Count of Payees”, you are finished with this file. The file will automatically be released after 10 calendar days unless you contact us within this timeframe.
“File Released” — File has been released to our mainline processing.
“File Bad” — Correct the errors and timely resubmit the file as a replacement.
“Not Yet Processed” — File has been received, but we do not have results available yet. Please check back in a few days.
Select the desired file for a detailed report of your transmission.
When you are finished, enter “E” from the Main Menu to logoff.
Enter “2” to hang-up.

Sec. 10. Modem Configuration

.01 Hardware features

  1. Enable hardware flow control

  2. Enable modem error control

  3. Enable modem compression

Sec. 11. Common Problems and Questions Associated with Electronic Filing

.01 Refer to Part A, Sec. 16, for common format errors associated with electronic/magnetic files.

.02 The following are the major errors associated with electronic filing:

NON-FORMAT ERRORS
1. Transmitter does not dial back to the electronic system to determine file acceptability.
The results of your file transfer are posted to the FIRE System within two business days. It is your responsibility to verify file acceptability and, if the file contains errors, you can get an online listing of the errors. Date received and number of payee records are also displayed. If the file is good, but you do not want the file processed, you must contact IRS/MCC within 10 calendar days from the transmission of your file.
2. Incorrect file is not replaced timely.
If your file is bad, correct the file and timely resubmit as a replacement.
3. Transmitter compresses several files into one.
Only compress one file at a time. For example, if you have 10 uncompressed files to send, compress each file separately and send 10 separate compressed files.
4. Transmitter sends a file and File Status indicates that the file is good, but the transmitter wants to send a replacement or correction file to replace the original/correction/replacement file.
Once a file has been transmitted, you cannot send a replacement file unless File Status indicates the file is bad (1-2 business days after file was transmitted). If you do not want us to process the file, you must first contact us toll-free at 1-866-455-7438 to see if this is a possibility.
5. Transmitter sends an original file that is good, then sends a correction file for the entire file even though there are only a few changes.
The correction file, containing the proper coding, should only contain the records needing correction, not the entire file.
6. File is formatted as EBCDIC.
All files submitted electronically must be in standard ASCII code.
7. Transmitter has one TCC number, but is filing for multiple companies, which EIN should be used when logging into the system to send the file?
When sending the file electronically, you will need to enter the EIN of the company assigned to the TCC. When you upload the file, it will contain the EINs for the other companies that you are filing for. This is the information that will be passed forward.
8. Transmitter sent the wrong file, what should be done?
Call us as soon as possible toll-free at 1-866-455-7438, ext. 3. We may be able to stop the file before it has been processed. Please do not send a replacement for a file that is marked as a good file.
CONNECTING WITH DIAL-UP NETWORKING/WEB BROWSER ERRORS
1. I am receiving the error message “Remote PPP Peer Not Responding” or receiving a 718 error with Windows 2000 or XP.
Disable “enable LCP Extensions” and “Software Compression” in Dial-Up Networking. (This is located in Dial-up Networking Properties, Networking, and Settings.)
2. Transmitter is connecting using dial-up networking, but is unable to bring up the URL address using the web browser.

  • Proxy server should be disabled for a dial-up connection.

  • “Using a modem” option should be selected.

  • The home page should either display http://10.225.224.2 or be set to “about:blank”.

  • The security level should be set at medium.

  • The option “enable software compression” should be disabled under Dial-Up Networking.
3. Transmitter clicks on “Start the FIRE application”, but the logon screen is displayed again.
Your browser must be set to receive “cookies”.
4. Transmitter is getting a menu when connecting with dial-up networking.
The option “pop-up a terminal window” should be disabled.
5. The line is busy when dialed.
The volume of filers accessing the FIRE System peaks during the last weeks and days of February and March. If you wait to download your files until these peak times, you may receive a busy signal. If you do, please keep trying and make sure you have dialed the correct number, 304-262-2400, and used the proper number to access an outside line (e.g. 8 or 9). Also, some companies require an access code for long distance dialing. Contacting the Customer Service Section will not expedite your access to the FIRE System. We encourage you to prepare and download your files during less busy times in February and March.
CONNECTING WITH HYPERTERMINAL ERRORS
1. Transmitter is unable to connect using HyperTerminal.
• If you need a number such as an 8 or a 9 to access an outside line, make sure it is present.
• Set the terminal emulation to VT100.
• Try lowering the modem speed.
• Turn the modem off and then back on to reset it.
(Make sure you are using analog lines rather than digital.)
2. Transmitter is getting the message “annex command line interpreter”.
Disconnect and try again. You may need to lower the modem speed if this happens several times in a row.
3. When trying to logon, the cursor is not in the correct box, or the menus are distorted.
The terminal emulation must be set to VT100. Also, verify that the data bits are set at 8, the stop bit is set at 1 and parity is set at None.
4. Transmitter was able to connect and the menu is displayed, but is unable to type anything.
Scroll lock cannot be turned on.
5. When transmitter connects, the menus keep scrolling and display garbage characters.
Make sure “Use error control” and “Compress data” are enabled under the Advanced Connection Settings.
6. Transmitter receives message “bad data packet” when the file is transmitting. What does this mean?
Your modem is having problems sending the data, so it is trying to resend the bad data packet. Normally, if the transfer does not abort, the file will be sent successfully.

PART C. MAGNETIC MEDIA SPECIFICATIONS

.01 Transmitters should be consistent in the use of recording codes and density on files. If the media does not meet these specifications, IRS/MCC will request a replacement file. Filers are encouraged to submit a test prior to submitting the actual file. Contact IRS/MCC toll-free at 1-866-455-7438 for further information. Transmitters should also check media for viruses before submitting it to IRS/MCC.

Sec. 1. Tape Cartridge Specifications

.01 In most instances, IRS/MCC can process tape cartridges that meet the following specifications:

(a) Must be IBM 3480, 3490, 3490E, 3590, 3590E or AS400 compatible.

(b) Must meet American National Standard Institute (ANSI) standards, and have the following characteristics:

  1. Tape cartridges will be -inch tape contained in plastic cartridges that are approximately 4-inches by 5-inches by 1-inch in dimension.

  2. Magnetic tape will be chromium dioxide particle based -inch tape.

  3. Cartridges must be 18-track, 36-track, 128-track or 256-track parallel (See Note).

  4. Cartridges will contain 37,871 CPI, 75,742 CPI, or 3590 CPI (characters per inch).

  5. Mode will be full function.

  6. The data may be compressed using EDRC (Memorex) or IDRC (IBM) compression.

  7. Either EBCDIC (Extended Binary Coded Decimal Interchange Code) or ASCII (American Standard Coded Information Interchange) may be used.

.02 The tape cartridge records defined in this Revenue Procedure may be blocked subject to the following:

  1. A block must not exceed 32,250 tape positions.

  2. If the use of blocked records would result in a short block, all remaining positions of the block must be filled with 9s; however, the last block of the file may be filled with 9s or truncated. Do not pad a block with blanks.

  3. All records, except the header and trailer labels, may be blocked or unblocked. A record may not contain any control fields or block descriptor fields, which describe the length of the block or the logical records within the block. The number of logical records within a block (the blocking factor) must be constant in every block with the exception of the last block, which may be shorter (see item (b) above). The block length must be evenly divisible by 750.

  4. Records may not span blocks.

.03 Tape cartridges may be labeled or unlabeled.

.04 For the purposes of this Revenue Procedure, the following must be used:

Tape Mark:

  1. Signifies the physical end of the recording on tape.

  2. For even parity, use BCD configuration 001111 (8421).

  3. May follow the header label and precede and/or follow the trailer label.

Note: Filers should indicate on the external media label whether the cartridge is 18-track, 36-track, 128-track or 256-track.

Sec. 2. 3-Inch Diskette Specifications

.01 To be compatible, a diskette file must meet the following specifications:

  1. 3-inches in diameter.

  2. Data must be recorded in standard ASCII code.

  3. Records must be a fixed length of 750 bytes per record.

  4. Delimiter character commas (,) must not be used.

  5. Positions 749 and 750 of each record have been reserved for use as carriage return/line feed (cr/lf) characters, if applicable.

  6. Filename of IRSTAX must be used. Do not enter any other data in this field. If a file will consist of more than one diskette, the filename IRSTAX will contain a three-digit extension. This extension will indicate the sequence of the diskettes within the file. For example, if the file consists of three diskettes, the first diskette will be named IRSTAX.001, the second will be IRSTAX.002, and the third will be IRSTAX.003. The first diskette, IRSTAX.001 will begin with a “T” Record and the third diskette, IRSTAX.003 will have an “F” Record at the end of the file.

  7. A diskette can not contain multiple files. A file can have only ONE Transmitter “T” Record.

  8. Failure to comply with instructions will result in IRS/MCC requesting a replacement file.

  9. Diskettes must meet one of the following specifications:

    Capacity Tracks Sides/Density Sector Size
    1.44 mb 96tpi hd 512
    1.44 mb 135tpi hd 512

.02 IRS/MCC encourages transmitters to use blank or currently formatted diskettes when preparing files. If extraneous data follows the End of Transmission “F” Record, IRS/MCC will request a replacement file.

.03 IRS/MCC will only accept 3-inch diskettes created using MS-DOS.

.04 3 -inch diskettes created on a System 36 or iSeries(AS400) are not acceptable.

PART D. RECORD FORMAT SPECIFICATIONS AND RECORD LAYOUTS

Sec. 1. General

.01 The specifications contained in this part of the Revenue Procedure define the required formation and contents of the records to be included in the electronic or magnetic media files.

.02 A provision is made in the “B” Records for entries which are optional. If the field is not used, enter blanks to maintain a fixed record length of 750 positions. Each field description explains the intended use of specific field positions.

Sec. 2. Transmitter “T” Record — General Field Descriptions

.01 The Transmitter “T” Record identifies the entity transmitting the electronic/magnetic media file and contains information which is critical if it is necessary for IRS/MCC to contact the filer.

.02 The Transmitter “T” Record is the first record on each file and is followed by a Payer “A” Record. A file format diagram is located at the end of Part D. A replacement file will be requested by IRS/MCC if the “T” Record is not present. For transmitters with multiple diskettes, refer to Part C, Sec. 2, 3-Inch Diskette Specifications.

.03 For all fields marked “Required”, the transmitter must provide the information described under Description and Remarks. For those fields not marked “Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the indicated field positions and for the indicated length.

.04 All records must be a fixed length of 750 positions.

.05 All alpha characters entered in the “T” Record must be upper-case, except email addresses which may be case sensitive. Do not use punctuation in the name and address fields.

Record Name: Transmitter “T” Record
Field
Position 		Field Title Length Description and Remarks
1 Record Type 1 Required. Enter “T.”
2-5 Payment Year 4 Required. Enter “2003” (unless reporting prior year data; report the year which applies [2001, 2002 etc.] and set the Prior Year Data Indicator in field position 6).
6 Prior Year Data Indicator 1 Required. Enter “P” only if reporting prior year data; otherwise, enter blank. Do not enter a “P” if tax year is 2003. (See Note.)

Note

Note: Current year data mailed December 2 or later must be coded with a “P”. Current year processing ends in December and programs are converted for the next processing year.

7-15 Transmitter's TIN 9 Required. Enter the transmitter's nine-digit Taxpayer Identification Number (TIN). May be an EIN, SSN or ITIN.
16-20 Transmitter Control Code 5 Required. Enter the five-character alpha/numeric Transmitter Control Code (TCC) assigned by IRS/MCC. A TCC must be obtained to file data with this program.
21-22 Replacement Alpha Character 2 Required for replacement files only. Enter the alpha/numeric character which appears immediately following the TCC number on the Media Tracking Slip (Form 9267). Form 9267 accompanies correspondence sent by IRS/MCC when files can not be processed. This field must be blank unless a replacement file has been requested. If the file is being replaced magnetically, information is required in this field. If the file was originally sent magnetically, but the replacement is being sent electronically, the information is required in this field. Otherwise, leave blank for electronic files. Left-justify information and fill unused positions with blanks. If this is not a replacement file, enter blanks.
23-27 Blank 5 Enter blanks.
28 Test File Indicator 1 Required for test files only. Enter a “T” if this is a test file; otherwise, enter a blank.
29 Foreign Entity Indicator 1 Enter a “1” (one) if the transmitter is a foreign entity. If the transmitter is not a foreign entity, enter a blank.
30-69 Transmitter Name 40 Required. Enter the name of the transmitter in the manner in which it is used in normal business. Left-justify and fill unused positions with blanks.
70-109 Transmitter Name (Continuation) 40 Required. Enter any additional information that may be part of the name. Left-justify information and fill unused positions with blanks.
110-149 Company Name 40 Required. Enter the name of the company to be associated with the address where correspondence should be sent.
150-189 Company Name (Continuation) 40 Enter any additional information that may be part of the name of the company where correspondence should be sent.
190-229 Company Mailing Address 40 Required. Enter the mailing address where correspondence should be sent.
Note: Any correspondence relating to problem media or electronic files will be sent to this address. This should be the same address as in box 5 of Form 4804.
For U.S. addresses, the payer city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively. Filers must adhere to the correct format for the payer city, state, and ZIP Code.
For foreign addresses, filers may use the payer city, state, and ZIP Code as a continuous 51-position field. Enter information in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the Foreign Entity Indicator in position 29 must contain a “1” (one).
Record Name: Transmitter “T” Record (Continued)
Field
Position 		Field Title Length Description and Remarks
230-269 Company City 40 Required. Enter the city, town, or post office where correspondence should be sent.
270-271 Company State 2 Required. Enter the valid U.S. Postal Service state abbreviation. Refer to the chart for valid state codes in Part A, Sec. 15.
272-280 Company ZIP Code 9 Required. Enter the valid nine-digit ZIP assigned by the U. S. Postal Service. If only the first five digits are known, left-justify information and fill unused positions with blanks.
281-295 Blank 15 Enter blanks.
296-303 Total Number of Payees 8 Enter the total number of Payee “B” Records reported in the file. Right-justify information and fill unused positions with zeros.
304-343 Contact Name 40 Required. Enter the name of the person to be contacted if IRS/MCC encounters problems with the file or transmission.
344-358 Contact Phone Number & Extension 15 Required. Enter the telephone number of the person to contact regarding electronic or magnetic files. Omit hyphens. If no extension is available, left-justify information and fill unused positions with blanks. For example, the IRS/MCC Customer Service Section phone number of 866-455-7438 with an extension of 52345 would be 866455743852345.
359-393 Contact Email Address 35 Required if available. Enter the email address of the person to contact regarding electronic or magnetic files. Left-justify information. If no email address is available, enter blanks.
394-395 Cartridge Tape File Indicator 2 Required for tape cartridge filers only. Enter the letters “LS” (in uppercase only). Use of this field by filers using other types of media will be acceptable but is not required.
396-410 Electronic File Name For a Replacement File 15 Required. Use for an electronic file which “FILE STATUS” has indicated was rejected. Enter the ORIGINAL or CORRECTION electronic file name assigned by the IRS electronic FIRE System. If you are sending an original, correction, or test file, enter blanks.
EXAMPLE: If you have sent an original file, the TCC is 44444 and it is your first original file, then the filename would be ORIG.44444.0001
411-416 Transmitter's Media Number 6 For magnetic media filers only. If your organization uses an in-house numbering system to identify media, enter that number; otherwise, enter blanks.
417-499 Blank 83 Enter blanks.
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you can have only one “T” record in a file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-517 Blank 10 Enter blanks.
518 Vendor Indicator 1 Required. Enter the appropriate code from the table below to indicate if your software was provided by a vendor or produced in-house.
Indicator Usage
V Your software was purchased from a vendor or other source.
I Your software was produced by in-house programmers.

Note

Note: In-house programmer is defined as an employee or a hired contract programmer. If your software is produced in-house, the following Vendor information fields are not required.

519-558 Vendor Name 40 Required. Enter the name of the company from whom you purchased your software.
559-598 Vendor Mailing Address 40 Required. Enter the mailing address.
For U.S. addresses, the payer city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively. Filers must adhere to the correct format for the payer city, state, and ZIP Code. For foreign addresses, filers may use the payer city, state, and ZIP Code as a continuous 51-position field. Enter information in the following order: city, province or state, postal code, and the name of the country.
599-638 Vendor City 40 Required. Enter the city, town, or post office.
639-640 Vendor State 2 Required. Enter the valid U.S. Postal Service state abbreviation. Refer to the chart of valid state codes in Part A, Sec. 15.
641-649 Vendor ZIP Code 9 Required. Enter the valid nine-digit ZIP Code assigned by the U.S. Postal Service. If only the first five digits are known, left-justify information and fill unused positions with blanks.
650-689 Vendor Contact Name 40 Required. Enter the name of the person who can be contacted concerning any software questions.
690-704 Vendor Contact Phone Number & Extension 15 Required. Enter the telephone number of the person to contact concerning software questions. Omit hyphens. If no extension is available, left-justify information and fill unused positions with blanks.
705-739 Vendor Contact Email Address 35 Required. Enter the email address of the person to contact concerning software questions. Left-justify information and fill unused positions with blanks.
740 Vendor Foreign Entity Indicator 1 Enter a “1” (one) if the vendor is a foreign entity. Otherwise, enter a blank.
741-748 Blank 8 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed characters (CR/LF).

Sec. 3. Transmitter “T” Record — Record Layout

Record Type Payment Year Prior Year Data Indicator Transmitter's TIN Transmitter Control Code Replacement Alpha Character Blank
1 2-5 6 7-15 16-20 21-22 23-27
Test File Indicator Foreign Entity Indicator Transmitter Name Transmitter Name (Continuation) Company Name Company Name (Continuation)
28 29 30-69 70-109 110-149 150-189
Company Mailing Address Company City Company State Company ZIP Code Blank Total Number of Payees Contact Name
190-229 230-269 270-271 272-280 281-295 296-303 304-343
Contact Phone Number & Extension Contact Email Address Cartridge Tape File Indicator Electronic File Name For a Replacement File Transmitter's Media Number Blank Record Sequence Number
344-358 359-393 394-395 396-410 411-416 417-499 500-507
Blank Vendor Indicator Vendor Name Vendor Mailing Address Vendor City Vendor State
508-517 518 519-558 559-598 599-638 639-640
Vendor ZIP Code Vendor Contact Name Vendor Contact Phone Number & Extension Vendor Contact Email Address Vendor Foreign Entity Indicator Blank Blank or CR/LF
641-649 650-689 690-704 705-739 740 741-748 749-750

Sec. 4. Payer “A” Record — General Field Descriptions

.01 The Payer “A” Record identifies the person making payments, a recipient of mortgage or student loan interest payments, an educational institution, a broker, a person reporting a real estate transaction, a barter exchange, a creditor, a trustee or issuer of any IRA or MSA plan, and a lender who acquires an interest in secured property or who has a reason to know that the property has been abandoned. The payer will be held responsible for the completeness, accuracy, and timely submission of electronic/magnetic files.

.02 The second record on the file must be an “A” Record. A transmitter may include Payee “B” records for more than one payer in a file. However, each group of “B” records must be preceded by an “A” Record and followed by an End of Payer “C” Record. A single file may contain different types of returns but the types of returns must not be intermingled. A separate “A” Record is required for each payer and each type of return being reported.

.03 The number of “A” Records depends on the number of payers and the different types of returns being reported. Do not submit separate “A” Records for each payment amount being reported. For example, if a payer is filing Form 1099-DIV to report Amount Codes 1, 2, and 3, all three amount codes should be reported under one “A” Record, not three separate “A” Records.

.04 The maximum number of “A” Records allowed on a file is 90,000.

.05 All records must be a fixed length of 750 positions.

.06 All alpha characters entered in the “A” Record must be upper case.

.07 For all fields marked “Required”, the transmitter must provide the information described under Description and Remarks. For those fields not marked “Required”, a transmitter must allow for the field, but may be instructed to enter blanks or zeros in the indicated media position(s) and for the indicated length.

Record Name: Payer “A” Record
Field Position Field Title Length Description and Remarks
1 Record Type 1 Required. Enter an “A.”
2-5 Payment Year 4 Required. Enter “2003” (unless reporting prior year data; report the year which applies [2001, 2002, etc.]).
6-11 Blank 6 Enter blanks.
12-20 Payer's Taxpayer Identification Number (TIN) 9 Required. Must be the valid nine-digit Taxpayer Identification Number assigned to the payer. Do not enter blanks, hyphens, or alpha characters. All zeros, ones, twos, etc., will have the effect of an incorrect TIN.
Note: For foreign entities that are not required to have a TIN, this field must be blank. However, the Foreign Entity Indicator, position 52 of the “A” Record, must be set to “1”(one).
21-24 Payer Name Control 4 The Payer Name Control can be obtained only from the mail label on the Package 1099 that is mailed to most payers each December. Package 1099 contains Form 7018 C, Order Blank for Forms, and the mail label on the package contains a four (4) character name control. If a Package 1099 has not been received, you can determine you name control using the following simple rules or you can leave the field blank. For a business, use the first four significant characters of the business name. Disregard the word “the” when it is the first word of the name, unless there are only two words in the name. A dash (-) and an ampersand (&) are the only acceptable special characters. Names of less than four (4) characters should be left-justified, filling the unused positions with blanks.
25 Last Filing Indicator 1 Enter a “1” (one) if this is the last year this payer name and TIN will file information returns electronically, magnetically or on paper; otherwise, enter blank.
26 Combined Federal/State Filer 1 Required for the Combined Federal/State Filing Program. Enter “1” (one) if approved to participate in the Combined Federal/State Filing Program; otherwise, enter blank.

Note

Note: If you entered one in this field position, be sure to code the Payee “B” Records with the appropriate state code. Refer to Part A, Sec. 13, for further information.

27 Type of Return 1 Required. Enter the appropriate code from the table below:
Type of Return Code
1098 3
1098-E 2
1098-T 8
1099-A 4
1099-B B
1099-C 5
1099-CAP P
1099-DIV 1
1099-G F
1099-H J
1099-INT 6
1099-LTC T
1099-MISC A
1099-MSA M
1099-OID D
1099-PATR 7
1099-Q Q
1099-R 9
1099-S S
Record Name: Payer “A” Record (Continued)
Field Position Field Title Length Description and Remarks
5498 L
5498-ESA V
5498-MSA K
W-2G W
28-41 Amount Codes (See Note.) 14 Required. Enter the appropriate amount codes for the type of return being reported. In most cases, the box numbers on paper information returns correspond with the amount codes used to file electronically or magnetically. However, if discrepancies occur, this Revenue Procedure governs. Enter the amount codes in ascending sequence, left-justify, and fill unused positions with blanks.

Note

Note: A type of return and an amount code must be present in every Payer “A” Record even if no money amounts are being reported. For a detailed explanation of the information to be reported in each amount code, refer to the appropriate paper instructions for each form.

Amount Codes Form 1098 — Mortgage Interest Statement For Reporting Mortgage Interest Received From Payers/Borrowers (Payer of Record) on Form 1098:
Amount Code Amount Type
1 Mortgage interest received from payer(s)/borrower(s)
2 Points paid on purchase of principal residence
3 Refund (or credit) of overpaid interest
4 Blank (Filer's use)
Amount Codes Form 1098-E — Student Loan Interest For Reporting Interest on Student Loans on Form 1098-E:
Amount
Code 		Amount Type
1 Student loan interest received by lender
Amount Codes Form 1098-T — Tuition Payments Statement For Reporting Tuition Payments on Form 1098-T:
See the 2003 Instructions for Form 1098-E and T for further information Amount Code Amount Type
1 Payments received for qualified tuition and related expenses
2 Amounts billed for qualified tuition and related expenses
3 Adjustments made for prior year
4 Scholarships or grants
5 Adjustments to scholarships or grants for a prior year
7 Reimbursements or refunds of qualified tuition and related expenses from an insurance contract
Amount Codes Form 1099-A — Acquisition or Abandonment of Secured Property For Reporting the Acquisition or Abandonment of Secured Property on Form 1099-A:
See the 2003 Instructions for Forms 1099-A and 1099-C for further information on coordination with Form 1099-C Amount
Code 		Amount Type
2 Balance of principal outstanding
4 Fair market value of property
Amount Codes Form 1099-B — Proceeds From Broker and Barter Exchange Transactions For Reporting Payments on Form 1099-B:
Amount
Code 		Amount Type
2 Stocks, bonds, etc. (For forward contracts, See Note 1. )
3 Bartering (Do not report negative amounts.)
4 Federal income tax withheld (backup withholding) (Do not report negative amounts.)
6 Profit (or loss) realized in 2003
7 Unrealized profit (or loss) on open contracts — 12/31/2003 (See Note 2. )
8 Unrealized profit (or loss) on open contracts — 12/31/2003 (See Note 2. )
9 Aggregate profit (or loss) (See Note.)
A Post — 05/05/2003 Profit of (loss) realized
B Post — 05/05/2003 Aggregate profit or (loss)
Note 1: The payment amount field associated with Amount Code 2 may be used to report a loss from a closing transaction on a forward contract. Refer to the “B” Record — General Field Descriptions and Record Layouts, Payment Amount Fields, for instructions on reporting negative amounts.
Note 2: Payment Amount Fields 6, 7, 8, and 9 are to be used for the reporting of regulated futures or foreign currency contracts.
Amount Codes Form 1099-C — Cancellation of Debt For Reporting Payments on Form 1099-C:
Amount
Code 		Amount Type
2 Amount of debt canceled
3 Interest, if included in Amount Code 2
7 Fair market value of property ( See Note.)

Note

Note: Use Amount Code 7 only if a combined Form 1099-A and 1099-C is being filed.

Amount Codes Form 1099-CAP — Changes in Corporate Control and Capital Structure For Reporting Payments on Form 1099-CAP:
Amount
Code 		Amount Type
3 Cash received
4 Federal income tax withheld
8 Fair market value of stock received
9 Fair market value of other property received
Amount Codes Form 1099-DIV — Dividends and Distributions For Reporting Payments on Form 1099-DIV:
See the 2003 Instructions for Form 1099-DIV for further information Amount
Code 		Amount Type
1 Total ordinary dividends
2 Qualified dividends
3 Total capital gain distributions
4 Post — May 5 capital gain distributions
5 Qualified 5-year gain
6 Unrecaptured Section 1250 gain
7 Section 1202 gain
8 Collectibles (28%) gain
9 Nontaxable distributions
A Federal income tax withheld
B Investment expenses
C Foreign tax paid
D Cash liquidation distribution
E Non-cash liquidation distribution
Amount Codes Form 1099-G — Certain Government Payments For Reporting Payments on Form 1099-G:
Amount
Code 		Amount Type
1 Unemployment compensation
2 State or local income tax refunds, credits, or offsets
4 Federal income tax withheld (backup withholding or voluntary withholding on unemployment compensation or Commodity Credit Corporation Loans, or certain crop disaster payments)
6 Taxable grants
7 Agriculture payments
Amount Codes Form 1099-H — Health Insurance Advance Payments For Reporting Payments on Form 1099-H:
Amount
Code 		Amount Type
1 Gross amount of health insurance advance payments
2 Amount of advance payment for January
3 Amount of advance payment for February
4 Amount of advance payment for March
5 Amount of advance payment for April
6 Amount of advance payment for May
7 Amount of advance payment for June
8 Amount of advance payment for July
9 Amount of advance payment for August
A Amount of advance payment for September
B Amount of advance payment for October
C Amount of advance payment for November
D Amount of advance payment for December
Amount Codes Form 1099-INT — Interest Income For Reporting Payments on Form 1099-INT:
Amount
Code 		Amount Type
1 Interest income not included in Amount Code 3
2 Early withdrawal penalty
3 Interest on U.S. Savings Bonds and Treasury obligations
4 Federal income tax withheld (backup withholding)
5 Investment expenses
6 Foreign tax paid
Amount Codes Form 1099-LTC— Long-Term Care and Accelerated Death Benefits For Reporting Payments on Form 1099-LTC:
Amount
Code 		Amount Type
1 Gross long-term care benefits paid
2 Accelerated death benefits paid
Amount Codes Form 1099-MISC — Miscellaneous Income ( See Note 1.) For Reporting Payments on Form 1099-MISC:
Amount
Code 		Amount Type
1 Rents
2 Royalties ( See Note 2.)
3 Other income
4 Federal income tax withheld (backup withholding or withholding on Indian gaming profits)
5 Fishing boat proceeds
6 Medical and health care payments
7 Nonemployee compensation
8 Substitute payments in lieu of dividends or interest
A Crop insurance proceeds
B Excess golden parachute payments
C Gross proceeds paid to an attorney in connection with legal services
Note 1: When using the Direct Sales Indicator in position 547 of the Payee “B” Record, use Type of Return Code A and Amount Code 1 in the Payer “A” Record. All payment amount fields in the Payee “B” Record will contain zeros.
Note 2: Do not report timber royalties under a “pay-as-cut” contract; these must be reported on Form 1099-S.
Amount Codes Form 1099-MSA — Distributions From an Archer MSA or Medicare+Choice MSA For Reporting Distributions from an Archer Medical Savings Account or Medicare+Choice MSA on Form 1099-MSA:
Amount
Code 		Amount Type
1 Gross distribution
2 Earnings on excess contributions
4 Fair market value of the account on date of death
Amount Codes Form 1099-OID — Original Issue Discount For Reporting Payments on Form 1099-OID:
See the 2003 Instructions for Forms 1099-INT and 1099-OID for further reporting information Amount
Code 		Amount Type
1 Original issue discount for 2003
2 Other periodic interest
3 Early withdrawal penalty
4 Federal income tax withheld (backup withholding)
6 Original issue discount on U.S. Treasury Obligations
7 Investment expenses
Amount Codes Form 1099-PATR — Taxable Distributions Received From Cooperatives For Reporting Payments on Form 1099-PATR:
Amount
Code 		Amount Type
1 Patronage dividends
2 Nonpatronage distributions
3 Per-unit retain allocations
4 Federal income tax withheld (backup withholding)
5 Redemption of nonqualified notices and retain allocations
Pass-Through Credits
6 For filer's use for pass-through credits
7 Investment credit
8 Work opportunity credit
9 Patron's alternative minimum tax (AMT) adjustment
Amount Codes Form 1099-Q — Qualified Tuition Program Payments (Under Sections 529 and 530) For Reporting Distributions or Earnings from Qualified Tuition Plan on a Form 1099-Q:
Amount
Code 		Amount Type
1 Gross distribution
2 Earnings
3 Basis
Amount Codes Form 1099-R — Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. For Reporting Payments on Form 1099-R:
Amount
Code 		Amount Type
1 Gross distribution
2 Taxable amount (See Note 1.)
3 Capital gain (included in Amount Code 2)
4 Federal income tax withheld
5 Employee contributions or insurance premiums
6 Net unrealized appreciation in employer's securities
8 Other
9 Total employee contributions
A Traditional IRA/SEP/SIMPLE distribution or Roth conversion (See Note 2.)
Note 1: If the taxable amount cannot be determined, enter a “1” (one) in position 547 of the “B” Record. Payment Amount 2 must contain zeroes.
Note 2: For Form 1099-R, report the Roth conversion or total amount distributed from an IRA, SEP, or SIMPLE in Payment Amount Field A (IRA/SEP/SIMPLE distribution or Roth conversion) of the Payee “B” Record, and generally, the same amount in Payment Amount Field 1 (Gross Distribution). The IRA/SEP/SIMPLE indicator should be set to “1” (one) in Field Position 548 of the Payee “B” Record.
Amount Codes Form 1099-S — Proceeds From Real Estate Transactions For Reporting Payments on Form 1099-S:
Amount
Code 		Amount Type
2 Gross proceeds (See Note.)
5 Buyer's part of real estate tax
Note: Include payments of timber royalties made under a “pay-as-cut” contract, reportable under IRC Section 6050N. If timber royalties are being reported, enter “TIMBER” in the description field of the “B” Record.
Amount Codes Form 5498 — IRA Contribution Information For Reporting Information on Form 5498:
Amount
Code 		Amount Type
1 IRA contributions (other than amounts in Amount Codes 2, 3, 4, 8, 9, and A) (See Notes 1 and 2.)
2 Rollover contributions
3 Roth conversion amount
4 Recharacterized contributions
5 Fair market value of account
6 Life insurance cost included in Amount Code 1
8 SEP contributions
9 SIMPLE contributions
A Roth IRA contributions
Note 1: If reporting IRA contributions for a participant in a military operation, see 2003 Instructions for Forms 1099-R and 5498.
Note 2: Also include employee contributions to an IRA under a SEP plan but not salary reduction contributions. DO NOT include EMPLOYER contributions; these are included in Amount Code 8.
Amount Codes Form 5498-ESA — Coverdell ESA Contribution Information For Reporting Information on Form 5498-ESA:
Amount
Code 		Amount Type
1 Coverdell ESA contributions
2 Rollover contributions
Amount Codes Form 5498-MSA — Archer MSA or Medicare+Choice MSA Information For Reporting Information on 5498-MSA:
Amount
Code 		Amount Type
1 Employee or self-employed person's MSA contributions made in 2003 and 2004 for 2003
2 Total contributions made in 2003 (See current 2003 Instructions.)
3 Total MSA contributions made in 2004 for 2003
4 Rollover contributions (See Note.)
5 Fair market value of Archer MSA or M+C MSA account on December 31, 2003
Note: This is the amount of any rollover made to this MSA in 2003 after a distribution from another MSA. For detailed information on reporting, see the 2003 Instructions for Forms 1099-MSA and 5498-MSA.
Amount Codes Form W-2G — Certain Gambling Winnings For Reporting Payments on Form W-2G:
Amount
Code 		Amount Type
1 Gross winnings
2 Federal income tax withheld
7 Winnings from identical wagers
42-47 Blank 6 Enter blanks.
48 Original File Indicator 1 Required for original files only. Enter “1” (one) if the information is original data. Otherwise, enter a blank.
49 Replacement File Indicator 1 Required for replacement files only. Enter “1” (one) if this file is to replace a file that IRS/MCC has informed you in writing can not be processed or the FIRE System indicated a FILE STATUS of bad. Otherwise, enter a blank.
Note: If selecting the Replacement File Indicator in Position 49, Field Positions 48 and 50 must be blank. Only one indicator may be selected in positions 48, 49, and 50 for each Payer “A” Record.
50 Correction File Indicator 1 Required for correction files only Enter “1” (one) if this file is to correct information which was previously submitted to IRS/MCC, was processed, but contained erroneous information. Any information return which was inadvertently omitted from a file must be submitted as original. Otherwise, enter a blank.
51 Blank 1 Enter a blank.
52 Foreign Entity Indicator 1 Enter a “1” (one) if the payer is a foreign entity and income is paid by the foreign entity to a U. S. resident. Otherwise, enter a blank.
53-92 First Payer Name Line 40 Required. Enter the name of the payer whose TIN appears in positions 12-20 of the “A” Record. Any extraneous information must be deleted. Left-justify information, and fill unused positions with blanks. (Filers should not enter a transfer agent's name in this field. Any transfer agent's name should appear in the Second Payer Name Line Field.)
93-132 Second Payer Name Line 40 If the Transfer (or Paying) Agent Indicator (position 133) contains a “1” (one), this field must contain the name of the transfer (or paying) agent. If the indicator contains a “0” (zero), this field may contain either a continuation of the First Payer Name Line or blanks. Left-justify information and fill unused positions with blanks.
133 Transfer Agent Indicator 1 Required. Identifies the entity in the Second Payer Name Line Field.
Code Meaning
1 The entity in the Second Payer Name Line Field is the transfer (or paying) agent.
0 (zero) The entity shown is not the transfer (or paying) agent (i.e., the Second Payer Name Line Field contains either a continuation of the First Payer Name Line Field or blanks).
134-173 Payer Shipping Address 40 Required. If the Transfer Agent Indicator in position 133 is a “1” (one), enter the shipping address of the transfer (or paying) agent. Otherwise, enter the actual shipping address of the payer. The street address should include number, street, apartment or suite number, or PO Box if mail is not delivered to street address. Left-justify information, and fill unused positions with blanks.
For U.S. addresses, the payer city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively. Filers must adhere to the correct format for the payer city, state, and ZIP Code.
For foreign addresses, filers may use the payer city, state, and ZIP Code as a continuous 51-position field. Enter information in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the Foreign Entity Indicator in position 52 must contain a “1” (one).
174-213 Payer City 40 Required. If the Transfer Agent Indicator in position 133 is a “1” (one), enter the city, town, or post office of the transfer agent. Otherwise, enter the city, town, or post office of the payer. Left-justify information, and fill unused positions with blanks. Do not enter state and ZIP Code information in this field.
214-215 Payer State 2 Required. Enter the valid U.S. Postal Service state abbreviations. Refer to the chart of valid state abbreviations in Part A, Sec. 15.
216-224 Payer ZIP Code 9 Required. Enter the valid nine-digit ZIP Code assigned by the U.S. Postal Service. If only the first five-digits are known, left-justify information and fill the unused positions with blanks. For foreign countries, alpha characters are acceptable as long as the filer has entered a “1” (one) in the Foreign Entity Indicator, located in Field Position 52 of the “A” Record.
225-239 Payer Number & Extension 15 Enter the payer's phone number and extension. Omit hyphens. Left-justify information and fill unused positions with blanks.
240-499 Blank 260 Enter blanks.
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you can have only one “T” record in a file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-748 Blank 241 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.

Sec. 5. Payer “A” Record — Record Layout

Record Type Payment Year Blank Payer TIN Payer Name Control Last Filing Indicator
1 2-5 6-11 12-20 21-24 25
Combined Federal/State Filer Type of Return Amount Codes Blank Original File Indicator Replacement File Indicator Correction File Indicator
26 27 28-41 42-47 48 49 50
Blank Foreign Entity Indicator First Payer Name Line Second Payer Name Line Transfer Agent Indicator Payer Shipping Address
51 52 53-92 93-132 133 134-173
Payer City Payer State Payer ZIP Code Payer Phone Number and Extension Blank Record Sequence Number Blank Blank or CR/LF
174-213 214-215 216-224 225-239 240-499 500-507 508-748 749-750

Sec. 6. Payee “B” Record — General Field Descriptions and Record Layouts

.01 The “B” Record contains the payment information from the information returns. The record layout for field positions 1 through 543 is the same for all types of returns. Field positions 544 through 750 vary for each type of return to accommodate special fields for individual forms. In the “B” Record, the filer must allow for all fourteen Payment Amount Fields. For those fields not used, enter “0s” (zeros).

.02 The following specifications include a field in the payee records called “Name Control” in which the first four characters of the payee's surname are to be entered by the filer;

  1. If filers are unable to determine the first four characters of the surname, the Name Control Field may be left blank. Compliance with the following will facilitate IRS computer programs in identifying the correct name control:

    • 1. The surname of the payee whose TIN is shown in the “B” Record should always appear first. If, however, the records have been developed using the first name first, the filer must leave a blank space between the first and last names.

    • 2. In the case of multiple payees, only the surname of the payee whose TIN (SSN, EIN, ITIN, or ATIN) is shown in the “B” Record must be present in the First Payee Name Line. Surnames of any other payees may be entered in the Second Payee Name Line.

.03 For all fields marked “Required” , the transmitter must provide the information described under “Description and Remarks”. For those fields not marked “Required” , the transmitter must allow for the field, but may be instructed to enter blanks or zeros in the indicated field position(s) and for the indicated length.

.04 All records must be a fixed length of 750 positions.

.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 personal use of the filer. IRS does not use the data provided in the Special Data Entries Field; therefore, the IRS program does not check the content or format of the data entered in this field. It is the filer's option to use the Special Data Entry Field.

.06 Following the Special Data Entries Field in the “B” Record, payment fields have been allocated for State Income Tax Withheld and Local Income Tax Withheld. These fields are for the convenience of the filers. The information will not be used by IRS/MCC.

.07 Those payers participating in the Combined Federal/State Filing Program must adhere to all of the specifications in Part A, Sec. 13, to participate in this program.

.08 All alpha characters in the “B” Record must be uppercase.

.09 Do not use decimal points (.) to indicate dollars and cents. Payment Amount Fields must be all numerics.

Record Name: Payee “B” Record
Field
Position 		Field Title Length Description and Remarks
1 Record Type 1 Required. Enter “B”.
2-5 Payment Year 4 Required. Enter “2003” (unless reporting prior year data; report the year which applies [2001, 2002, etc.]).
6 Corrected Return Indicator (See Note.) 1 Required for corrections only. Indicates a corrected return
Code Definition
G If this is a one-transaction correction or the first of a two-transaction correction
Record Name: Payee “B” Record (Continued)
Field
Position 		Field Title Length Description and Remarks
C If this is the second transaction of a two transaction correction
Blank If this is not a return being submitted to correct information already processed by IRS.
Note: C, G, and non-coded records must be reported using separate Payer “A” Records. Refer to Part A, Sec. 11, for specific instructions on how to file corrected returns.
7-10 Name Control 4 If determinable, enter the first four characters of the surname of the person whose TIN is being reported in positions 12-20 of the “B” Record; otherwise, enter blanks. This usually is the payee. If the name that corresponds to the TIN is not included in the first or second payee name line and the correct name control is not provided, a backup withholding notice may be generated for the record. Surnames of less than four characters should be left-justified, filling the unused positions with blanks. Special characters and imbedded blanks should be removed. In the case of a business, other than a sole proprietorship, use the first four significant characters of the business name. Disregard the word “the” when it is the first word of the name, unless there are only two words in the name. A dash (-) and an ampersand (&) are the only acceptable special characters. Surname prefixes are considered, e.g., for Van Elm, the name control would be VANE. For a sole proprietorship use the name of the owner to create the name control and report the owner's name in positions 248-287, First Payer Name Line.
Note: Imbedded blanks, extraneous words, titles, and special characters (i.e., Mr., Mrs., Dr., period [.], apostrophe [']) should be removed from the Payee Name Lines. This information may be dropped during subsequent processing at IRS/MCC. A dash (-) and an ampersand (&) are the only acceptable special characters.
The following examples may be helpful to filers in developing the Name Control:
Name: Name Control
Individuals:
Jane Brow n BROW
John A. Lee LEE*
James P. En , Sr. EN*
John O'Nei l ONEI
Mary Van B uren VANB
Juan De Je sus DEJE
Gloria A. El-R oy EL-R
Mr. John Smit h SMIT
Joe McCa rthy MCCA
Pedro Torr es-Lopes** TORR
Maria Lope z Moreno** LOPE
Binh To La LA*
Nhat Thi Pham PHAM
Mark D'All esandro DALL
Corporations:
The Firs t National Bank FIRS
The H ideaway THEH
A&B C afe A&BC
11TH Street Inc. 11TH
Sole Proprietor:
Mark Heml ockDBA The Sunshine Club HEML
Partnership:
Robert Aspe nand Bess Willow ASPE
Harold Fir , Bruce Elm,and Joyce Spruce et al Ptr FIR*
Estate:
Frank Whit e Estate WHIT
Estate of Sheila Blue BLUE
Trusts and Fiduciaries:
Dais y Corporation Employee Benefit Trust DAIS
Trust FBO The Cher ry-blossomSociety CHER
Exempt Organizations:
Labo rer's Union, AFL-CIO LABO
St. Be rnard's Methodist Church Bldg. Fund STBE
*Name Controls of less than four significant characters must be left-justified and blank-filled.
**For Hispanic names, when two last names are shown for an individual, derive the name control from the first last name.
11 Type of TIN 1 This field is used to identify the Taxpayer Identification Number (TIN) in positions 12-20 as either an Employer Identification Number (EIN), a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN). Enter the appropriate code from the following table:
Code Type of TIN Type of Account
1 EIN A business, organization, some sole proprietors, or other entity
2 SSN An individual, including some sole proprietors
2 ITIN An individual required to have a taxpayer identification number, but who is not eligible to obtain an SSN
2 ATIN An adopted individual prior to the assignment of a social security number
Blank N/A If the type of TIN is not determinable, enter a blank.
12-20 Payee's Taxpayer Identification Number (TIN) 9 Required. Enter the nine-digit Taxpayer Identification Number of the payee (SSN, ITIN, ATIN, or EIN). If an identification number has been applied for but not received, enter blanks. Do not enter hyphens or alpha characters. All zeros, ones, twos, etc., will have the effect of an incorrect TIN. If the TIN is not available, enter blanks. Payers who submit data with missing TINs, and have taken the required steps to obtain this information, should submit a letter with their media.
Note: If you are required to report payments made through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099, see the 2003 General Instructions for Forms 1099, 1098, 5498 and W-2G for reporting requirements.
21-40 Payer's Account Number For Payee 20 Required. Enter any number assigned by the payer to the payee that can be used by the IRS to distinguish between information returns. This number must be unique for each information return. If a payee has more than one reporting of the same document type, it is vital that each reporting have a unique account number. For example, if a payer has 3 separate pension distributions for the same payee and 3 separate Forms 1099-R are filed, 3 separate unique account numbers are required. A payee's account number may be given a unique sequencing number, such as, 01, 02 or A, B, etc. to differentiate each reported information return. Do not use the payee's TIN since this will not make each record unique. This information is critical when corrections are filed. This number will be provided with the backup withholding notification and may be helpful in identifying the branch or subsidiary reporting the transaction. Do not define data in this field in packed decimal format. If fewer than twenty characters are used, filers may either left or right-justify, filling the remaining positions with blanks.
41-44 Payer's Office Code 4 Enter office code of payer; otherwise, enter blanks. For payers with multiple locations, this field may be used to identify the location of the office submitting the information return. This code will also appear on backup withholding notices.
45-54 Blank 10 Enter blanks
Payment Amount Fields (Must be numeric) Required. Filers should allow for all payment amounts. For those not used, enter zeros. Each payment field must contain 12 numeric characters. Each payment amount must contain U.S. dollars and cents. The right-most two positions represent cents in the payment amount fields. Do not enter dollar signs, commas, decimal points, or negative payments, except those items that reflect a loss on Form 1099-B or 1099-Q. Positive and negative amounts are indicated by placing a “+” (plus) or “-” (minus) sign in the left-most position of the payment amount field. A negative over punch in the unit's position may be used, instead of a minus sign, to indicate a negative amount. If a plus sign, minus sign, or negative over punch is not used, the number is assumed to be positive. Negative over punch cannot be used in PC created files. Payment amounts must be right-justified and unused positions must be zero-filled.
55-66 Payment Amount 1* 12 The amount reported in this field represents payments for Amount Code 1 in the “A” Record.
67-78 Payment Amount 2* 12 The amount reported in this field represents payments for Amount Code 2 in the “A” Record.
79-90 Payment Amount 3* 12 The amount reported in this field represents payments for Amount Code 3 in the “A” Record.
91-102 Payment Amount 4* 12 The amount reported in this field represents payments for Amount Code 4 in the “A” Record.
103-114 Payment Amount 5* 12 The amount reported in this field represents payments for Amount Code 5 in the “A” Record.
115-126 Payment Amount 6* 12 The amount reported in this field represents payments for Amount Code 6 in the “A” Record.
127-138 Payment Amount 7* 12 The amount reported in this field represents payments for Amount Code 7 in the “A” Record.
139-150 Payment Amount 8* 12 The amount reported in this field represents payments for Amount Code 8 in the “A” Record.
151-162 Payment Amount 9* 12 The amount reported in this field represents payments for Amount Code 9 in the “A” Record.
163-174 Payment Amount A* 12 The amount reported in this field represents payments for Amount Code A in the “A” Record.
175-186 Payment Amount B* 12 The amount reported in this field represents payments for Amount Code B in the “A” Record.
187-198 Payment Amount C* 12 The amount reported in this field represents payments for Amount Code C in the “A” Record.
199-210 Payment Amount D* 12 The amount reported in this field represents payments for Amount Code D in the “A” Record.
211-222 Payment Amount E* 12 The amount reported in this field represents payments for Amount Code E in the “A” Record.
* If there are discrepancies between the payment amount fields and the boxes on the paper forms, the instructions in this Revenue Procedure govern.
222-246 Reserved 25 Enter blanks.
247 Foreign Country Indicator 1 If the address of the payee is in a foreign country, enter a “1” (one) in this field; otherwise, enter blank. When filers use this indicator, they may use a free format for the payee city, state, and ZIP Code. Enter information in the following order: city, province or state, postal code, and the name of the country. Address information must not appear in the First or Second Payee Name Line.
248-287 First Payee Name Line 40 Required. Enter the name of the payee (preferably surname first) whose Taxpayer Identification Number (TIN) was provided in positions 12-20 of the “B” Record. Left-justify and fill unused positions with blanks. If more space is required for the name, use the Second Payee Name Line Field. The names of any other payees may be entered in the Second Payee Name Line Field. If reporting information for a sole proprietor, the individual's name must always be present on the First Payee Name Line. The use of the business name is optional in the Second Payee Name Line Field. End the First Payee Name Line with a full word. Use appropriate spacing. Extraneous words, titles, and special characters (i.e., Mr., Mrs., Dr., period, apostrophe) should be removed from the Payee Name Lines. This information may be dropped during subsequent processing at IRS/MCC. A dash (-) and an ampersand (&) are the only acceptable special characters for First and Second Payee Name Lines.
Note: If you are required to report payments made through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099, see the 2003 General Instructions for Forms 1099, 1098, 5498 and W-2G for reporting requirements.
288-327 Second Payee Name Line 40 If there are multiple payees (e.g., partners, joint owners, or spouses), use this field for those names not associated with the TIN provided in positions 12-20 of the “B” Record, or if not enough space was provided in the First Payee Name Line, continue the name in this field. Do not enter address information. It is important that filers provide as much payee information to IRS/MCC as possible to identify the payee associated with the TIN. Left-justify and fill unused positions with blanks. See Note above in First Payee Name Line.
328-367 Blank 40 Enter blanks.
368-407 Payee Mailing Address 40 Required. Enter mailing address of payee. Street address should include number, street, apartment or suite number, or PO Box if mail is not delivered to street address. Left-justify information and fill unused positions with blanks. This field must not contain any data other than the payee's mailing address.
408-447 Blank 40 Enter blanks.
448-487 Payee City 40 Required. Enter the city, town or post office. Left-justify information and fill the unused positions with blanks. Enter APO or FPO if applicable. Do not enter state and ZIP Code information in this field.
488-489 Payee State 2 Required. Enter the valid U.S. Postal Service state abbreviations for states or the appropriate postal identifier (AA, AE, or AP) described in Part A, Sec. 15.
490-498 Payee ZIP Code 9 Required. Enter the valid ZIP Code (nine or five-digit) assigned by the U.S. Postal Service. If only the first five-digits are known, left-justify information and fill the unused positions with blanks. For foreign countries, alpha characters are acceptable as long as the filer has entered a “1” (one) in the Foreign Country Indicator, located in position 247 of the “B” Record.
499 Blank 1 Enter blank.
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you can have only one “T” record in a file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4 etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-543 Blank 36 Enter blanks.

Standard Payee “B” Record Format For All Types of Returns, Positions 1-543
Record Type Payment Year Corrected Return Indicator Name Control Type of TIN Payee's TIN Payer's Account Number For Payee
1 2-5 6 7-10 11 12-20 21-40
Payer's Office Code Blank Payment Amount 1 Payment Amount 2 Payment Amount 3 Payment Amount 4 Payment Amount 5
41-44 45-54 55-66 67-78 79-90 91-102 103-114
Payment Amount 6 Payment Amount 7 Payment Amount 8 Payment Amount 9 Payment Amount A Payment Amount B
115-126 127-138 139-150 151-162 163-174 175-186
PaymentAmountC Payment Amount D Payment Amount E Reserved Foreign Country Indicator First Payee Name Line Second Payee Name Line Blank
187-198 199-210 211-222 223-246 247 248-287 288-327 328-367
Payee Mailing Address Blank Payee City Payee State Payee ZIP Code Blank Record Sequence Number Blank
368-407 408-447 448-487 488-489 490-498 499 500-507 508-543

The following sections define the field positions for the different types of returns in the Payee “B” Record (positions 544-750):

  1. Form 1098

  2. Form 1098-E

  3. Form 1098-T

  4. Form 1099-A

  5. Form 1099-B

  6. Form 1099-C

  7. Form 1099-CAP

  8. Form 1099-DIV*

  9. Form 1099-G*

  10. Form 1099-H

  11. Form 1099-INT*

  12. Form 1099-LTC

  13. Form 1099-MISC*

  14. Form 1099-MSA

  15. Form 1099-OID*

  16. Form 1099-PATR*

  17. Form 1099-Q

  18. Form 1099-R*

  19. Form 1099-S

  20. Form 5498*

  21. Form 5498-ESA

  22. Form 5498-MSA

  23. Form W-2G

* These forms may be filed through the Combined Federal/State Filing Program. IRS/MCC will forward these records to participating states for filers who have been approved for the program. See Part A, Sec. 13, for information about the program, including specific codes for the record layouts.

(1) Payee “B” Record — Record Layout Positions 544-750 for Form 1098
Field
Position 		Field Title Length Description and Remarks
544-662 Blank 119 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Forms 1098
Blank Special Data Entries Blank Blank or CR/LF
544-662 663-722 723-748 749-750
(2) Payee “B” Record — Record Layout Positions 544-750 for Form 1098-E
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Origination Fees/Capitalized Interest Indicator 1 Enter “1” (one) if the amount reported in Payment Amount Field 1 includes loan origination fees and/or capitalized interest. Otherwise, enter a blank.
548-662 Blank 115 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for the filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Forms 1098-E
Blank Origination Fees/Capitalized Interest Indicator Blank Special Data Entries Blank Blank or CR/LF
544-546 547 548-662 663-722 723-748 749-750
(3) Payee “B” Record — Record Layout Positions 544-750 for Form 1098-T
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Half-time Student Indicator 1 Enter “1” (one) if the student was at least a half-time student during any academic period that began in 2003. Otherwise, enter a blank.
548 Graduate Student Indicator 1 Enter “1” (one) if the student is enrolled exclusively in a graduate level program. Otherwise, enter a blank.
(3) Payee “B” Record — Record Layout Positions 544-750 for Form 1098-T (Continued)
Field
Position 		Field Title Length Description and Remarks
549 Academic Period Indicator 1 Enter “1” (one) if the amount reported in Payment Amount Field 1 or Payment Amount Field 2 includes amounts for an academic period beginning January through March 2004. Otherwise, enter a blank.
550-662 Blank 113 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for the filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1098-T
Blank Half-time Student Indicator Graduate Student Indicator Academic Period Indicator Blank Special Data Entries Blank Blank or CR/LF
544-546 547 548 549 550-662 663-722 723-748 749-750
(4) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-A
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Personal Liability Indicator 1 Enter the appropriate indicator from the table below:
Indicator Usage
1 Borrower was personally liable for repayment of the debt.
Blank Borrower was not personally liable for repayment of the debt.
548-555 Date of Lender's Acquisition or Knowledge of Abandonment 8 Enter the acquisition date of the secured property or the date the lender first knew or had reason to know the property was abandoned, in the format YYYYMMDD (e.g., January 5, 2003, would be 20030105). Do not enter hyphens or slashes.
(4) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-A (Continued)
Field
Position 		Field Title Length Description and Remarks
556-594 Description of Property 39 Enter a brief description of the property. For real property, enter the address, or, if the address does not sufficiently identify the property, enter the section, lot and block. For personal property, enter the type, make and model (e.g., Car-1999 Buick Regal or Office Equipment). Enter “CCC” for crops forfeited on Commodity Credit Corporation loans. If fewer than 39 positions are required, left-justify information and fill unused positions with blanks.
595-662 Blank 68 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for the filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-A
Blank Personal Liability Indicator Date of Lender's Acquisition or Knowledge of Abandonment Description of Property Blank
544-546 547 548-555 556-594 595-662
Special Data Entries Blank Blank or CR/LF
663-722 723-748 749-750
(5) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-B
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” (two) to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
(5) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-B (Continued)
Field
Position 		Field Title Length Description and Remarks
547 Gross Proceeds Indicator 1 Enter the appropriate indicator from the following table, to identify the amount reported in Amount Code 2; otherwise, enter a blank.
Indicator Usage
1 Gross proceeds
2 Gross proceeds less commissions and options premiums
548-555 Date of Sale 8 For broker transactions, enter the trade date of the transaction. For barter exchanges, enter the date when cash, property, a credit, or scrip is actually or constructively received in the format YYYYMMDD (e.g., January 5, 2003, would be 20030105). Enter blanks if this is an aggregate transaction. Do not enter hyphens or slashes.
556-568 CUSIP Number 13 For broker transactions only, enter the CUSIP (Committee on Uniform Security Identification Procedures) number of the item reported for Amount Code 2 (stocks, bonds, etc.). Enter blanks if this is an aggregate transaction. Enter “0s” (zeros) if the number is not available. Right-justify information and fill unused positions with blanks.
569-607 Description 39 If fewer than 39 characters are required, left-justify information and fill unused positions with blanks. For broker transactions, enter a brief description of the disposition item (e.g., 100 shares of XYZ Corp). For regulated futures and forward contracts, enter “RFC” or other appropriate description. For bartering transactions, show the services or property provided.
608-662 Blank 55 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Blank 2 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-B
Second TIN Notice (Optional) Blank Gross Proceeds Indicator Date of Sale CUSIP Number Description
544 545-546 547 548-555 556-568 569-607
Blank Special Data Entries State Income Tax Withheld Local Income Tax Withheld Blank Blank or CR/LF
608-662 663-722 723-734 735-746 747-748 749-750
(6) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-C
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Bankruptcy Indicator 1 Enter “1” (one) to indicate the debt was discharged in bankruptcy, if known. Otherwise, enter a blank.
548-555 Date Canceled 8 Enter the date the debt was canceled in the format of YYYYMMDD (e.g., January 5, 2003, would be 20030105). Do not enter hyphens or slashes.
556-594 Debt Description 39 Enter a description of the origin of the debt, such as student loan, mortgage, or credit card expenditure. If a combined Form 1099-C and 1099-A is being filed, also enter a description of the property.
595-662 Blank 68 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Forms 1099-C
Blank Bankruptcy Indicator Date Canceled Debt Description Blank Special Data Entries
544-546 547 548-555 556-594 595-662 663-722
Blank Blank or CR/LF
723-748 749-750
(7) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-CAP
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” (two) to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
547 Gross Proceeds Indicator 1 Enter the appropriate indicator from the following table, to identify the amount reported in Amount Code 2; otherwise, enter a blank.
Indicator Usage
1 Gross proceeds
2 Gross proceeds less commissions and options premiums
548-555 Date of Exchange 8 Enter the date the stock was exchanged for cash, stock in the successor corporation, or other property received in the format YYYYMMDD (e.g., January 5, 2003, would be 20030105). Do not enter hyphens or slashes.
556-568 CUSIP Number 13 For broker transactions only, enter the CUSIP (Committee on Uniform Security Identification Procedures) number of the item reported. Enter blanks if this is an aggregate transaction. Enter “0s” (zeros) if the number is not available. Right-justify information and fill unused positions with blanks.
569-607 Description 39 If filed by a broker, enter the corporation's name and Employer Identification Number (EIN). If fewer than 39 characters are required, left-justify information and fill unused positions with blanks.
608-615 Number of Shares Exchanged 8 Enter the number of shares of the corporation's stock which were exchanged in the transaction. Report whole number only. Right-justify information and fill unused positions with blanks.
616-625 Class of Stock 10 Enter the class of stock that was exchanged. Left-justify the information and fill unused positions with blanks.
626 Filed By Broker Indicator 1 Enter a “1” (one) if the transaction was filed by a Broker. Otherwise, enter a blank.
627 Shareholder Indicator 1 Enter a“1” (one) if the shareholder cannot take a loss on their tax return. Otherwise, enter a blank.
628-662 Blank 35 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
(7) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-CAP (Continued)
Field
Position 		Field Title Length Description and Remarks
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-CAP
Second TIN Notice Blank Gross Proceeds Indicator Date of Exchange CUSIP Number Description Number of Shares Exchanged
544 545-546 547 548-555 556-568 569-607 608-615
Class of Stock Filed By Broker Indicator Shareholder Indicator Blank Special Data Entries Blank Blank or CR/LF
616-625 626 627 628-662 663-722 723-748 749-750
(8) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-DIV
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice(Optional) 1 Enter “2” (two) to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
547-586 Foreign Country or U.S. Possession 40 Enter the name of the foreign country or U.S. possession to which the withheld foreign tax (Amount Code A) applies. Otherwise, enter blanks.
587-662 Blank 76 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
(8) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-DIV (Continued)
Field
Position 		Field Title Length Description and Remarks
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-DIV
Second TIN Notice (Optional) Blank Foreign Country or U.S. Possession Blank Special Data Entries
544 545-546 547-586 587-662 663-722
State Income Tax Withheld Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
723-734 735-746 747-748 749-750
(9) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-G
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Trade or Business Indicator 1 Enter “1” (one) to indicate the state or local income tax refund, credit, or offset (Amount Code 2) is attributable to income tax that applies exclusively to income from a trade or business.
Indicator Usage
1 Income tax refund applies exclusively to a trade or business.
Blank Income tax refund is a general tax refund.
548-551 Tax Year of Refund 4 Enter the tax year for which the refund, credit, or Offset (Amount Code 2) was issued. The tax year must reflect the tax year for which the payment was made, not the tax year of the Form 1099-G. The tax year must be in the four-position format of YYYY (e.g., 2001). The valid range of years for the refund is 1992 through 2002.
(9) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-G (Continued)
Field
Position 		Field Title Length Description and Remarks
Note: This data is not considered prior year data since it is required to be reported in the current tax year. Do NOT enter “P” in field position 6 of the Transmitter “T” Record.
552-662 Blank 111 Enter blanks.
633-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. You may enter your routing and transit number (RTN) here. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-G
Blank Trade or Business Indicator Tax Year of Refund Blank Special Data Entries State Income Tax Withheld
544-546 547 548-551 552-662 663-722 723-734
Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
735-746 747-748 749-750
(10) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-H
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547-548 Number of Months Eligible 2 Required. Enter the total number of months you are eligible for health insurance advance payments. Left-justify and blank fill any remaining positions.
549-662 Blank 114 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-H
Blank Number of Months Eligible Blank Special Data Entries Blank Blank or CR/LF
544-546 547-548 549-662 663-722 723-746 749-750
(11) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-INT
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
547-586 Foreign Country or U.S. Possession 40 Enter the name of the foreign country or U.S. possession to which the withheld foreign tax (Amount Code 6) applies. Otherwise, enter blanks.
587-662 Blank 76 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. You may enter your routing and transit number (RTN) here. If this field is not utilized, enter blanks.
(11) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-INT (Continued)
Field
Position 		Field Title Length Description and Remarks
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-INT
Second TIN Notice (Optional) Blank Foreign Country or U.S. Possession Blank Special Data Entries State Income Tax Withheld
544 545-546 547-586 587-662 663-722 723-734
Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
735-746 747-748 749-750
(12) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-LTC
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Type of Payment Indicator 1 Enter the appropriate indicator from the following table; otherwise, enter blanks.
Indicator Usage
1 Per diem
2 Reimbursed amount
548-556 Social Security Number of Insured 9 Required. Enter the Social Security Number of the insured.
(12) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-LTC (Continued)
Field
Position 		Field Title Length Description and Remarks
557-596 Name of Insured 40 Required. Enter the name of the insured.
597-636 Address of Insured 40 Required. Enter the address of the insured. Street address should include number, street, apartment or suite number (or PO Box if mail is not delivered to street address). Left-justify information and fill unused positions with blanks. This field must not contain any data other than payee's address.
For U.S. addresses, the payee city, state, and ZIP Code must be reported as a 40, 2, and 9-position field, respectively. Filers must adhere to the correct format for the insured's city, state, and ZIP Code.
For foreign addresses, filers may use the insured's city, state, and ZIP Code as a continuous 51-position field. Enter information in the following order: city, province or state, postal code, and the name of the country. When reporting a foreign address, the Foreign Country Indicator in position 247 must contain a “1” (one).
637-676 City of Insured 40 Required. Enter the city, town, or post office. Left-justify information and fill the unused positions with blanks. Enter APO or FPO, if applicable. Do not enter state and ZIP Code information in this field.
677-678 State of Insured 2 Required. Enter the valid U.S. Postal Service state abbreviations for states or the appropriate postal identifier (AA, AE, or AP) described in Part A, Sec. 15.
679-687 ZIP Code of Insured 9 Required. Enter the valid nine-digit ZIP Code assigned by the U.S. Postal Service. If only the first five-digits are known, left-justify information and fill the unused positions with blanks. For foreign countries, alpha characters are acceptable as long as the filer has entered a “1” (one) in the Foreign Country Indicator, located in position 247 of the “B” Record.
688 Status of Illness Indicator (Optional) 1 Enter the appropriate code from the table below to indicate the status of the illness of the insured; otherwise, enter blank:
Indicator Usage
1 Chronically ill
2 Terminally ill
689-696 Date Certified (Optional) 8 Enter the latest date of a doctor's certification of the status of the insured's illness. The format of the date is YYYYMMDD (e.g., January 5, 2003, would be 20030105). Do not enter hyphens or slashes.
697 Qualified Contract Indicator (Optional) 1 Enter a “1” (one) if benefits were from a qualified long-term care insurance contract; otherwise, enter blank.
698-722 Blank 25 Enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled.
747-748 Blank 2 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-LTC
Blank Type of Payment Indicator SSN of Insured Name of Insured Address of Insured City of Insured State of Insured ZIP Code of Insured
544-546 547 548-556 557-596 597-636 637-676 677-678 679-687
Status of Illness Indicator (Optional) Date Certified(Optional) Qualified Contract Indicator(Optional) Blank State Income Tax Withheld Local Income Tax Withheld
688 689-696 697 698-722 723-734 735-746
Blank Blank or CR/LF
747-748 749-750
(13) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MISC
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
547 Direct Sales Indicator(See Note.) 1 Enter a “1” (one) to indicate sales of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or any other commission basis for resale anywhere other than in a permanent retail establishment. Otherwise, enter a blank.
Note: If reporting a direct sales indicator only, use Type of Return “A” in Field Position 27, and Amount Code 1 in Field Position 28 of the Payer “A” Record. All payment amount fields in the Payee “B” Record will contain zeros.
548-662 Blank 115 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not used, enter blanks.
(13) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MISC (Continued)
Field
Position 		Field Title Length Description and Remarks
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MISC
Second TIN Notice (Optional) Blank Direct Sales Indicator Blank Special Data Entries State Income Tax Withheld Local Income Tax Withheld
544 545-546 547 548-662 663-722 723-734 735-746
Combined Federal/State Code Blank or CR/LF
747-748 749-750
(14) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MSA
Field
Position 		Field Title Length Description and Remarks
544 Blank 1 Enter blank.
545 Distribution Code 1 Required. Enter the applicable code to indicate the type of payment:
Code Category
1 Normal distribution
2 Excess contribution
3 Disability
(14) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MSA (Continued)
Field
Position 		Field Title Length Description and Remarks
4 Death distribution other than code 6 (This includes distributions to a spouse, nonspouse, or estate beneficiary in the year of death and to an estate after the year of death.)
5 Prohibited transaction
6 Death distribution after year of death to a nonspouse beneficiary (Do not use for distribution to an estate.)
546 Blank 1 Enter a blank.
547 Medicare+Choice MSA Indicator 1 Enter “1” (one) if distributions are from a Medicare+Choice MSA. Otherwise, enter a blank.
548-662 Blank 115 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Blank 2 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-MSA
Blank Distribution Code Blank Medicare+Choice MSA Indicator Blank Special Data Entries
544 545 546 547 548-662 663-722
State Income Tax Withheld Local Income Tax Withheld Blank Blank or CR/LF
723-734 735-746 747-748 749-750
(15) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-OID
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-546 Blank 2 Enter blanks.
547-585 Description 39 Required. Enter the CUSIP number, if any. If there is no CUSIP number, enter the abbreviation for the stock exchange and issuer, the coupon rate, and year (must be 4-digit year) of maturity (e.g., NYSE XYZ 12/2003). Show the name of the issuer if other than the payer. If fewer than 39 characters are required, left-justify information and fill unused positions with blanks.
586-662 Blank 77 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table l. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-OID
Second TIN Notice (Optional) Blank Description Blank Special Data Entries State Income Tax Withheld
544 545-546 547-585 586-662 663-722 723-734
Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
735-746 747-748 749-750
(16) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-PATR
Field
Position 		Field Title Length Description and Remarks
544 Second TIN Notice (Optional) 1 Enter “2” (two) to indicate notification by IRS twice within three calendar years that the payee provided an incorrect name and/or TIN combination; otherwise, enter a blank.
545-662 Blank 118 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks, or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-PATR
Second TIN Notice (Optional) Blank Special Data Entries State Income Tax Withheld Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
544 545-662 663-722 723-734 735-746 747-748 749-750
(17) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-Q
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Trustee to Trustee Rollover Indicator 1 Required. Enter a “1” (one) if reporting a trustee to trustee rollover, otherwise, enter blank.
548 Type of Tuition Payment 1 Required. Enter the appropriate code from the table below to indicate the type of tuition payment, otherwise, leave blank.
Indicator Usage
1 Private Payment
2 State Payment
3 Coverdell ESA contribution
549 Designated Beneficiary 1 Required. Enter a “1” (one) if the recipient is not the designated beneficiary otherwise, enter a blank.
550-662 Blank 113 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-Q
Blank Trustee to Trustee Rollover Indicator Type of Tuition Payment Designated Beneficiary Blank Special Data Entries Blank Blank or CR/LF
544-546 547 548 549 550-662 663-722 723-748 749-750
(18) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-R
Field
Position 		Field Title Length Description and Remarks
544 Blank 1 Enter blank.
545-546 Distribution Code

(For a detailed explanation of distribution codes, see the 2003 Instructions for Forms 1099-R and 5498.)

See chart at the end of this record layout for a diagram of valid combinations of Distribution Codes. 		2 Required. Enter at least one distribution code from the table below. More than one code may apply. If only one code is necessary, it must be entered in position 545 and position 546 will be blank. When using Code P for an IRA distribution under section 408(d)(4) of the Internal Revenue Code, the filer may also enter Code 1, 2, or 4, if applicable. Only three numeric combinations are acceptable, Codes 8 and 1, 8 and 2, and 8 and 4, on one return. These three combinations can be used only if both codes apply to the distribution being reported. If more than one numeric code is applicable to different parts of a distribution, report two separate “B” Records.Distribution Codes 5, 6, 9, E, F, N, R, and S cannot be used with any other codes. Distribution Code G may be used with Distribution Code 4 only if applicable.
Code Category
1 *Early distribution, no known exception (in most cases, under age 59)
2 *Early distribution, exception applies (Under age 59)
3 *Disability
4 *Death
5 *Prohibited transaction
6 Section 1035 exchange (a tax-free exchange of life insurance, annuity, or endowment contracts)
7 *Normal distribution
8 *Excess contributions plus earnings/excess deferrals (and/or earnings) taxable in 2003
9 Cost of current life insurance protection (premiums paid by a trustee or custodian for current insurance protection)
A May be eligible for 10-year tax option
D *Excess contributions plus earnings/excess deferrals taxable in 2001
E Excess annual additions under section 415/certain excess amounts under section 403(b) plans
F Charitable gift annuity
G Direct rollover
(18) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-R (Continued)
Field
Position 		Field Title Length Description and Remarks
J Early distribution from a Roth IRA, no known exception. (This code may be used with Code 8, or P.)
L Loans treated as deemed distributions under section 72(p)
N Recharacterized IRA contribution made for 2003
P *Excess contributions plus earnings/excess deferrals taxable in 2002
Q Early distribution from a Roth IRA, known exception. (Distribution from Roth IRAs when recipient is not 59, and the 5 year holding period for qualified distributions has not been met but exception under 72(q), (t), or (v) applies.)
R Recharacterized IRA contribution made for 2002 (See Note.)
S *Early distribution from a SIMPLE IRA in first 2 years, no known exception
T Roth IRA distribution, exception applies if participant dies or is disabled. (This code may be used with Code 5, 8, or P.)
*If reporting a traditional IRA, SEP, or SIMPLE distribution or a Roth conversion, use the IRA/SEP/SIMPLE Indicator of “1” (one) in position 548 of the Payee “B” Record.
Note: The trustee of the first IRA must report the recharacterization as a distribution on Form 1099-R (and the original contribution and its character on Form 5498).
547 Taxable Amount Not Determined Indicator 1 Enter “1” (one) only if the taxable amount of the payment entered for Payment Amount Field 1 (Gross distribution) of the “B” Record cannot be computed; otherwise, enter blank. (If Taxable Amount Not Determined Indicator is used, enter “0's” [zeros] in Payment Amount Field 2 of the Payee “B” Record.) Please make every effort to compute the taxable amount.
548 IRA/SEP/SIMPLE Indicator 1 Enter “1” (one) for a traditional IRA, SEP, or SIMPLE distribution or Roth conversion; otherwise, enter a blank. (See Note.) If the IRA/SEP/SIMPLE Indicator is used, enter the amount of the Roth conversion or distribution in Payment Amount Field A of the Payee “B” Record. Do not use the indicator for a distribution from a Roth or Coverdell ESA or for an IRA recharacterization.
Note: For Form 1099-R, generally, report the Roth conversion or total amount distributed from a traditional IRA, SEP, or SIMPLE in Payment Amount Field A (traditional IRA/SEP/SIMPLE distribution or Roth conversion), as well as Payment Amount Field 1 (Gross Distribution) of the “B” Record. Refer to the 2003 Instructions for Forms 1099-R and 5498 for exceptions (Box 2a instructions).
549 Total Distribution Indicator (See Note.) 1 Enter a “1” (one) only if the payment shown for Distribution Amount Code 1 is a total distribution that closed out the account; otherwise, enter a blank.
Note: A total distribution is one or more distributions within one tax year in which the entire balance of the account is distributed. Any distribution that does not meet this definition is not a total distribution.
550-551 Percentage of Total Distribution 2 Use this field when reporting a total distribution to more than one person, such as when a participant is deceased and a payer distributes to two or more beneficiaries. Therefore, if the percentage is 100, leave this field blank. If the percentage is a fraction, round off to the nearest whole number (for example, 10.4 percent will be 10 percent; 10.5 percent will be 11 percent). Enter the percentage received by the person whose TIN is included in positions 12-20 of the “B” Record. This field must be right-justified, and unused positions must be zero-filled. If not applicable, enter blanks. Filers are not required to enter this information for any IRA distribution or for direct rollovers.
552-662 Blank 111 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. The state/payer's state number, state distribution, name of locality, and/or local distribution can be entered in this field. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
This is an Image: 2003-30_fileformat.gif
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-R
Blank Distribution Code Taxable Amount Not Determined Indicator IRA/SEP/SIMPLE Indicator Total Distribution Indicator Percentage of Total Distribution
544 545-546 547 548 549 550-551
Blank Special Data Entries State Income Tax Withheld Local Income Tax Withheld Combined Federal/State Code Blank or CR/LF
552-662 663-722 723-734 735-746 747-748 749-750
(19) Payee “B” Record — Record Layout Positions 544-750 for Form 1099-S
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Property or Services Indicator 1 Required. Enter “1” (one) if the transferor received or will receive property (other than cash and consideration treated as cash in computing gross proceeds) or services as part of the consideration for the property transferred. Otherwise, enter a blank.
548-555 Date of Closing 8 Required. Enter the closing date in the format YYYYMMDD (e.g., January 5, 2003, would be 20030105). Do not enter hyphens or slashes.
556-594 Address or Legal Description 39 Required. Enter the address of the property transferred (including city, state, and ZIP Code). If the address does not sufficiently identify the property, also enter a legal description, such as section, lot, and block. For timber royalties, enter “TIMBER.” If fewer than 39 positions are required, left-justify information and fill unused positions with blanks.
595-662 Blank 68 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Blank 2 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 1099-S
Blank Property or Services Indicator Date of Closing Address or Legal Description Blank Special Data Entries
544-546 547 548-555 556-594 595-662 663-722
State Income Tax Withheld Local Income Tax Withheld Blank Blank or CR/LF
723-734 735-746 747-748 749-750
(20) Payee “B” Record — Record Layout Positions 544-750 for Form 5498
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 IRA Indicator(IndividualRetirementAccount) 1 Required, if applicable. Enter “1” (one) if reporting a rollover (Amount Code 2) or Fair Market Value (Amount Code 5) for an IRA. Otherwise, enter a blank.
548 SEP Indicator(Simplified EmployeePension) 1 Required, if applicable. Enter “1” (one) if reporting rollover (Amount Code 2) or Fair Market Value (Amount Code 5) for a SEP. Otherwise, enter a blank.
549 SIMPLE Indicator(Savings IncentiveMatch Plan for Employees) 1 Required, if applicable. Enter “1” (one) if reporting a rollover (Amount Code 2) or Fair Market Value (Amount Code 5) for a SIMPLE. Otherwise, enter a blank.
550 Roth IRAIndicator 1 Required, if applicable. Enter “1” (one) if reporting a rollover (Amount Code 2) or Fair Market Value (Amount Code 5) for a Roth IRA. Otherwise, enter a blank.
551 RMD Indicator 1 Required. Enter “1” (one) if reporting RMD for 2004.
552-662 Blank 111 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-746 Blank 24 Enter blanks.
747-748 Combined Federal/State Code 2 If this payee record is to be forwarded to a state agency as part of the Combined Federal/State Filing Program, enter the valid state code from Part A, Sec. 13, Table 1. For those payers or states not participating in this program, enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 5498
Blank IRA Indicator SEP Indicator SIMPLE Indicator Roth IRA Indicator RMD Indicator
544-546 547 548 549 550 551
Blank Special Data Entries Blank Combined Federal/State Code Blank or CR/LF
552-662 663-722 723-746 747-748 749-750
(21) Payee “B” Record — Record Layout Positions 544-750 for Form 5498-ESA
Field
Position 		Field Title Length Description and Remarks
544-662 Blank 119 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 5498-ESA
Blank Special Data Entries Blank Blank or CR/LF
544-662 663-722 723-748 749-750
(22) Payee “B” Record — Record Layout Positions 544-750 for Form 5498-MSA
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Medicare+Choice MSA Indicator 1 Enter “1” (one) for Medicare+Choice MSA.
548-662 Blank 115 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-748 Blank 26 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form 5498-MSA
Blank Medicare +Choice MSA Indicator Blank Special Data Entries Blank Blank or CR/LF
544-546 547 548-662 663-722 723-748 749-750
(23) Payee “B” Record — Record Layout Positions 544-750 for Form W-2G
Field
Position 		Field Title Length Description and Remarks
544-546 Blank 3 Enter blanks.
547 Type of Wager Code 1 Required. Enter the applicable type of wager code from the table below:
Code Category
1 Horse race track (or off-track betting of a horse track nature)
2 Dog race track (or off-track betting of a dog track nature)
3 Jai-alai
4 State-conducted lottery
5 Keno
6 Bingo
7 Slot machines
8 Any other type of gambling winnings
548-555 Date Won 8 Required. Enter the date of the winning transaction in the format YYYYMMDD (e.g., January 5, 2003 would be 20030105). Do not enter hyphens or slashes. This is not the date the money was paid, if paid after the date of the race (or game).
556-570 Transaction 15 Required. For state-conducted lotteries, enter the ticket or other identifying number. For keno, bingo, and slot machines, enter the ticket or card number (and color, if applicable), machine serial number, or any other information that will help identify the winning transaction. For all others, enter blanks.
571-575 Race 5 If applicable, enter the race (or game) relating to the winning ticket; otherwise, enter blanks.
576-580 Cashier 5 If applicable, enter the initials or number of the cashier making the winning payment; otherwise, enter blanks.
581-585 Window 5 If applicable, enter the window number or location of the person paying the winning payment; otherwise, enter blanks.
586-600 First ID 15 For other than state lotteries, enter the first identification number of the person receiving the winning payment; otherwise, enter blanks.
601-615 Second ID 15 For other than state lotteries, enter the second identification number of the person receiving the winnings; otherwise, enter blanks.
616-662 Blank 47 Enter blanks.
663-722 Special Data Entries 60 This portion of the “B” Record may be used to record information for state or local government reporting or for the filer's own purposes. Payers should contact the state or local revenue departments for filing requirements. If this field is not utilized, enter blanks.
723-734 State Income Tax Withheld 12 State income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting state tax withheld, this field may be used as a continuation of the Special Data Entries Field.
(23) Payee “B” Record — Record Layout Positions 544-750 for Form W-2G (Continued)
Field
Position 		Field Title Length Description and Remarks
735-746 Local Income Tax Withheld 12 Local income tax withheld is for the convenience of the filers. This information does not need to be reported to IRS. The payment amount must be right-justified and unused positions must be zero-filled. If not reporting local tax withheld, this field may be used as a continuation of the Special Data Entries Field.
747-748 Blank 2 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Payee “B” Record — Record Layout Positions 544-750 for Form W-2G
Blank Type of Wager Code Date Won Transaction Race Cashier Window First ID
544-546 547 548-555 556-570 571-575 576-580 581-585 586-600
Second ID Blank Special Data Entries State Income Tax Withheld Local Income Tax Withheld Blank Blank or CR/LF
601-615 616-662 663-722 723-734 735-746 747-748 749-750

Sec. 7. End of Payer “C” Record — General Field Descriptions and Record Layout

.01 The “C” Record consists of the total number of payees and the totals of the payment amount fields filed for each payer and/or particular type of return. The “C” Record must follow the last “B” Record for each type of return for each payer.

.02 For each “A” Record and group of “B” Records on the file, there must be a corresponding “C” Record.

.03 The End of Payer “C” Record is a fixed length of 750 positions. The control fields are each 18 positions in length.

Record Name: End of Payer “C” Record
Field
Position		 Field Title Length Description and Remarks
1 Record Type 1 Required. Enter “C”
2-9 Number of Payees 8 Required. Enter the total number of “B” Records covered by the preceding “A” Record. Right-justify information and fill unused positions with zeros.
10-15 Blank 6 Enter blanks.

Record Name: End of Payer “C” Record (Continued)
Field
Position		 Field Title Length Description and Remarks
16-33 Control Total 1 18 Required. Accumulate totals of any payment amount fields in the “B” Records into the appropriate control total fields of the “C” Record. Control totals must be right-justified and unused control total fields zero-filled. All control total fields are 18 positions in length. Each payment amount must contain U.S. dollars and cents. The right-most two positions represent cents in the payment amount fields.
34-51 Control Total 2 18
52-69 Control Total 3 18
70-87 Control Total 4 18
88-105 Control Total 5 18
106-123 Control Total 6 18
124-141 Control Total 7 18
142-159 Control Total 8 18
160-177 Control Total 9 18
178-195 Control Total A 18
196-213 Control Total B 18
214-231 Control Total C 18
232-249 Control Total D 18
250-267 Control Total E 18
268-499 Blank 232 Enter blanks.
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you can have only one “T” record in a file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-748 Blank 241 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.

End of Payer “C” Record — Record Layout

Record Type Number of Payees Blank Control Total 1 Control Total 2 Control Total 3 Control Total 4 Control Total 5 Control Total 6
1 2-9 10-15 16-33 34-51 52-69 70-87 88-105 106-123

Control Total 7 Control Total 8 Control Total 9 Control Total A Control Total B Control Total C Control Total D Control Total E Blank
124-141 142-159 160-177 178-195 196-213 214-231 232-249 250-267 268-499

Record Sequence Number Blank Blank or CR/LF
500-507 508-748 749-750

Sec. 8. State Totals “K” Record — General Field Descriptions and Record Layout

.01 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.

.02 The “K” Record will contain the total number of payees and the total 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. A file format diagram is located at the end of Part D.

.03 The “K” Record is a fixed length of 750 positions. The control total fields are each 18 positions in length.

.04 In developing the “K” Record, for example, if a payer used Amount Codes 1, 3, and 6 in the “A” Record, the totals from the “B” Records coded for this state would 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. 13, for the requirements and conditions that must be met to file via this program.

State Totals “K” Record — Record Layout Forms 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, 1099-PATR, 1099-R, and 5498
Field
Position 		Field Title Length Description and Remarks
1 Record Type 1 Required. Enter “K”.
2-9 Number of Payees 8 Required. Enter the total number of “B” Records being coded for this state. Right-justify information and fill unused positions with zeros.
10-15 Blank 6 Enter blanks.
16-33 Control Total 1 18 Required. Accumulate totals of any payment amount fields in the “B” Records for each state being reported into the appropriate control total fields of the appropriate “K” Record. Each payment amount must contain U.S. dollars and cents. The right-most two positions represent cents in the payment amount field. Control totals must be right-justified and unused control total fields zero-filled. All control total fields are 18 positions in length.
34-51 Control Total 2 18
52-69 Control Total 3 18
70-87 Control Total 4 18
88-105 Control Total 5 18
106-123 Control Total 6 18
124-141 Control Total 7 18
142-159 Control Total 8 18
160-177 Control Total 9 18
178-195 Control Total A 18
196-213 Control Total B 18
214-231 Control Total C 18
232-249 Control Total D 18
250-267 Control Total E 18
268-499 Blank 232 Enter blanks.

State Totals “K” Record — Record Layout Forms 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, 1099-PATR, 1099-R, and 5498 (Continued)
Field
Position 		Field Title Length Description and Remarks
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you may have only one “T” record in the file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-706 Blank 199 Enter blanks.
707-724 State Income Tax Withheld Total 18 State income tax withheld total is for the convenience of the filers. Aggregate totals of the state income tax withheld field in the Payee “B” Records; otherwise, enter blanks.
725-742 Local Income Tax Withheld Total 18 Local income tax withheld total is for the convenience of the filers. Aggregate totals of the local income tax withheld field in the Payee “B” Records; otherwise, enter blanks.
743-746 Blank 4 Enter blanks.
747-748 Combined Federal/State Code 2 Required. Enter the code assigned to the state which is to receive the information. (Refer to Part A, Sec. 13, Table l.)
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.

State Totals “K” Record — Record Layout Forms 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, 1099-PATR, 1099-R, and 5498

Record Type Number of Payees Blank Control Total 1 Control Total 2 Control Total 3 Control Total 4 Control Total 5 Control Total 6
1 2-9 10-15 16-33 34-51 52-69 70-87 88-105 106-123

Control Total 7 Control Total 8 Control Total 9 Control Total A Control Total B Control Total C Control Total D Control Total E Blank
124-141 142-159 160-177 178-195 196-213 214-231 232-249 250-267 268-499

Record Sequence Number Blank State Income Tax Withheld Total Local Income Tax Withheld Total Blank Combined Federal/State Code Blank or CR/LF
500-507 508-706 707-724 725-742 743-746 747-748 749-750

Sec. 9. End of Transmission “F” Record — General Field Descriptions and Record Layout

.01 The End of Transmission “F” Record is a summary of the number of payers in the entire file.

.02 The “F” Record is a fixed record length of 750 positions.

.03 This record must be written after the last “C” Record (or last “K” Record, when applicable) of the entire file.

Record Name: End of Transmission “F” Record
Field
Position 		Field Title Length Description and Remarks
1 Record Type 1 Required. Enter “F”.
2-9 Number of “A” Records 8 Enter the total number of Payer “A” Records in the entire file (right-justify and zero-fill) or enter all zeros.
10-30 Zero 21 Enter zeros.
31-49 Blank 19 Enter blanks.
50-57 Total Number of payees 8 Enter the total number of Payee “B” Records reported in the file. Right-justify information and fill unused positions with zeros. If you have entered this total in the “T” Record, you may leave this field blank.
58-499 Blank 442 Enter blanks.
500-507 Record Sequence Number 8 Required. Enter the number of the record as it appears within your file. The record sequence number for the “T” record will always be “1” (one), since it is the first record on your file and you can only have one “T” record in a file. Each record, thereafter, must be incremented by one in ascending numerical sequence, i.e., 2, 3, 4, etc. Right-justify numbers with leading zeroes in the field. For example, the “T” record sequence number would appear as “00000001” in the field, the first “A” record would be “00000002”, the first “B” record, “00000003”, the second “B” record, “00000004” and so on until you reach the final record of the file, the “F” record.
508-748 Blank 241 Enter blanks.
749-750 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.

End of Transmission “F” Record — Record Layout

Record Type Number of “A” Records Zero Blank Total Number of Payees Blank Record Sequence Number Blank Blank or CR/LF
1 2-9 10-30 31-49 50-57 58-499 500-507 508-748 749-750

Sec. 10. File Layout Diagram

This is an Image: 2003-30_Form_1099R.gif

PART E. EXTENSIONS OF TIME AND WAIVERS

Sec. 1. General — Extensions

.01 An extension of time to file may be requested for Forms 1098, 1099, 5498, 5498-MSA, 5498-ESA, W-2G, W-2 series, 8027 and 1042-S.

.02 Form 8809, Request for Extension of Time To File Information Returns, should be submitted to IRS/MCC at the address listed in .08 of this section. This form may be used to request an extension of time to file information returns submitted on paper, electronically or magnetically to the IRS. Use a separate Form 8809 for each method of filing information returns you intend to use, i.e., electronically and/or magnetically.

.03 To be considered, an extension request must be postmarked or transmitted by the due date of the returns; otherwise, the request will be denied. (See Part A, Sec. 9, for due dates.) If requesting an extension of time to file several types of forms, use one Form 8809; however, Form 8809 or file must be postmarked no later than the earliest due date. For example, if requesting an extension of time to file both Forms 1099-INT and 5498, submit Form 8809 on or before March 1, 2004. (See Note.)

Note: For Tax Year 2003, if you will be filing Forms 1098, 1099, 8027, W-2G, or W-2 electronically, Form 8809 is not required unless an extension is needed beyond March 31, 2004.

.04 As soon as it is apparent that a 30-day extension of time to file is needed, an extension request should be submitted. It will take a minimum of 30 days for IRS/MCC to respond to an extension request. Generally, IRS/MCC does not begin processing extension requests until January. Extension requests received prior to January are input on a first come, first serve basis.

.05 Under certain circumstances, a request for an extension of time may be denied. When a denial letter is received, any additional or necessary information may be resubmitted within 20 days.

.06 Requesting an extension of time for multiple payers (50 or less) may be done by submitting Form 8809 and attaching a list of the payer names and associated TINs (EIN or SSN). The listing must be attached to ensure an extension is recorded for all payers. Form 8809 may be computer-generated or photocopied. Be sure to use the most recently updated version and include all the pertinent information.

.07 Requests for an extension of time to file for more than 50 payers are required to be submitted electronically or magnetically. IRS encourages requests for 10 to 50 payers to be filed electronically or magnetically. (See Sec. 3, for the record layout.) The request may be filed electronically, on tape cartridges, and 3-inch diskettes.

.08 All requests for an extension of time filed on Form 8809 or magnetic media should be sent using the following address:

IRS—Martinsburg Computing Cente
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430

Note: Due to the large volume of mail received by IRS/MCC and the time factor involved in processing Extension of Time (EOT) requests, it is imperative that the attention line be present on all envelopes or packages containing Form 8809.

.09 Requests for extensions of time to file postmarked by the United States Postal Service on or before the due date of the returns, and delivered by United States mail to IRS/MCC after the due date, are treated as timely under the “timely mailing as timely filing” rule. A similar rule applies to designated private delivery services (PDSs). See Part A, Sec.9, for more information on PDSs. For requests delivered by a designated PDS, but through a non-designated service, the actual date of receipt by IRS/MCC will be used as the filing date.

.10 Transmitters requesting an extension of time for multiple payers will receive one approval letter, accompanied by a list of payers covered under that approval.

.11 If an additional extension of time is needed, a second Form 8809 or file must be filed by the initial extended due date. Check line 7 on the form to indicate that an additional extension is being requested. A second 30-day extension will be approved only in cases of extreme hardship or catastrophic event. If requesting a second 30-day extension of time, submit the information return files as soon as prepared. Do not wait for MCC's response to your second extension request.

.12 If an extension request is approved, the approval letter should be kept on file. DO NOT send the approval letter or copy of the approval letter to IRS/MCC with the magnetic media file or to the service center where the paper returns are filed.

.13 Request an extension for only one tax year.

.14 A signature is not required when requesting a 30 day extension. If a second 30 day extension is requested, the Form 8809 MUST be signed.

.15 Failure to properly complete and sign Form 8809 may cause delays in processing the request or result in a denial. Carefully read and follow the instructions on the back of Form 8809.

.16 Form 8809 may be obtained by calling 1-800-TAX-FORM (1-800-829-3676). The form is also available on the IRS Website at www.irs.gov. A copy of Form 8809 is also provided in the back of Publication 1220.

Sec. 2. Specifications for Electronic Filing or Magnetic Media Extensions of Time

.01 The specifications in Sec. 3 include the required 200-byte record layout for extensions of time to file requests submitted electronically or magnetically. Also included are the instructions for the information that is to be entered in the record. Filers are advised to read this section in its entirety to ensure proper filing.

.02 If a filer does not have an IRS/MCC assigned Transmitter Control Code (TCC), Form 4419, Application for Filing Information Returns Electronically/Magnetically, must be submitted to obtain a TCC. This number must be used to submit an extension request electronically/magnetically. (See Part A, Sec. 6.)

.03 For extension requests filed on magnetic media, the transmitter must mail the completed, signed Form 8809, Request for Extension of Time To File Information Returns, in the same package as the corresponding media or fax it to 304-264-5602. For extension requests filed electronically, the transmitter must fax Form 8809 the same day the transmission is made.

.04 Transmitters submitting an extension of time electronically or magnetically should not submit a list of payer names and TINs with Form 8809 since this information is included on the electronic or magnetic file. However, Line 6 of Form 8809 must be completed with the total number of records included on the electronic file or magnetic media.

.05 Do not submit tax year 2003 extension requests filed on magnetic media before January 1, 2004, or electronically before January 6, 2004.

.06 Each piece of magnetic media must have an external media label containing the following information:

  1. Transmitter name

  2. Transmitter Control Code (TCC)

  3. Tax year

  4. The words “Extension of Time”

  5. Record count

.07 Electronic Filing, Tape Cartridge, and 3-inch Diskette specifications for extensions are the same as the specifications for filing of information returns. (See Part B, or C for specific technical information.)

Sec. 3. Record Layout — Extension of Time

.01 Positions 6 through 188 of the following record should contain information about the payer for whom the extension of time to file is being requested. Do not enter transmitter information in these fields. Only one TCC may be present in a file.

Record Layout for Extension of Time
Field
Position 		Field Title Length Description and Remarks
1-5 Transmitter Control Code 5 Required. Enter the five-digit Transmitter Control Code (TCC) issued by IRS. Only one TCC per file is acceptable.
6-14 Payer TIN 9 Required. Must be the valid nine-digit EIN/SSN assigned to the payer. Do not enter blanks, hyphens or alpha characters. All zeros, ones, twos, etc., will have the effect of an incorrect TIN. For foreign entities that are not required to have a TIN, this field may be blank; however, the Foreign Entity Indicator, position 187, must be set to “X.”
15-54 Payer Name 40 Required. Enter the name of the payer whose TIN appears in positions 6-14. Left-justify information and fill unused positions with blanks.
55-94 Second Payer Name 40 If additional space is needed, this field may be used to continue name line information (e.g., c/o First National Bank); otherwise, enter blanks.
95-134 Payer Address 40 Required. Enter the payer's address. Street address should include number, street, apartment or suite number (or PO Box if mail is not delivered to a street address).
135-174 Payer City 40 Required. Enter payer city, town, or post office.
175-176 Payer State 2 Required. Enter the payer valid U.S. Postal Service state abbreviation. (Refer to Part A, Sec. 15.)
177-185 Payer ZIP Code 9 Required. Enter payer ZIP Code. If using a five-digit ZIP Code, left-justify information and fill unused positions with blanks.
186 Document Indicator (See Note.) 1 Required. Enter the appropriate document code that indicates the form for which you are requesting an extension of time.
Code Document
1 W-2
2 1098, 1098-E, 1098-T, 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-LTC, 1099-MISC, 1099-MSA, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-S, or W-2G
3 5498
4 1042-S
Record Layout for Extension of Time (Continued)
Field
Position 		Field Title Length Description and Remarks
5 REMIC Documents (1099-INT or 1099-OID)
9 5498-MSA
10 5498-ESA
Note: Do not enter any other values in this field. Submit a separate record for each document. For example, if you are requesting an extension for Form 1099-INT and Form 5498 for the same payer, submit one record with “2” coded in this field and another record with “3” coded in this field. If you are requesting an extension for Form 1099-DIV and Form 1099-MISC for the same payer, submit one record with “2” coded in this field.
187 Foreign Entity Indicator 1 Enter “X” if the payer is a foreign entity.
188 Recipient Request Indicator 1 Enter “X” if the extension request is to furnish statements to the recipients of the information return.
189-198 Blank 10 Enter blanks.
199-200 Blank 2 Enter blanks or carriage return/line feed (CR/LF) characters.
Extension of Time Record Layout
Transmitter Control Code Payer TIN Payer Name Second Payer Name Payer Address Payer City Payer State
1-5 6-14 15-54 55-94 95-134 135-174 175-176
Payer ZIP Code Document Indicator Foreign Entity Indicator Recipient Requests Indicator Blank Blank or CR/LF
177-185 186 187 188 189-198 199-200

Sec. 4. Extension of Time for Recipient Copies of Information Returns

.01 Request an extension of time to furnish the statements to recipients of Forms 1098, 1099, 5498, W-2G, W-2 series, and 1042-S by submitting a letter to IRS/MCC at the address listed in Part E, Sec 1.08. The letter should contain the following information:

  1. Payer name

  2. TIN

  3. Address

  4. Type of Return

  5. Specify that the extension request is to provide statements to recipients

  6. Reason for delay

  7. Signature of payer or duly authorized person

.02 Requests for an extension of time to furnish statements to recipients of Forms 1098, 1099, 5498, W-2G, W-2 series, and 1042-S are not automatically approved; however, if approved, generally an extension will allow a maximum of 30 additional days from the due date. The request must be postmarked by the date on which the statements are due to the recipients.

.03 Generally, only the payer may sign the letter requesting the extension for recipient copies. A transmitter must have a contractual agreement with the filers to submit extension requests on their behalf. This should be stated in your letter of request for recipient copy extensions. If you are requesting an extension for multiple payers electronically or magnetically, you must use the format specifications in Sec. 4 (See Sec.1 .07). The Transmitter Control Code (TCC) is not required for recipient requests.

Sec. 5. Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media

.01 If a payer is required to file on magnetic media but fails to do so (or fails to file electronically in lieu of magnetic media filing) and does not have an approved waiver on record, the payer will be subject to a penalty of $50 per return in excess of 250. (For penalty information, refer to the Penalty Section of the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G.)

.02 If payers are required to file original or corrected returns on magnetic media, but such filing would create an undue hardship, they may request a waiver from these filing requirements by submitting Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, to IRS/MCC. Form 8508 can be obtained on the IRS Website at www.irs.gov or by calling toll-free 1-800-829-3676.

.03 Even though a payer may submit as many as 249 corrections on paper, IRS encourages electronic or magnetic filing of corrections. Once the 250 threshold has been met, filers are required to submit any returns of 250 or more electronically or magnetically. However, if a waiver for original documents is approved, any corrections for the same type of returns will be covered under this waiver.

.04 Generally, only the payer may sign Form 8508. A transmitter may sign if given power of attorney; however, a letter signed by the payer stating this fact must be attached to Form 8508.

.05 A transmitter must submit a separate Form 8508 for each payer. Do not submit a list of payers.

.06 All information requested on Form 8508 must be provided to IRS for the request to be processed.

.07 The waiver, if approved, will provide exemption from the magnetic media filing requirement for the current tax year only. Payers 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.

.08 Form 8508 may be photocopied or computer-generated as long as it contains all the information requested on the original form.

.09 Filers are encouraged to submit Form 8508 to IRS/MCC at least 45 days before the due date of the returns. Generally, IRS/MCC does not process waiver requests until January. Waiver requests received prior to January are processed on a first come, first serve basis.

.10 All requests for a waiver should be sent using the following address:

IRS — Martinsburg Computing Center
Information Reporting Program
240 Murall Drive
Kearneysville, WV 25430

.11 File Form 8508 for the W-2 series of forms with IRS/MCC, not SSA.

.12 Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth in the regulations under section 6011(e) of the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/MCC to respond to a waiver request.

.13 If a waiver request is approved, keep the approval letter on file. DO NOT send a copy of the approved waiver to the service center where the paper returns are filed.

.14 An approved waiver only applies to the requirement for filing information returns electronically/magnetically. The payer must still timely file information returns on the official IRS paper forms or an acceptable substitute form with the appropriate service center.

Part IV. Items of General Interest

Announcement 2003-46

Section 29 — Test Procedures and Significant Chemical Change

Section 29 of the Internal Revenue Code provides a tax credit for the production and sale of solid synthetic fuels produced from coal. In Rev. Proc. 2001-30, 2001-1 C.B. 1163, the Internal Revenue Service provided that taxpayers need to satisfy certain conditions in order to obtain a letter ruling that a solid fuel (other than coke) produced from coal is a qualified fuel under § 29(c)(1)(C). Rev. Proc. 2001-30, as modified by Rev. Proc. 2001-34, 2001-1 C.B. 1293. Consistent with prior ruling practice, the revenue procedure requires taxpayers to present evidence that all, or substantially all, of the coal used as feedstock undergoes a significant chemical change. To meet this requirement and obtain favorable letter rulings, taxpayers have provided representations, as well as expert reports, asserting that their processes resulted in a significant chemical change.

The Service has had reason to question the scientific validity of test procedures and results that have been presented as evidence that fuel underwent a significant chemical change, and is currently reviewing information regarding these test procedures and results. If, upon further inquiry, the Service determines that these test procedures and results do not demonstrate that a significant chemical change has occurred, the Service will take appropriate action, including revoking letter rulings relying on such procedures and results.

Until the Service’s review is complete, rulings on the question of significant chemical change will be suspended for requests relying on the procedures and results being reviewed. Taxpayers may request a letter ruling pre-submission conference to determine if a ruling request relies on test procedures and results that are being reviewed. See Section 11.07, Rev. Proc. 2003-1, 2003-1 I.R.B. 1. During this review period, taxpayers that previously received letter rulings and want certainty with respect to test procedures and results used as evidence of a significant chemical change may request a Pre-Filing Agreement by following the procedures set forth in Rev. Proc. 2001-22, 2001-1 C.B. 745.

DRAFTING INFORMATION

The principal author of this announcement is Joseph Makurath

of the Office of Associate Chief Counsel (Passthroughs and Special Industries).

For further information regarding this announcement, contact Mr. Makurath at

202-622-3120

(not a toll-free call).

Announcement of Disciplinary Actions Involving Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries — Suspensions, Censures, Disbarments, and Resignations

Under Title 31, Code of Federal Regulations, Part 10, attorneys, certified public accountants, enrolled agents, and enrolled actuaries may not accept assistance from, or assist, any person who is under disbarment or suspension from practice before the Internal Revenue Service if the assistance relates to a matter constituting practice before the Internal Revenue Service and may not knowingly aid or abet another person to practice before the Internal Revenue Service during a period of suspension, disbarment, or ineligibility of such other person.

To enable attorneys, certified public accountants, enrolled agents, and enrolled actuaries to identify persons to whom these restrictions apply, the Director, Office of Professional Responsibility will announce in the Internal Revenue Bulletin their names, their city and state, their professional designation, the effective date of disciplinary action, and the period of suspension. This announcement will appear in the weekly Bulletin at the earliest practicable date after such action and will continue to appear in the weekly Bulletins for five successive weeks.

Suspensions From Practice Before the Internal Revenue Service After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been placed under suspension from practice before the Internal Revenue Service:

Name Location Designation Date
Arnold, John Clovis, CA Enrolled Agent February 13, 2003 to August 12, 2003

Disbarments From Practice Before the Internal Revenue Service After Notice and an Opportunity for a Proceeding

Under Title 31, Code of Federal Regulations, Part 10, after notice and an opportunity for a proceeding before an administrative law judge, the following individuals have been disbarred from practice before the Internal Revenue Service:

Name Location Designation Date
Kalajian, Thomas Laguna Hills, CA CPA October 2, 2002
Messman, Carla Outing, MN Enrolled Agent January 9, 2003

Consent Suspensions From Practice Before the Internal Revenue Service

Under Title 31, Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her consent to suspension from such practice. The Director, Office of Professional Responsibility, in his discretion, may suspend an attorney, certified public accountant, enrolled agent or enrolled actuary in accordance with the consent offered.

The following individuals have been placed under consent suspension from practice before the Internal Revenue Service:

Name Location Designation Date
Kemp, Bart Sonoma, CA Attorney March 15, 2003 to November 15, 2003
Marks, Gary Hewlett, NY CPA March 24, 2003 to March 23, 2004
Fehl, Kenneth Palo Alto, CA Attorney April 1, 2003 to March 31, 2004
Cohen, Peter Edison, NJ CPA April 3, 2003 to May 2, 2005
Kohn, Michael St. Louis, MO Attorney Indefinite from April 30, 2003
Sogamoso, Carlos Bellflower, CA Enrolled Agent Indefinite fromMay 1, 2003
Huston, James Kingman, AZ CPA May 1, 2003 to April 30, 2006
Halleran, Edward Carle Place, NY Enrolled Agent Indefinite from May 1, 2003
Marshall, E. Peter Glens Falls, NY CPA May 1, 2003 to April 30, 2006
Bell, Rosanna Irvington, NY CPA Indefinite from May 8, 2003
Kingsley, Steven Weston, CT CPA Indefinite from May 15, 2003
Schawe, Rudolph Brenham, TX Enrolled Agent May 22, 2003to October 21, 2004
Scheve, Michael Baltimore, MD CPA Indefinite from May 27, 2003
McKenzie, Dawna Fort Smith, AR Enrolled Agent Indefinite from June 2, 2003
Suen, Ming San Francisco, CA Enrolled Agent Indefinite from June 3, 2003
Reyes, Ruperto Placentia, CA Enrolled Agent June 10, 2003 to December 9, 2005
Garmo, Georgis W. Bloomfield, MI CPA Indefinite from June 10, 2003
Holmes, James L. Burlington, NC Enrolled Agent Indefinite from June 18, 2003
Brooks, Sandra San Diego, CA Enrolled Agent Indefinite from June 20, 2003
Malley, Wayne Cupertino, CA Enrolled Agent Indefinite from June 27, 2003
Leininger, Barbara Lutz, FL Enrolled Agent Indefinite from June 27, 2003

Expedited Suspensions From Practice Before the Internal Revenue Service

Under Title 31, Code of Federal Regulations, Part 10, the Director, Office of Professional Responsibility, is authorized to immediately suspend from practice before the Internal Revenue Service any practitioner who, within five years from the date the expedited proceeding is instituted (1) has had a license to practice as an attorney, certified public accountant, or actuary suspended or revoked for cause or (2) has been convicted of certain crimes.

The following individuals have been placed under suspension from practice before the Internal Revenue Service by virtue of the expedited proceeding provisions:

Name Location Designation Date
Radwick, Peter Woodinville, WA CPA Indefinite from March 10, 2003
Jellinger, Richard Anoka, MN Attorney Indefinite from March 10, 2003
Deen, Billy Mansfield, TX CPA Indefinite from March 10, 2003
Dougherty Jr, William Newport News, VA Attorney Indefinite from March 10, 2003
Abood, Norman Oregon, OH Attorney Indefinite from March 10, 2003
Matis, Vendel Redlands, CA Attorney Indefinite from March 31, 2003
Workman, Andrew Panama City, FL CPA Indefinite from March 31, 2003
Bagwell, Jr., Noel Cunningham, TN Attorney Indefinite from March 31, 2003
O’Brien, Brien Sioux City, IA Attorney Indefinite from March 31, 2003
Boykoff, Franklin Pleasantville, NY Attorney Indefinite from March 31, 2003
McKinnon, Marva Statesville, NC Attorney Indefinite from March 31, 2003
Bailey, Scott K. Eden Prairie, MN Attorney Indefinite from March 31, 2003
Kim, Kun Atlanta, GA CPA Indefinite from March 31, 2003
Massari III, Domenic Tampa, FL Attorney Indefinite from May 12, 2003
Haugabrook II, Tyrone Valdosta, GA Attorney Indefinite from May 19, 2003
Wester, Joseph Montgomery, AL CPA Indefinite from May 19, 2003
Smercina, David Solon, OH CPA Indefinite from May 19, 2003
Pullings, Retna Washington, DC Attorney Indefinite from May 19, 2003
Boyd, James Mendota Heights, MN Attorney Indefinite from May 20, 2003
Spindler, Judith Omaha, NE Attorney Indefinite from May 20, 2003
Wintroub, Edward Omaha, NE Attorney Indefinite from May 20, 2003
Brinker, Peter Omaha, NE Attorney Indefinite from May 21, 2003
Valdes, Alfredo Old Greenwich, CT CPA Indefinite from May 21, 2003
Cruise, Michael Lincoln, NE Attorney Indefinite from May 22, 2003
Schoppert, Thomas Minot, ND Attorney Indefinite from June 2, 2003
White, Paul Smithfield, NC Enrolled Agent Indefinite from June 2, 2003
Brier, Michael Providence, RI CPA Indefinite from June 16, 2003

Resignations of Enrolled Agents

Under Title 31, Code of Federal Regulations, Part 10, an enrolled agent, in order to avoid the institution or conclusion of a proceeding for his or her disbarment or suspension from practice before the Internal Revenue Service, may offer his or her resignation as an enrolled agent. The Director, Office of Professional Responsibility, in his discretion, may accept the offered resignation.

The Director, Office of Professional Responsibility, has accepted offers of resignation as an enrolled agent from the following individuals:

Name Location Designation Date
Evans, Caroline Tiverton, RI May 7, 2003

Censure Issued by Consent

Under Title 31, Code of Federal Regulations, Part 10, in lieu of a proceeding being instituted or continued, an attorney, certified public accountant, enrolled agent, or enrolled actuary, may offer his or her consent to the issuance of a censure. Censure is a public reprimand.

The following individuals have consented to the issuance of a Censure:

Name Location Designation Date
Pargas, Carlos B. Miami, FL CPA March 19, 2003
Malkasian, Gary Sacramento, CA CPA March 27, 2003
Wilcox, Ronald E. Mt. Carmel, IL CPA April 29, 2003
Wood, David T. Shawneetown, IL CPA May 27, 2003

Definition of Terms and Abbreviations

Definition of Terms

Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.

Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.

Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.

Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.

Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.

Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect:

Abbreviations

The following abbreviations in current use and formerly used will appear in material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel's Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D. —Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z —Corporation.

Numerical Finding List

Numerical Finding List

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27, dated July 7, 2003.

Bulletin 2003-27 through 2003-29

Announcements

Article Issue Link Page
2003-45 2003-28 I.R.B. 2003-28 73
2003-47 2003-29 I.R.B. 2003-29 124
2003-48 2003-28 I.R.B. 2003-28 73
2003-46 2003-30 I.R.B.
2003-50 2003-30 I.R.B.


Notices

Article Issue Link Page
2003-38 2003-27 I.R.B. 2003-27 9
2003-39 2003-27 I.R.B. 2003-27 10
2003-40 2003-27 I.R.B. 2003-27 10
2003-41 2003-28 I.R.B. 2003-28 49
2003-42 2003-28 I.R.B. 2003-28 49
2003-43 2003-28 I.R.B. 2003-28 50
2003-44 2003-28 I.R.B. 2003-28 52
2003-45 2003-29 I.R.B. 2003-29 86
2003-46 2003-28 I.R.B. 2003-28 53
2003-47 2003-30 I.R.B.
2003-48 2003-30 I.R.B.


Proposed Regulations

Article Issue Link Page
106736-00 2003-28 I.R.B. 2003-28 60
107618-02 2003-27 I.R.B. 2003-27 13
122917-02 2003-27 I.R.B. 2003-27 15


Revenue Procedures

Article Issue Link Page
2003-45 2003-27 I.R.B. 2003-27 11
2003-46 2003-28 I.R.B. 2003-28 54
2003-47 2003-28 I.R.B. 2003-28 55
2003-48 2003-29 I.R.B. 2003-29 86
2003-49 2003-29 I.R.B. 2003-29 89
2003-50 2003-29 I.R.B. 2003-29 119
2003-51 2003-29 I.R.B. 2003-29 121
2003-52 2003-30 I.R.B.


Revenue Rulings

Article Issue Link Page
2003-70 2003-27 I.R.B. 2003-27 3
2003-71 2003-27 I.R.B. 2003-27 1
2003-73 2003-28 I.R.B. 2003-28 44
2003-74 2003-29 I.R.B. 2003-29 77
2003-75 2003-29 I.R.B. 2003-29 79
2003-77 2003-29 I.R.B. 2003-29 75
2003-78 2003-29 I.R.B. 2003-29 76
2003-79 2003-29 I.R.B. 2003-29 80
2003-80 2003-29 I.R.B. 2003-29 83
2003-87 2003-29 I.R.B. 2003-29 82
2003-81 2003-30 I.R.B.
2003-82 2003-30 I.R.B.
2003-83 2003-30 I.R.B.


Treasury Decisions

Article Issue Link Page
9061 2003-27 I.R.B. 2003-27 5
9062 2003-28 I.R.B. 2003-28 46


Effect of Current Actions on Previously Published Items

Findings List of Current Actions on Previously Published Items

A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2003-1 through 2003-26 is in Internal Revenue Bulletin 2003-27, dated July 7, 2003.

Bulletin 2003-27 through 2003-29

Notices

Old Article Action New Article Issue Link Page
89-79 Modified and superseded by Rev. Proc. 2003-47 2003-28 I.R.B. 2003-28 55
2001-70 Ampilfied by Notice 2003-45 2003-29 I.R.B. 2003-29 86
2001-74 Ampilfied by Notice 2003-45 2003-29 I.R.B. 2003-29 86


Proposed Regulations

Old Article Action New Article Issue Link Page
EE-86-88 (LR-279-81) Withdrawn by REG-122917-02 2003-27 I.R.B. 2003-27 15


Revenue Procedures

Old Article Action New Article Issue Link Page
77-12 Amplified, modified, and superseded by Rev. Proc. 2003-51 2003-29 I.R.B. 2003-29 121
96-30 Modified and amplified by Rev. Proc. 2003-48 2003-29 I.R.B. 2003-29 86
2002-9 Modified by Rev. Proc. 2003-50 2003-27 I.R.B. 2003-27 11
2002-33 Amplified and modified by Rev. Proc. 2003-50 2003-29 I.R.B. 2003-29 119
2002-34 Superseded by Rev. Proc. 2003-52 2003-30 I.R.B.
2002-9 Modified and amplified by Rev. Rul. 2003-81 2003-30 I.R.B.
2003-3 Modified by Rev. Proc. 2003-48 2003-29 I.R.B. 2003-29 86
2003-15 Modified and superseded by Rev. Proc. 2003-49 2003-29 I.R.B. 2003-29 89


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