SERVICE ISSUES GUIDANCE FOR MAGNETIC TAPE FILING OF FORMS W-4.

Rev. Proc. 87-47

                              CONTENTS

SECTION 1. PURPOSE

.01 The purpose of this revenue procedure is to update Rev. Proc. 86-13, 1986-1 C.B. 535, (IRS Pub. 1245), which outlines the requirements and conditions for submitting certain Forms W-4, Employee's Withholding Allowance Certificate, on magnetic tape to the Internal Revenue Service (IRS), National Computer Center (NCC). It also makes certain other changes based on new requirements contained in The Tax Reform Act of 1986.

.02 Employers may submit all information on magnetic tape; or a combination of tape records and paper documents is acceptable, provided there is no duplication or omission of documents.

.03 Employers are required to receive a new Form W-4 or Form W-4A from all employees before October 1, 1987.

.04 Employers are required to send to IRS quarterly copies of all Forms W-4 received during the quarter from employees still employed at the end of the quarter who claim the following:

(a) More than ten (10) withholding allowances, or

(b) Exempt status and are expected to earn more than $200 a week.

Employers are not required to send any others unless notified by IRS in writing to do so. Employers are required also to notify certain employees not having income tax withheld that they may be eligible for a tax refund because of the Earned Income Credit (EIC) since the amount of EIC that exceeds the tax liability is refunded. Employers can notify these employees by giving them Notice 797 with their Forms W-2s (or within 1 week before or after giving the W-2).

SEC. 2. NATURE OF CHANGES

.01 There are two major changes in the lengths of tape fields; i.e., "Employee Zip Code" is increased from 5 to 9 positions and "Allowances" is increased from 2 to 3 positions. As a result, all tape positions starting at position 142 are changed.

YOUR PROGRAMS MUST BE UPDATED TO INCORPORATE THESE CHANGES.

.02 In Part B, Magnetic Tape Specifications, Section 1. General, note the changes for the Interrecord Gap. Also, see instructions regarding use of special characters.

.03 The filing requirement for Form 4419 is changed from Quarterly to Yearly. This does not affect the quarterly reporting of the information returns.

.04 In Part A, Section 9, General, "Definition of Terms" has been added.

.05 A Calendar which is also included in Circular E has been added at the end of this revenue procedure.

.06 Other changes are editorial in nature only.

SEC. 3. APPLICATION FOR MAGNETIC MEDIA REPORTING

.01 Employers or transmitters who wish to file on magnetic tape must submit a Form 4419, Application for Magnetic Media Reporting of Information Returns. (Copy attached at the end of this publication. Instructions for its completion are on the reverse side of the form.)

.02 Magnetic tape returns may not be filed with IRS until authorization to file is received. Requests will be approved or disapproved within 30 days of receipt.

.03 Only applications of employers or transmitters whose tape files meet the specifications in Part B, Section 1, will be approved.

.04 In general, once authorization to file on magnetic tape has been granted, a five-character alpha/numeric Transmitter Control Code (TCC) will be assigned and such approval will continue in effect in succeeding years provided the requirements of the current revenue procedure are met and there are no equipment changes by the employer or transmitter. Although a TCC may have been already assigned to a transmitter from a previous filing of information returns other than Form W-4, the W-4 program requires a separate TCC of its own. This TCC must appear on all transmittal forms submitted with magnetic media files as well as other correspondence.

.05 New applications are required whenever:

(a) You have made hardware or software changes that would affect the characteristics of the magnetic media submission, in which case a new TCC may be necessary.

(b) You discontinue filing on magnetic media for a year, in which case your TCC may have been reassigned. In the past it was necessary to refile if you missed one quarter. This requirement is changed to "yearly".

(c) You have used a Service Agency in the past to prepare your files but now have computer equipment compatible with that of IRS, in which case you must request your own TCC.

If any of the above conditions apply to you, contact the IRS NCC Magnetic Media area for clarification at (304) 263-8700.

SEC. 4. FILING DATES

Magnetic tape reporting of Forms W-4 to IRS must be at least quarterly (monthly reporting is encouraged) following the quarter ending due dates:

 Period Covered                                            Due Date

.01 A Magnetic Tape Reporting package (MTR), which includes all packaging, shipping, and mailing instructions, and the necessary transmittals and labels will be mailed to approved filers each year.

.02 If the employer chooses to file paper copies (originals are for your records), then a cover letter which includes the employer's name, address, employer identification number, and the number of Forms W-4 being submitted, must be sent to the service center where Forms 941 are filed. The paper copies may also be submitted as an attachment to Form 941.

If the employer chooses to file on magnetic media, then a Form 6466 Transmittal of Magnetic Tape of Form W-4, Employee's Withholding Allowance Certificate, must be sent to the IRS National Computer Center as prescribed in Part A, Section 8.

NOTE: NCC DOES NOT PROCESS ANY PAPER RETURNS. PAPER RETURNS MUST BE FILED WITH THE APPROPRIATE SERVICE CENTER.

.03 The affidavit appearing on Form 6466 should be signed by the employer(s); however, the transmitter, service bureau, or disbursing agent may sign the affidavit on behalf of the employer(s) if all the following conditions are met:

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

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

(ii) If the return of more than one employer is included in a single tape submission, covered by a single Form 6466, each employer has attested by affidavit to the transmitter, service bureau, paying agent, or disbursing agent that the payer has complied with the law in attempting to secure correct TINs.

(c) The agent signs the form and adds the caption "For: (name of employer or other person required to file)."

.04 Although a duly authorized agent signs the affidavit, the employer is held responsible for the accuracy of Form W-4 contained on magnetic tape.

SEC. 6. PROCESSING OF MAGNETIC MEDIA RETURNS

.01 THE MAGNETIC TAPE SPECIFICATIONS CONTAINED IN PART B OF THIS REVENUE PROCEDURE MUST BE STRICTLY ADHERED TO. If files are unprocessable, they will be returned to you for replacement and resubmission of tapes or for submission of copies of paper Forms W-4. Replacement files must be submitted to IRS as soon as possible and should be identified as "magnetic media replacements" (write, type or machine print in upper case letters). This identification must also appear on the external label of the magnetic media shipment.

.02 IRS will process the information from the original tapes and will return the original tapes to the employer. Normally tapes will be returned either within three months after the quarterly due date for submission to IRS or within three months after actual receipt of acceptable tapes, whichever is later.

.03 IRS cannot accept any COD (Cash-on-Delivery) or Charge-to-IRS shipments of reportable tax information that an individual or organization is legally required to submit. Do not use special containers because IRS cannot guarantee their return. When shipping more than one box, number the boxes in sequence (Box 1 of 4, 2 of 4, etc.). Use the shipping label, Form 4801, on the outside of the shipping container.

SEC. 7. EFFECT ON PAPER DOCUMENTS

.01 Magnetic tape reporting to IRS eliminates the need to submit copies of paper Forms W-4. However, employers must maintain the original Forms W-4, either on magnetic media or on paper for their records; or they must have the ability to reconstruct the data for four years.

.02 If part of the Forms W-4 are reported on magnetic tape and the remainder are reported on paper copy forms, those paper copy returns must be filed on the prescribed forms and, as stated earlier in Section 5.02, filed with the appropriate service center.

SEC. 8. ADDITIONAL INFORMATION

.01 Effective January 1, 1986, all magnetic media processing was centralized at the IRS National Computer Center (NCC) in Martinsburg, West Virginia. Functions previously performed by the magnetic media coordinators at the service centers are being performed at NCC.

.02 All magnetic media files must now be submitted to NCC at the address shown below. In addition, all correspondence and telephone contacts regarding magnetic media related forms, publications, information, and applications for reporting on magnetic media must be directed to:

    Magnetic Media Reporting

Requests for paper forms or material related to paper filing should be requested by calling the "Forms Only Number" listed in the local telephone directory under Internal Revenue Service.

SEC. 9. DEFINITION OF TERMS

 EMPLOYER                Generally, an employer is a person or

SECTION 1. GENERAL

.01 These specifications prescribe the required format and content of the records to be included in the file but not the methods or equipment to be used in their preparation. If you are unable to use the special characters specified in this Revenue Procedure, please contact us to let us know what characters you will be using as substitutes. Usually, IRS will be able to process any compatible tape file. To be compatible, tape files must meet all the following specifications:

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

(b) Interrecord Gap:

(1) .6-inch for 800 or 1600 BPI density 9 track

(2) .3-inch for 6250 BPI density 9 track

(c) Recording Code--9-track ASCII (American Standard Coded Information Interchange) with:

(1) Odd parity, and

(2) A density of 800, 1600, or 6250 BPI (bits per inch).

.02 Conversion facilities are currently available for the following tapes:

Recording Code--9-track EBCDIC (Extended Binary Coded Decimal Interchange Code) with:

(1) Odd parity, and

(2) A density of 800, 1600, or 6250 BPI.

.03 The employer or the transmitter must affix an external label to each tape with the following information:

(a) Name of transmitter

(b) Number of data records on that reel

(c) Recording Code (ASCII, EBCDIC, or BCD)

(d) Density (800, 1600, or 6250 BPI)

(e) Track (9)

(f) Parity (odd)

(g) Manufacturer and model of main frame and tape drives

(h) Sequence number of reel and total number of reels in the file (for example, 1 of 3, 2 of 3, etc.)

.04 All records, including Header and Trailer Labels (if used) must be transmitted using the same density.

.05 Do not submit an employee W-4 record without the required Employer Identification Number. Every record must contain both employee and employer data.

SEC. 2. LABEL CONVENTIONS

.01 Header Labels, Trailer Labels, Record Marks, and Tape Marks are all optional. They may be used as required by the transmitter's equipment or programming. If used, they must conform to the following standards:

(a) Header Labels:

(1) Transmitters may use standard headers, provided they begin with 1HDR, HDR1, VOL1 or VOL 2.

(2) Header labels may not exceed 80 characters in length.

(b) Trailer Labels:

(1) Standard Trailer Labels may be used provided they begin with 1EOR, 1EOF, EOR1, or EOF1.

(2) Trailer labels may not exceed 80 characters in length.

(c) Record Marks:

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

(2) Can be written only at the end of a record or block.

(3) All records are of uniform length; therefore, record marks are not necessary on this file. However, if you choose to use record marks, for odd parity tapes use BCD bit configuration of 011010; for even parity use 111010.

(d) Tape Marks:

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

(2) Tape marks, if used, must be BCD configuration 001111 in even parity.

(3) May follow the Header Label and precede and/or follow the trailer label.

SEC. 3. RECORD LENGTH AND BLOCKING

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

(a) All data records are of a fixed length of 320 positions.

(b) All records may be blocked, except header and trailer labels.

(c) If blocking is used (more than one record per block), the desired blocking factor is ten (10) records per block. At no time may a block contain more than 3,200 characters; however, a smaller block size may be used if necessary. If sufficient records are not available for a full block, the remainder should be either "padded" with 9s to fill all unused positions or truncated. Do not pad the block with blanks or create blank records.

                 RECORD NAME: W-4 MAGNETIC TAPE RECORD

Rev. Proc. 86-13, 1986-1 C.B. 535, is superseded.

SEC. 5

Calendar

The following is a list of important dates during the year that you should take note of.

Note: If any date shown falls on a Saturday, Sunday, or legal holiday, use the next regular workday.

By January 31 or When Employment Ends

Give each employee a completed Form W-2, Wage and Tax Statement. Give each annuitant a completed Form W-2P Statement for Recipients of Annuities, Pensions, Retired Pay, or IRA Payments, by January 31.

By January 31

Federal Unemployment (FUTA) Tax.--File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. If you deposited all the tax when due, you have 10 more days to file the return.

By February 15

Ask for a new Form W-4, Employee's Withholding Allowance Certificate, from each employee who claimed total exemption from withholding during the prior year.

On February 16

Begin withholding for each employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year.

By February 28

Income Tax Withholding.--File Form W-3, Transmittal of Income and Tax Statements, with the Social Security Administration and include Copy A of all Forms W-2 and W-2P you gave employees or recipients for the year before.

Allocated Tip Reporting.--File Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the Internal Revenue Service.

By April 30, July 31, October 31, and January 31

Deposit Federal unemployment tax due if it is more than $100. File Form Form 941, Employer's Quarterly Federal Tax Return, or Form 941E, Quarterly Return of Withheld Federal Income Tax and Hospital Insurance (Medicare) Tax, and pay any undeposited income and social security taxes. If you deposited all the taxes when due, you have 10 more days to file the return.

File Form 942, Employer's Quarterly Tax Return for Household Employees, if you have such employees, and pay the tax due.

Before October 1, 1987

All your employees must have filed a new Form W-4 with you.

Before December 1

Income Tax Withholding.--Ask for a new Form W-4 from each employee whose withholding allowances will change for the next year.

On December 31

Form W-5, Earned Income Credit Advance Payment Certificate, expires. Employees who want to continue receiving advance payments of the earned income credit for the next year must file a new Form W-5.

                    Department of the Treasury -- IRS Use

File Form 4419 to request authorization to file any of the forms shown in Block 5 on magnetic media. Please be sure to complete all appropriate blocks. For further information, contact a magnetic media coordinator at the National Computer Center address given below under "Filing Your Application," or by telephone at (304) 263-8700.

Block 1

Enter the name and complete address of the person or organization that will prepare and submit the magnetic media.

Block 4

Show the tax year for which you are requesting authorization to file on magnetic media.

Block 5

Check the boxes next to all of the returns you will file with IRS on magnetic media.

Block 6

Note: The only type of magnetic media on which you can report Forms 1042-S, 6248, 8027 and W-4 is 1/2 inch magnetic tape.

Enter the information requested for the type of magnetic media you intend to submit. Check the appropriate boxes. Enter the name of the manufacturer and the model number or name under "Main Frame" and "Drive Unit." Under "Software," indicate whether the software was purchased or is self-programmed. If purchased, provide the name of the software company.

Block 7

If you will be preparing returns on magnetic media for filers other than yourself, attach to your application a list of names and employer identification numbers of the other filers. If you add or delete any names from your file, submit an updated list to IRS.

Block 8

The form must be signed and dated by an official of the company or organization requesting authorization to report on magnetic media.

Filing Your Application

1. Mail the completed application and any attached lists 90 days before the due date of the returns to:

    If by Postal Service,

3. After authorization is received, we encourage new filers to submit test data on magnetic media before the filing season. If you want to submit test data, contact the magnetic media coordinator.

4. Your authorization will be valid as long as the magnetic media submitted conforms to the specifications of the applicable revenue procedures. A new application is not required in following years unless magnetic media filing has been discontinued and you wish to resume it.

PAPERWORK REDUCTION ACT NOTICE

We ask for this information to carry out the Internal Revenue laws of the United States. We need it to ensure that the magnetic media you are using will be compatible with our processing equipment. The information is also used to more efficiently schedule and manage its processing at the National Computer Center. You are required to give us this information.