SEC. 12. PROCESSING OF FORM

1042–S MAGNETICALLY/ ELECTRONICALLY

.01 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.

.02 When the magnetic media is returned to the transmitter for replacement, a listing identifying the type of errors and frequency of such errors will be provided. It is the responsibility of the transmitter to check the entire file for similar errors. The transmitter must correct the problems and submit a replacement file to IRS/MCC.

.03 Some conditions may not require corrective actions. For example, certain recipients should have had tax withheld at a particular rate, but the withholding agent withheld at a different tax rate. The withholding agent should verify that the tax rates in question are in fact the rates at which tax was withheld. A letter must accompany the original and/or replacement files stipulating that the amount withheld is accurate.

.04 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 successfully processed by IRS/MCC, but contained erroneous information.

A replacement is media that IRS/ MCC has returned due to format or

coding errors encountered during processing.

Media returned should receive prompt attention. After necessary

changes have been made, these files

are to be returned to IRS/MCC within

45 days from the date of notice or the

withholding agent may be subject to a

failure to file penalty. A penalty may

also be assessed if the media is

returned to the withholding agent more

than two times. A penalty for inten-

tional disregard of filing requirements

will be assessed if a replacement file is

not returned to IRS/MCC. (For penalty

information, refer to the Penalty sec-

tion of the 1995 Instructions for Form

1042–S.)

.05 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 tracing capabilities or one that will provide proof of delivery.

.06 IRS/MCC will work with filers as much as possible to assist with processing problems. If the filer is contacted by IRS/MCC, please respond promptly. IRS/MCC may have information that the filer needs to correct their file.

.07 Do not use special shipping containers for transmitting data to IRS/ MCC. Shipping containers will not be returned.