SEC. 2. REQUIREMENTS FOR — Internal Revenue Bulletin 1997-16

SUBSTITUTE FORMS FURNISHED TO EMPLOYEES (COPIES B, C, AND 2 OF FORMS W–2)

.01 All employers (including those who file on magnetic media and do not file a paper Copy A) must furnish employees with at least two copies of the Forms W–2 (three or more for employees required to file a state, city, or local income tax return). The dimensions of these copies (Copies B, C, etc.) but not copy A, may be expanded from the dimensions of the official form to allow space for conveying additional information, such as additional entries required for Boxes 13 or 14, withholding from pay for health insurance, union dues, bonds, charity, etc. The requirement that a maximum of three items are permitted in Box 13 of Form W–2 applies only to the paper Copy A that is filed with SSA. As long as sufficient space is provided on the substitute employee copies, as many items as needed may be placed in Box 13 or box 14. Also, on these copies (Copies B, C, etc.), the size of these boxes may be adjusted. (However, see the minimum sizes for certain boxes, below). This may permit the employer to eliminate other statements or notices that would otherwise be furnished to employees.

The MAXIMUM allowable dimensions for employee copies of Forms W–2 are:

(a) depth should be no more than 6.5 inches;

(b) width should be no more than 8.5 inches.

The MINIMUM allowable dimensions for employee copies of Forms W–2 are:

(a) 2.67 inches by 5.0 inches. (b) horizontal or vertical format is permitted. NOTE: These minimum and maximum size specifications are for 1997 only and may change for future years. The maximum width of 8.5 inches is for employee copies of Form W–2 only. The width of the paper Copy A, submitted to SSA, is specified in Part B, section 1.05 above.

.02 The paper for all copies should be white. The substitute Copy B (or its equal), that employees are instructed to

Railroad Retirement Tax Withheld. NOTE: Railroad employees may not be subject to Social Security coverage but are subject to Railroad Retirement Tax Tier I and II coverage. Railroad Compensation employers may make the above modifications to Forms W–2 but only for substitute Forms W–2 furnished to employees and not for any Copy A forms to be filed with SSA. The ‘‘core’’ boxes must be printed in the exact order on each line as on the IRS printed form (see the Exhibits at the end of this revenue procedure). Boxes 1 and 2 must be next to each other, with

attach to their Federal income tax return, must be at least 12 pound paper (basis 17 x 22–500), while the other copies furnished the employee should be at least 9-pound paper (basis 17 x 22– 500). .03 Interleaved carbon and chemical transfer paper for employee copies must meet the following standards:

All copies must be CLEARLY LEGIBLE;
All copies must have the capability to be photocopied; and
Fading must not be of such a degree as to preclude legibility and the ability to photocopy.

In general, black chemical transfer inks are preferred; other colors are permitted only if the above standards are met. ‘‘Spot carbons’’ are NOT permitted (See Part B, Sec. 1.15, above, for standards for chemical transfer paper for Copy A.)

.04 The following requirements govern the private printing of employee copies of Forms W–2. All substitutes must be a form, which contains boxes, box numbers, and box titles that, where applicable, match the IRS printed form. The placement, numbering, and size of certain boxes (the ‘‘core’’ information) is specified as follows:

The items and box numbers that constitute the core data are:

Box 1—Wages, tips, other compensa tion, Box 2—Federal income tax withheld, Box 3—Social Security Wages/

Railroad Retirement Compensation, Box 4—Social Security tax withheld/

Railroad Retirement Tax Withheld, Box 5—Medicare wages and tips/

Railroad Retirement Tips, and Box 6—Medicare tax withheld/

Boxes 3 and 4 below on the next line, and Boxes 5 and 6 on the line below Boxes 3 and 4.

The block of core data (Boxes 1 through 6) must be placed in the upper right of the form. Substitute employee copies of Form W–2, which are printed using a vertical format with dimensions smaller than the IRS printed form, may have the core data entirely on the top of the form (see Exhibit F). In no instance will boxes or other information be permitted to the right of the core data. Standard margins or a small amount of other blank space may appear to the top or right of this data. The form title, number, or copy (Copy B, C, etc.) may be at the top of the form. Also, a reversed or blocked-out area to accommodate a postal permit number or other postal considerations is permitted at the upper right of the form.
Boxes 1 through 6 must each be a minimum of 1 3/8 inches wide and 1/4 inch deep.
Other required boxes: —Employer identification number (EIN),

—Employer’s name, address, and ZIP code,

—Employee’s Social Security number, and

—Employee’s name, address, and ZIP code. These items are required to be present on the form and must be in boxes similar to those on the IRS printed form. However, they may be placed in any location, other than the top or upper right. The lettering system used on the IRS printed form (‘‘a’’ through ‘‘f’’) need not be used. The employer’s EIN may be included in the box for the employer’s name and address. If this is done, a separate box for the EIN is not required. The Control number box (Box ‘‘a’’ on the IRS printed form) is not required.

The Tax Year (1997) MUST be clearly printed on all copies of substitute Forms W–2. It is recommended (but not required) that this information be located to the right of the form title on the lower left of the Form W–2. The tax year must also be printed in non- reflective black ink using 24 pt OCR–A font.
If applicable, Social Security tips MUST be shown separately from Social Security wages. A separate box is not required unless Social Security tips are to be reported.

Boxes 1 and 2 on Copy B are required to be outlined in bold 2-point

rule (see Exhibit E) or highlighted in some manner to distinguish these boxes.

If a box for Advance EIC (Earned Income Credit) payments (Box 9) is present, the box must be outlined in bold 2-point rule or highlighted in some manner to distinguish this box. However, if no amounts are paid for Advance EIC, this box is not required and may be omitted by printers. Do not use Box 9 for any other purpose than reporting Advance EIC payments.
If Allocated tips (Box 8) are being reported for the individual employee (or class of employees that are being provided Forms W–2), it is recommended (but not required) that this box also be outlined in bold 2-point rule or highlighted on Copy B. However, if allocated tips are not being reported, this box may be omitted by printers.
If Form W–2 contains additional data concerning payroll deductions (e.g., saving bonds withholding, retirement withholding, or payroll savings), there should be a special highlighting of the areas pertaining to Federal income tax withheld; wages, tips, and other compensation; or Advance EIC (Earned Income Credit) payments that are related to those items.
Employers who are required to report or withhold state income tax information are required to include the following boxes on substitute Forms W–2:

Box 16—State and Employer’s state

identification (I.D.) number, Box 17—State wages, tips, etc., and Box 18—State income tax withheld. 11. Employers who are required to report or withhold local income tax information are required to include the following boxes on substitute Forms W–2:

Box 19—Locality name Box 20—Local wages, tips, etc., and Box 21—Local income tax. 12. If state or local tax information is required, this information is also considered ‘‘core data.’’ The state and local information MUST be placed at the bottom of the form. See the exhibits at the end of this revenue procedure.

Other boxes on the IRS printed form (Boxes 7 through 15) need not appear on substitute Forms W–2 provided to employees unless an employer has that item of information to report to an employee. For example, if an employee did not have Social Security tips (Box 7), Allocated tips (Box 8), or Advance EIC payments (Box 9), the

form could be printed without these boxes. However, if the employer had provided amounts for dependent care benefits, those amounts would be required to be reported separately and shown in a box labeled ‘‘Box 10, Dependent care benefits,’’ as on the IRS printed form and the exhibits in this revenue procedure.

Employers may provide multiple entries in Box 13, but each entry should use the same codes as assigned by the IRS for that type of item. (See Reference Guide for Box 13 Codes in the 1997 Form W–2 instructions). For example, employers reporting deferred compensation must label the box as ‘‘13d’’ and not as ‘‘13a’’, even though it is the first or only item to go in this box. Use the codes shown with the dollar amount. On Copy A, Form W–2, do not enter more than three codes in this box. If more than three items need to be reported in box 13, use a separate Form W–2 to report the additional items (see Multiple Forms in the 1997 Form W–2 instructions). However, employers may enter more than three codes in box 13 of Copies 1, 2, B, C, and D of Form W–2. Do not report in box 13 any items that are not listed as codes A–T in the Form W–2 instructions. Do not report the same Federal tax data to the SSA on more than one Copy A, Form W–2.
If you are a military employer and provide your employee with basic quarters, subsistence allowances, and combat zone compensation, report the amount in Box 13, Form W–2, using code Q.
Beginning January 1, 1997, employer’s contributions to an employee’s Medical Savings Account’s (MSAs), must be reported in Box 13, Form W–2, using code R.
Beginning January 1, 1997, an employees elective contributions to a salary reduction SIMPLE retirement account must be included in Box 13, Form W–2, using code S. However, if the amount is contributed to a SIMPLE that is part of a section 401(k) arrangement, that amount must be reported in Box 13, Form W–2, using code D.
Beginning January 1, 1997, amounts paid or expenses incurred by an employer to or for an employee for qualified adoption expenses must be reported in Box 13, Form W–2, using code T.

Note: See the 1997 Form W–2 in- structions for more information re- garding codes R, S, and T.

Employers may use Box 14 for any other information you want to give your employee. Please label each item. Examples are union dues, health insurance, premiums deducted, nontaxable income, voluntary after-tax contributions, or educational assistance payments.

.05 Substitute forms for employees (Copies B, C, and 2 of Forms W–2) must meet the following requirements:

All copies of Forms W–2 must clearly show the form number, the form title, and the tax year. The title of Form W–2 is ‘‘Wage and Tax Statement.’’ It is recommended (but not required) that this be located on the bottom left of Form W–2. The reference to the Department of the Treasury—Internal Revenue Service must be on all copies of Form W–2 provided to the employee. It is recommended (but not required) that this be located on the bottom right of Form W–2.
If the substitute forms are not labeled as to the disposition of the copies, then written notification must be provided to each employee as specified below:

(a) The first copy of the form (Copy B) is filed with the employee’s Federal tax return.

(b) The second copy of the form (Copy C) is for the employee’s records.

(c) If applicable, the third copy (Copy 2) of the form is filed with the employee’s state, city, or local income tax return.

If the substitute forms are labeled, the forms must contain the applicable description:

‘‘Copy B, to be filed with employee’s Federal tax return,’’ and ‘‘Copy C, for employee’s records.’’ It is recommended (but not required) that this be located on the lower left of Form W–2. The designation ‘‘Form W–2, is recommended (but not required) to be located on the lower left of Form W–2 and Department of the Treasury—Internal Revenue Service.’’ It is recommended (but not required) that this be located on the lower right of Form W–2.

Instructions similar to those contained on the back of Copies B and C of the official Form W–2 must be provided to each employees. Employers may modify or delete certain information in these instructions (such as modification for employees of railroads to cover Railroad Retirement Tier I and II Compensation and Taxes. Employers are allowed to delete instructions that do not apply to the employee. For example, if

none of the employees have dependent care benefits (Box 10), the employer may delete the instructions for that item. Also, if an employer will only be reporting amounts for a 401(k) plan in Box 13, those instructions may be modified to cover only Section 401(k) contributions.

You must notify employees who have no income tax withheld that they may be able to claim a tax refund because of the earned income credit (EIC). You will meet this notification requirement if you issue the IRS Form W–2 with the EIC notice on the back of the employee’s copy (Copy B), or a substitute Form W–2 with the same statement. You may also meet the requirement by providing a substitute Form W–2 without the EIC notice and Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. For more information about notification requirements, see Notice 1015 (formerly Pub. 1325), Employers-Have You Told Your Employees About the Earned Income Credit (EIC).

NOTE: Printers are cautioned that the rules set forth here (Part B. Sec. 2) apply to employee copies (Copies B, C, etc.) only. Paper filers who send Copy A of Form W–2 to SSA must follow the requirements in Part B. Sec. 3, below for those paper submissions.