Part III. Administrative, Procedural, and Miscellaneous

Rev. Proc. 2000–19

TABLE OF CONTENTS

CHAPTER 1 - INTRODUCTION TO SUBSTITUTE FORMS

Section 1.1 - Overview of Revenue Procedure 2000–19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Section 1.2 - IRS Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Section 1.3 - Nature of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Section 1.4 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 788 Section 1.5 - Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789

CHAPTER 2 - GENERAL GUIDELINES FOR SUBMISSIONS AND APPROVALS

Section 2.1 - General Specificiations for Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 Section 2.2 - Highlights of Permitted Changes and Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 Section 2.3 - Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 Section 2.4 - Restrictions on Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Section 2.5 - Guidelines for Obtaining IRS Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791 Section 2.6 - Office of Management and Budget (OMB) Requirements

for All Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794

CHAPTER 3 - PHYSICAL ASPECTS AND REQUIREMENTS

Section 3.1- General Guidelines for Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 Section 3.2 - Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Section 3.3 - Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 Section 3.4 - Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797 Section 3.5 - Examples of Approved Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Section 3.6 - Miscellaneous Information for Substitute Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798

CHAPTER 4 - ADDITIONAL RESOURCES

Section 4.1 - Guidance From Other Revenue Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Section 4.2 - Ordering Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799 Section 4.3 - Electronic Tax Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Section 4.4 - Federal Tax Forms on CD-ROM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800

CHAPTER 5 - REQUIREMENTS FOR SPECIFIC TAX RETURNS

Section 5.1 - Tax Returns (Form 1040, 1040A, 1120, Etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801 Section 5.2 - Changes Permitted to Graphics (Forms 1040A and 1040) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802 Section 5.3 - Changes Permitted to Form 1040A Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803 Section 5.4 - Changes Permitted to Form 1040 Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803

CHAPTER 6 - FORMAT AND CONTENT OF SUBSTITUTE RETURNS

Section 6.1 - Acceptable Formats for Computer-Generated Forms

and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 Section 6.2 - Additional Instructions for All Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804

CHAPTER 7 - OCR FORMS

Section 7.1 - Special Form 1040EZ Optical Character Recognition/Image

Character Recognition (OCR/ICR) Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805 Section 7.2 - Computer-Generated Alternative Returns,

Form 1040PC Format Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 Section 7.3 - Specifications for OCR Scannable Application Forms

for Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 808

2000–12 I.R.B. 785 March 20, 2000

CHAPTER 8 - MISCELLANEOUS FORMS AND PROGRAMS

Section 8.1 - Paper Substitutes for Form 1042-S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 Section 8.2 - Specifications for Filing Substitute Schedules K-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Section 8.3 - Procedures for Printing Internal Revenue Service Envelopes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 811 Section 8.4 - Procedures for Substitute Form 5471 and Form 5472 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813

CHAPTER 9 - ALTERNATIVE METHODS OF FILING

Section 9.1 - Forms for Electronically Filed Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814 Section 9.2 - FTD Magnetic Tape Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815 Section 9.3 - Effect on Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815

EXHIBITS

Exhibit A-1. Schedule A (Preferred) Exhibit A-2. Schedule A (Acceptable) Exhibit B-1. Schedule B (Preferred) Exhibit B-2. Schedule B (Acceptable) Exhibit CG-A. Schedule A (Computer Generated) Exhibit CG-B. Schedule B (Computer Generated) Exhibit C. Sample Checklist Exhibit L-1. List of Forms Referred to in Revenue Procedure

Chapter 1 Introduction to Substitute Forms

Section 1.1 - Overview of Revenue Procedure 2000–19

1.1.1 This revenue procedure provides the general requirements and conditions for the development, print Purpose ing, and approval of all substitute tax forms to be acceptable for filing in lieu of official IRS forms.

1.1.2 Certain unique, specialized forms require the use of other additional revenue procedures to supplement Unique Forms this publication. See Chapter 4.

1.1.3 The Internal Revenue Service accepts quality substitute tax forms that are consistent with the official Scope forms and do not have an adverse impact on our processing. The IRS Substitute Forms Program administers the formal acceptance and processing of these forms nationwide. While this program deals primarily with paper documents, it also interfaces with other processing and filing media such as:

• Magnetic tape,

• Optical character recognition, and

• Electronic filing, etc.

Only those substitute forms that comply fully with the requirements set forth herein are acceptable. Exhibit L-1 lists the form numbers mentioned in this document and their titles. This revenue procedure is updated as required to reflect pertinent tax year form changes and to meet processing and/or legislative requirements.

1.1.4 Forms Covered The following types of forms are covered by this revenue procedure: by This Revenue Procedure - IRS tax returns and their related forms and schedules.

• Applications for permission to file returns electronically and forms used as required documentation for electronically filed returns.

• Powers of Attorney.

• Estimated tax payment vouchers.

• Forms and schedules relating to partnerships, exempt organizations, and employee plans.

1.1.5 The following types of forms are not covered: Forms NOT Covered by - W-2, W-3 (see Publication 1141 for information on these forms) This Revenue - 1096, 1098 series, 1099 series, 5498 series, and W-2G (see Publication 1179 for information on

March 20, 2000 786 2000–12 I.R.B.

Procedure these forms)

• Federal Tax Deposit (FTD) coupons, which may not be reproduced.

• Forms 1040-ES(OCR) and 1041-ES(OCR), which may not be reproduced.

  • Requests for information or documentation initiated by the Service.

  • Forms used internally by the Service.

  • State tax forms.

  • Forms developed outside IRS (except for Form TD F 90-22.1, Report of Foreign Bank and

Financial Accounts).

Section 1.2 — IRS Contacts

Substitute Forms

In addition, the Substitute Forms Program can be contacted via email at tfpmail@publish.no.irs.gov. Use this email address only to inquire about forms covered by this revenue procedure. DO NOT attach graphic files for approval with email.

For questions about Forms W-2 and W-3, refer to IRS Publication 1141, General Rules and Specifications for Private Printing of Substitute Forms W-2 and W-3. For Forms 1096, 1098, 1099, 5498, and W-2G, refer to IRS Publication 1179, Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096, 1098, 1099 Series, 5498, and W-2G.

Section 1.3 - Nature of Changes

1.3.1 Changes to the - The pages of this revenue procedure has been numbered to facilitate ease of use. Revenue Procedure - The IRS Internet website address has been changed to http://www.irs.gov. References to the FTP and Telnet addresses have been deleted..

• Definition of “advanced draft” has been added.

• Vendor responsibility for monitoring revisions to official forms has been articulated.

• Section on Form 941 OCR requirements has been removed.

• Pricing information for the Federal Tax Forms CD-ROM has been revised.

• Processing of 1999 Plan Year Forms 5500 and 5500-EZ will be processed by the Pension and

Welfare Benefits Administration, effective July 1, 2000.

2000–12 I.R.B. 787 March 20, 2000

• Form 5500-C/R has been obsoleted for Plan Year 1999.

• The Electronic Filing Program is now called the IRS e-file Program.

• Instructions for the boxes on Form 1042-S have been revised.

• Voucher scan lines now have a six-digit tax period (YYYYMM).

• Forms 8543-NR and 8453-OL are now referenced in the section on electroncially filed returns.

• Forms 1040-ES(OCR) and 1041-ES(OCR) added to list of forms not covered by this revenue procedure.

  • Four-digit portion of ZIP codes on envelopes revised for froms 1040, 940, and 943.

  • Various editorial changes have been made.

Section 1.4 - Definitions

1.4.1 A tax form (or related schedule) that differs in any way from the official version and is intended to Substitute replace theentire form that is printed and distributed by the Service. This term also covers those Form approved substitute forms exhibited in this revenue procedure.

1.4.2 Aform produced using conventional printing processes. Also, a printed form which has been reproduced Printed (or by photocopying or similar processes. Preprinted) Form

1.4.3 A printed form that has marginal perforations for use with automated and high-speed printing equipPreprinted ment. Pin-Fed Form

1.4.4 Computer- A preprinted form in which the taxpayer’s tax entry information has been inserted by a computer, comPrepared puter-printer, or other computer type equipment, such as word-processing equipment. Substitute Form

1.4.5 Computer- A tax return or form that is entirely designed and printed by the use of a computer printer,such as a Generated laser printer, etc., on plain white paper. This return or form must conform to the physical layout of the Substitute corresponding Service form although the typeface may differ. The text should match the text on the Tax Return officially printed form as closely as possible; condensed text and abbreviations will be considered or Form on a case-by-case basis. Exception: All jurats (perjury statements) must be reproduced verbatim.

1.4.6 Manually- A preprinted reproduced form in which the taxpayer’s tax entry information is entered by an individPrepared Form ual using a pen, pencil, typewriter, or other non-automated equipment.

1.4.7 Computer- A tax return that contains only the taxpayer’s significant line entries, and is formatted three columns Generated Answer per page with tax form headings, a summary, and jurat. This return is printed on plain white paper Sheet Format using a computer printer. Tax Return

1.4.8 Graphics Those parts of a printed tax form that are not tax amount entries nor called-for information. Generally, these are line numbers, captions, shadings, instructions, special indicators, borders, rules, and strokes created by typesetting, photographics, photocomposition, etc.

1.4.9 Acceptable A legible photocopy of an original form. Reproduced Form

1.4.10 Supporting A document providing detailed information to support an entry for a line(s) on an official or approved Statement substitute form and filed with (attached to) a tax return. (A supporting statement is not a tax form and (Supplemental does not take the place of an official form, unless specifically permitted elsewhere in this procedure.) Schedule)

1.4.11 Specific The following terms are used throughout this revenue procedure in reference to all substitute forms, Forms Terms with the exception of the 1040PC “answer sheet format” tax return.

Continued on next page

March 20, 2000 788 2000–12 I.R.B.

1.4.12 The overall physical arrangement and general layout of a substitute form. Format

1.4.13 Sequence The same numeric and logical placement order of data, as reflected on the official form version. Sequence is an integral part of the total format requirement.

1.4.14 Line The line numbers, letters or alphanumerics used to identify each captioned line on the official forms, Reference (Code) and printed to the immediate left of each caption or data entry field.

1.4.15 Item The textual portion of each line on the form identifying the specific data elements required. Caption

1.4.16 Data All areas designated on a form for the insertion of data, such as dollar amounts, quantities, responses, Entry Field checkboxes, etc.

1.4.17 Advanced A draft revision of a new or revised form may be posted to the IRS Internet site for information Draft purposes. Substitute forms may be submitted based on these advanced drafts but any company that receives forms approval based on these early drafts is responsible for monitoring and revising froms to mirror any revisions in the final forms provided by the Service.

Section 1.5 - Agreement

Section 1.5.1 Any person or company who uses substitute forms and makes all or part of the changes specified in Important this revenue procedure agrees to the following stipulations: Stipulation of This Revenue Procedure

• The Internal Revenue Service presumes the changes are made in accordance with these procedures and, as such, will be noninterruptive to the processing of the tax return.

• Should any of the changes prove to be not exactly as described, and as a result become disruptive to the Internal Revenue Service during processing of the tax return, the person or company agrees to accept the determination of the IRS as to whether or not the form may continue to

be used during the filing season.

• The person or company agrees to work with the IRS in correcting noted deficiencies.

Notification of deficiencies may be made by any combination of fax, letter, email, or phone contact and may include the return of unacceptable forms for resubmission of acceptable forms.

Chapter 2

General Guidelines for Submissions and Approvals

Section 2.1 - General Specifications for Approval

2.1.1 Overview If you produce any tax returns and forms using IRS guidelines on permitted changes, you can generate your own substitutes without further approval. If your changes are more extensive, you must get official approval before using substitute forms. These changes include the use of typefaces and sizes other than those found on the official form and the condensing of line item descriptions to save space.

2.1.2 Schedules Schedules are considered to be an integral part of a complete tax return when assigned consecutive page numbers and printed contiguously with page 1 of the return.

2.1.3 Example of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is an example of this Schedules That situation, where Schedules A through U have pages numbered as part of the basic return. For a Form Must Be Submitted 706 to be approved, the entire form including Schedules A through U must be submitted. With the Return

2.1.4 Examples of However, Schedules 1, 2, and 3 of Form 1040A are examples of schedules that can be separately comSchedules That puter-generated. Although printed by the IRS as a continuation of Form 1040A, none of these sched

Continued on next page 2000–12 I.R.B. 789

Can Be Submitted ules have page numbers that require them to be filed with Form 1040A, and may, therefore, be sepaSeparately rated from Form 1040A and submitted as computer-generated substitute schedules.

2.1.5 Use and The Internal Revenue Service is continuing a program to identify and contact tax return preparers, Distribution of forms developers, and software publishers who use or distribute unapproved forms that do not conUnapproved Forms form to this revenue procedure. The use of unapproved forms impedes processing of the returns.

Section 2.2 - Highlights of Permitted Changes and Requirements

2.1.1 Methods of Official versions are supplied by the Internal Revenue Service, such as those in the taxpayer’s tax package, Reproducing those printed in revenue procedures, and over-the-counter forms available at IRS and other governmental Internal Revenue public offices or buildings. Forms are also available on CD-ROM, and on-line viaFedworld and the Internet. Service Forms

There are methods of reproducing Internal Revenue Service printed tax forms suitable for use as substitute tax forms without prior approval.

• You can photocopy most tax forms and use them instead of the official ones. The entire substitute form, including entries, must be legible.

• You can reproduce any current tax form as cut sheets, snapsets, and marginally punched, pin-fed

forms so long as you use an official IRS version as the master copy.

• You can reproduce a “signature form” as a valid substitute form. Many tax forms (including returns)

have a taxpayer signature requirement as part of the form layout. The jurat/perjury statement/signature line areas must be retained and worded exactly as on the official form. The requirement for a signature by itself does not prohibit a tax form from being properly computer-generated.

• You can computer-generate Answer Sheet Format Tax Returns on plain bond paper using IRSaccepted software for the 1040PC format for return types 1040EZ, 1040, 1040A, and attachments, forms, and schedules.

Section 2.3 - Vouchers

2.3.1 Overview All payment vouchers (Forms 940-V, 940-EZ(V), 941- V, 943-V, 945-V, 1040-V, and 2290-V) must be reproduced. Substitute vouchers must be the same size as the officially printed vouchers. Vouchers that are prepared for printing on a laser printer may include a scanline.

2.3.2 Scanline NNNNNNNNN AA AAAA NN N NNNNNN NNN Specifications A B C D E F G A - Social Security Number/Employer Identification Number (SSN/EIN) has 9 numeric spaces. B - Check Digit has 2 alpha spaces. C - Name Control has 4 alphanumeric spaces. D - Master File Tax (MFT) Code has 2 numeric spaces (see below). E - Taxpayer Identification Number (TIN) Type has 1 numeric space (see below). F - Tax period has six numeric spaces in year/month format (YYYYMM). G - Transaction Code has 3 numeric spaces.

2.3.3 MFT Code Code Number for:

• Form 1040 family - 30;

• Form 940/940-EZ - 10;

• Form 941 - 01;

• Form 943 - 11;

• Form 945 - 16; and

• Form 2290 - 60.

2.4 TIN Type Type Number for:

• Form 1040 family - 0; and

• Forms 940, 940-EZ, 941, 943, 945, and 2290 - 2.

2.3.5 Voucher Size The voucher size must be exactly 8.0” X 3.25”. The document scanline must be vertically positioned 1.625 inches from the bottom of the scanline to the bottom of the voucher. The right most character

Continued on next page

March 20, 2000 790 2000–12 I.R.B.

of the scanline must be placed 3.5 inches from the right leading edge of the document. The maximum vertical displacement is .06 inches. The minimum required horizontal clear space between characters is .014 inches. The line to be scanned must have a clear band 0.25 inches in height from top to bottom of the scanline, and from border to border of the document. “Clear band” means no printing except for dropout ink.

2.3.6 Print and Vouchers must be imaged in black ink using OCR A or OCR B, size 1 font. The paper must be 20 to Paper Weight 24 pound OCR bond paper weight.

Section 2.4 - Restrictions on Changes

2.4.1 Things You You cannot, without prior IRS approval, change any Internal Revenue Service tax form or use your CANNOT Do to IRS own (non-approved) versions (preprinted labels), including graphics, unless specifically permitted by Forms Suitable this revenue procedure. for Substitute Tax Forms You cannot adjust any of the graphics on Forms 1040, 1040A, and 1040EZ (except in those areas specified in Chapter 5 of this revenue procedure) without prior approval from the IRS Substitute Forms Program.

You cannot use your own preprinted label on tax returns filed with IRS, unless you fully comply with the exception criteria specified in the section on use of preaddressed IRS labels in this revenue procedure.

Section 2.5 - Guidelines for Obtaining IRS Approval

2.5.1 Basic Preparers who desire to file substitute privately designed and printed tax forms and/or computer-genRequirements erated and computer-prepared tax forms must develop such substitutes using the guidelines for substitute forms established in this chapter. These substitutes, unless excepted by revenue procedure, must be approved by the IRS before being filed.

2.5.2 1040PC A software developer who wants to market, distribute, or use for its own clientele, a tax preparation Format Return package featuring the 1040PC tax return format, must first file an application to participate in the program. Only after successfully fulfilling test requirements will a developer’s software package be accepted by the IRS to produce 1040PC tax returns.

2.5.3 Conditional The Internal Revenue Service cannot grant final approval of your substitute form until the official form Approval Based has been published. However, the IRS has established a location on the Internet for the posting of on Advance Drafts advance drafts of forms. This site can be reached through the Tax Professional’s Corner at http://www.irs.ustreas.gov/prod/bus_info/tax_pro.

We encourage submission of proposed substitutes of these advance draft forms, and will grant conditional approval based solely on these early drafts. These advance drafts are subject to significant change before forms are finalized. If these advance drafts are used as the basis for your substitute forms, you will be responsible for subsequently updating your final forms to agree with the final official version before use. These revisions need not be submitted for further approval.

NOTE: Approval of forms based on advance drafts will not be granted after the final version of an official form is published.

• Any alteration of forms must be within the limits acceptable to the Service. It is possible that,

from one filing period to another, a change in law or a change in internal need (processing, audit, compliance, etc.) may change the allowable limits for the alteration of the official form.

• When specific approval of any substitute form (other than those specified in Chapter 2, IRS

Contacts) is desired, a sample of the proposed substitute should be forwarded for consideration by letter to the Substitute Forms Program Coordinator at the address shown in Chapter 2.

• To expedite multiple forms approval, we prefer that your proposed forms be submitted in separate sets by return. For example, Forms 1040 and their normally related schedules or attach

Continued on next page

2000–12 I.R.B. 791 March 20, 2000

2.5.3 Conditional Approval Based on Advanced Drafts (continued)

ments should be submitted separately from Forms 1120, 1065, 5500 Series, etc., if at all possible. Schedules and forms (e.g., Forms 3468, 4136, etc.) that can be used with more than one type of return (e.g., 1040, 1041, 1120, etc.) should be submitted only once for approval, regardless of the number of different tax returns with which they may be ultimately associated. In addition, all pages of a multipage form or return should be submitted in the same package.

2.5.4 Approving As no IRS office except the ones specified in this procedure (per the chart in Chapter 1) are authorized Offices to approve substitute forms, unnecessary delay may result if forms are sent elsewhere for approval. All forms submitted to any other office must be forwarded to the appropriate office for formal control and review. The Substitute Forms Program Coordinator may then coordinate the response with the program analyst responsible for the processing of that form. Such coordination may include allowing the analyst to officially approve the form. No IRS office is authorized to allow deviations from this revenue procedure.

2.5.5 Service’s The IRS does not review or approve the logic of specific software programs, nor confirm the calcula Review of Software tions entered on forms output from these programs that are submitted for approval. The accuracy of Programs, etc. the program itself remains the responsibility of the software package developer, distributor, or user. The Substitute Forms Program is primarily concerned with the prefiling quality review of the final forms output, produced by whatever means, that are expected to be processed by IRS field offices. For the above reasons, it is suggested that you submit forms without including any “taxpayer” information such as names, addresses, monetary amounts, etc.

2.5.6 When to Send Proposed substitutes, which are required to be submitted per this revenue procedure, should be sent as Proposed Substitutes much in advance of the filing period as possible. This is to allow adequate time for analysis and response.

2.5.7 Accompanying When the sample substitute is submitted, there should be an accompanying statement that lists the Statement form number of each substitute requested and detail those items that deviate from the official form in position, arrangement, appearance, line numbers, additions, deletions, etc. Included with each of the items should be a detailed reason or justification for the change and an approximation of the number of forms expected to be filed.

When requesting approval for multiple forms, the statement should be presented as a checksheet. Checksheets are not mandatory, but do facilitate the approval process. The checksheet may look like the example (Exhibit C) displayed in the back of this procedure or may be one of your own design. Please include your fax number on the checksheet.

2.5.8 Approval/ The Substitute Forms Coordinator will fax the checksheet or an approval letter back to the originator Non-Approval if a fax number has been provided, unless: Notice - the requester has asked for a formal letter; or

• significant corrections are required to the submitted forms

Notice of approval may contain qualifications for use of the substitutes. Notices of non-approval letters may specify the changes required for approval, and may also require resubmission of the form(s) in question. Telephone contact is used when possible.

2.5.9 Duration of Most signature tax returns and many of their schedules and related forms have the tax (liability) year Approval printed in the upper right corner. Approvals for these forms are usually good for one calendar year (January through December of the year of filing). Quarterly tax forms in the 94X series, and Form 720, require approval for any quarter in which the form has been revised.

• If the preprinted year is the only change made to a form, the form for the upcoming year is not

subject to review.

• Otherwise, each new filing season requires a new approval.

2.5.10 Limited Limited continued use of a change approved for one tax year may be allowed for the same form in the Continued Use following tax year. Examples of such limitations and requirements are the use of abbreviated words, of Approved revised form spacing, compressed text lines, shortened captions, etc., which do not change the con Change sistency of lines or text on the official forms.

If substantial changes are made to the form, new substitutes must be submitted for approval. If only minor editorial changes are made to the form, it is not subject to review.

Continued on next page

March 20, 2000 792 2000–12 I.R.B.

If you received written approval of a previous tax year substitute form governed by this revenue procedure and continue to use the approved change on your current tax year substitute form, you may revise your form to include this change and, without additional written approval, use it as a current tax year substitute form, provided you comply with the requirements in this revenue procedure.

2.5.11 When If you received written approval for a specific change on a specific form last year, such as deleting the Approval Is vertical lines used to separate dollars and cents on some forms and schedules, e.g., Schedules A&B Not Required of Form 1040, you may again make the same change on the same form this year if the item changed is still present on this year’s official form.

• The new substitute does not have to be sent to the IRS and written approval is not required.

• However, the new substitute must conform to the official current year IRS form in other respects:

date, Office of Management and Budget (OMB) approval number, attachment sequence number, Paperwork Reduction Act Notice statement, arrangement, item caption, line number, line reference, data sequence, etc.

• It must also comply with this revenue procedure—which may have eliminated, added to, or otherwise changed the guideline(s) which affected the change approved last year.

Exception : Those written approvals which state that the approved change or form would not be allowed in any other tax year, or for a temporary, limited, or interim approval pending resolution of a failure to meet one or more IRS-prescribed requirements are subject to revire in subsequent years.

• This authorization for continued use of an approved change is limited to the continuation of

design logic from an immediately prior tax year substitute form to a current tax year substitute form.

2.5.12 Continuous Forms without preprinted tax years are called “continuous use” forms. Many of these forms had expiUse Forms ration dates, but these are being phased out. Continuous use forms are revised when a legislative change affects the form or a change will facilitate processing.

2.5.13 Internet A chart of print dates (for annual and quarterly forms) and most current revision dates (for continuous Program Chart use forms) will be maintained on the Internet. For further details, see the section on Internet access in Chapter 4 of this revenue procedure.

2.5.14 Required Generally, you must send us one copy of each form being submitted for approval. However, if you Copies are producing forms for different computer systems (e.g., IBM (or compatible) vs. MacIntosh) or different types of printers (laser vs. dot matrix), and these forms differ significantly in appearance, submit one copy for each type of system or printer.

2.5.15 Requestor’s Following the receipt of initial approval for a substitute forms package, or of a software output proResponsibility After gram to print substitute forms, it is the responsibility of the originator (designer or distributor) to proReceipt of Approval vide each subsequent client firm or individual with the pertinent Service forms requirements that must be met for continuing acceptability. Examples of this responsibility include:

• The use of prescribed print paper, font size, legibility, state tax data deletion.

• The legal requirements of the Paperwork Reduction Act Notice for informing all users of substitute forms of the official use and collection requirements stated in the instructions for the official IRS forms, completion of documents, etc.

2.5.16 Source Code The Substitute Forms Program Unit, OP:FS:FP:F:CD, will assign a unique source code to each firm that submits substitute paper forms for approval. This will be a permanent control number that should be used on every form created by a particular firm.

• This source code should be printed at the bottom left margin area on the first page of every

approved substitute paper form.

• The source code for paper returns consists of three alpha characters.

• This source code should not be used on optically scanned (OCR) forms.

2000–12 I.R.B. 793 March 20, 2000

Section 2.6 - Office of Management and Budget (OMB) Requirements for All Substitute Forms

2.6.1 OMB Legal Requirements of the Paperwork Reduction Act of 1995 (“Act”). Public Law 104-13 requires that: Requirements for All Substitute Forms - OMB approve all IRS tax forms that are subject to the Act,

• Each IRS form contains (in the upper right corner) the OMB number, if any, and

• Each IRS form (or its instructions) states why IRS needs the information, how it will be used,

and whether or not the information is required to be furnished. This information must be provided to every user of official or substitute tax forms.

2.6.2 Application On forms to which OMB numbers have been assigned: of Act to Substitute Forms - All substitute forms must contain in the upper right corner the OMB number that is on the official form.

• Format Required - OMB No. XXXX-XXXX (Preferred) or OMB # XXXX-XXXX.

2.6.3 Required You must also inform the users of your substitute forms of the IRS use and collection requirements Explanation to stated in the instructions for the official IRS form. Users

• If you provide your users or customers with the official IRS instructions, page 1 of each form

must retain either the Paperwork Reduction Act Notice, or a reference to it as the IRS does on the official forms (usually in the lower left corner of the forms).

• If the IRS instructions are not provided to users of your forms, the exact text of the Paperwork

Reduction Act Notice must be furnished on the form or separately.

• This notice reads, in part, “We ask for this information to carry out the Internal Revenue laws of

the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax...”

• You must also include a copy of the alternative statement provided to users of your forms with

the forms you submit for approval.

2.6.4 Obtaining The OMB number and Paperwork Reduction Act Notice may be obtained from the official form (or OMB Number its instructions), or any format produced by the IRS (e.g., Compact Disc (CD), Internet download, or and Notice Bulletin Board System (BBS) download).

Chapter 3

Physical Aspects and Requirements

Section 3.1 - General Guidelines for Substitute Forms

3.1.1 General The Official Form is the standard. Because a substitute form is a variation from the official form, you Information should know the requirements of the official form for the year of use before you modify it to meet your needs. The IRS provides several means of obtaining the most frequently used tax forms. These include the Internet, fax-on-demand, CD-ROM and an electronic forms bulletin board (see chapter 4).

3.1.2 Design Each form must follow the design of the official form as to format arrangement, item caption, line numbers, line references, and sequence.

3.1.3 State Tax State tax information must not appear (be visible) on the federal tax return or associated form or schedule Information which is filed with the IRS, except where amounts are claimed on or required by the federal return, Prohibited e.g., state and local income taxes, Schedule A (Form 1040).

Continued on next page

March 20, 2000 794 2000–12 I.R.B.

3.1.4 Vertical Alignment of Amount Fields

3.1.5 Attachment - Most individual income tax forms have a required “attachment sequence number” located just Sequence Number below the year designation in the upper right corner of the form. The IRS uses this number to indicate the order in which forms are to be attached to the tax return so they may be processed in that order. Some of the attachment sequence numbers may change each year.

On computer-prepared forms:

• The sequence number may be printed in no less than 12-point boldface type and centered below

the form’s year designation.

• The sequence number may also be placed following the year designation for the tax form and

separate with an asterisk.

• It is not necessary to duplicate the “Attachment Sequence Number” wording, except for the

actual number.

3.1.6 Paid Preparer’s On Forms 1040EZ, 1040A, 1040, and 1120, etc., the “Paid Preparer’s Use Only” area may not be Information and rearranged or relocated. You may, however, add three extra lines to the paid preparer’s address area Signature Area without prior approval. This applies to other tax forms as well. Please note that the preparer’s area on Form 1040EZ is on the bottom of page 2. Substitute Forms 1040EZ with the preparer area in any location other than the bottom of page 2 will not be accepted.

3.1.7 Assembly If developing software or forms for use by others, please inform your customers/clients that the order of Forms in which the forms are arranged may affect the processing of the package. A return must be arranged in order indicated below.

2000–12 I.R.B. 795 March 20, 2000

Supporting statements should then follow in the same sequence as the forms they support. Additional information required should be attached last.

In this way, the forms are received in the order in which they must be processed. If you do not send returns to us in this order, the IRS has to delay processing to disassemble them and place them in order before processing is continued.

Section 3.2 - Paper

3.2.1 Paper The paper must be: Content - Chemical wood writing paper that is equal to or better than the quality used for the official form,

• At least 18 pound (17” x 22”, 500 sheets), or

• At least 50 pound offset book (25” x 38”, 500 sheets).

3.2.2 Paper with There are several kinds of paper prohibited for substitute forms. These are: Chemical Transfer - Carbon-bonded paper Properties - Chemical transfer paper except when the following specifications are met:

• Each ply within the chemical transfer set of forms must be labeled.

• Only the top ply (ply one and white in color), the one that contains chemical on the back

only (coated back), may be filed with the Service.

3.2.3 Example A set containing three plies would be constructed as follows: one ply (coated back), “Federal Return, File with IRS”; ply two (coated front and back), “Taxpayer’s copy”, and ply three (coated front), “Preparer’s copy.”

• The file designation, “Federal Return, File with IRS,”

for ply one must be printed in the bottom right margin (just below the last line of the form) in 12-point, bold-face type.

• It is not mandatory, but recommended, that the file designation ”Federal Return, File with IRS,”

be printed in a contrasting ink for visual emphasis.

3.2.4 Carbon Do not attach any carbon paper to any return you file with the Internal Revenue Service. Paper

3.2.5 Paper and We prefer that the color and opacity of paper substantially duplicates that of the original form. This Ink Color means that your substitute must be printed in black ink and may be on white or on the colored paper the IRS form is printed on. Forms 1040A and 1040 substitute reproductions may be in black ink without the colored shading. The only exception to this rule is Form 1041-ES, which should always be printed with a very light gray shading in the color screened area. This is necessary to assist us in expeditiously separating this form from the very similar Form 1040-ES.

3.2.6 Page Size Substitute or reproduced forms and computer prepared/generated substitutes may be the same size as the official form (8” x 11” in most cases) or they may be the standard commercial size (8 1/2” x 11”) exclusive of pin-feed holes. The thickness of the stock cannot be less than .003 inch.

March 20, 2000 796 2000–12 I.R.B.

Section 3.3 - Printing

3.3.1 Printing The private printing of all substitute tax forms must be by conventional printing processes, photo Medium copying, computer-graphics, or similar reproduction processes.

3.3.2 Legibility All forms must have a high standard of legibility, both as to printing and reproduction and as to fill-in matter. Entries of taxpayer data may be no smaller than eight points. The Internal Revenue Service reserves the right to reject those with poor legibility. The ink and printing method used must ensure that no part of a form (including text, graphics, data entries, etc.) develops “smears” or similar quality deterioration. This includes any subsequent copies or reproductions made from an approved master substitute form, either during preparation or during IRS processing.

3.3.3 Type Font Many federal tax forms are printed using “Helvetica” as the basic type font. We request that you use this type font when composing substitute forms.

3.3.4 Print Spacing Substitute forms should be printed using a 6 lines/inch vertical print option. They should also be printed horizontally in 10 pitch pica (i.e., 10 print characters per inch) or 12 pitch elite (i.e., 12 print positions per inch).

3.3.5 Image Size The image size of a printed substitute form should be as close as possible to that of the official form. You may omit any text on both computer-prepared and computer-generated forms that is solely instructional.

3.3.6 Title Area To allow a large top margin for marginal printing and more lines per page, the title line(s) for all subChanges stitute forms (not including the form’s year designation and sequence number, when present), may be photographically reduced by 40 percent or reset as one line of type. When reset as one line, the type size may be no smaller than 14-point. You may omit “Department of the Treasury, Internal Revenue Service” and all reference to instructions in the form’s title area.

3.3.7 Remove When privately printing substitute tax forms, the Government Printing Office symbol and/or jacket Government Printing number must be removed. In the same place, using the same type size, print the Employer Office Symbol and Identification Number (EIN), the Social Security Number (SSN) of the printer or designer, or the IRS IRS Catalog Number assigned source code. (We prefer this last number be printed in the lower left area of the first page of each form.) Also remove the IRS Catalog Number, if one is present in the bottom center margin, and the Recycle Symbol, if the substitute is not produced on recycled paper.

3.3.8 Printing While it is preferred that both sides of the paper be used for substitute and reproduced forms, resulton One Side ing in the same page arrangement as that of the official form or schedule, the IRS will not reject your of Paper forms if only one side of the paper is used.

3.3.9 Photocopy The IRS does not undertake to approve or disapprove the specific equipment or process used in reproEquipment ducing official forms. Photocopies of forms must be entirely legible and satisfy the conditions stated in this and other revenue procedures.

3.3.10 Reproductions Reproductions of official forms and substitute forms that do not meet the requirements of this revenue procedure may not be filed instead of the official forms. Illegible photocopies are subject to being returned to the filer for resubmission of legible copies.

3.3.11 Removal You may remove all references to instructions. No prior approval is needed. One exception is that the of Instructions statement, “For Paperwork Reduction Act Notice, see instructions”, must be retained or a similar statement provided on each form. Some forms refer the taxpayer to a page number in the instructions for information on the Paperwork Reduction Act.

Section 3.4 - Margins

3.4.1 Margin Size The format of a reproduced tax return when printed on the page must have margins on all sides at least as large as the margins on the official form. This allows room for IRS employees to make the necessary entries on the form during processing.

• A 1/2” to 1/4” inch margin must be maintained across the top, bottom, and both sides (exclusive

of any pin-fed holes) of all computer-generated substitutes.

2000–12 I.R.B. 797 March 20, 2000

• The marginal, perforated strips containing the pin-fed holes must be removed from all forms

prior to filing with the Internal Revenue Service.

3.4.2 Marginal Non-tax material allowed in limited areas. Printing

• Printing is never allowed in the top right margin of the tax return form (i.e., Forms 1040, 1040A, 1040EZ, 1120, 940, 941, 5500 Series, etc.). The Service uses this area to imprint a Document Locator Number for each return.

  • With the exception of the actual tax return forms (i.e., Forms 1040, 1040A, 1040EZ, 1120, 940,

941, etc.), you may print in the left vertical margin and in the left half of the bottom margin.

Prior approval is not required for the marginal printing allowed when printed on an official form or on a photocopy of an official form.

The marginal printing allowance is also the guide for the preparation of acceptable substitute forms. There is no exception to the requirement that no printing is allowed in the top right margin of the tax return form.

Section 3.5 - Examples of Approved Formats

3.5.1 Examples of Two sets of exhibits (Exhibits A-1, A-2, B-1, and B-2) are at the end of this revenue procedure. These Approved Formats are examples of how the guidelines in this revenue procedure may be used in some specific cases. From the Exhibits Vertical spacing is six (6) lines to the inch.

3.5.2 Examples of Examples of acceptable computer-generated formats are also shown in the Exhibits section of this rev Acceptable computer- enue procedure. Exhibits CG-A and CG-B show computer-generated Schedules 1995 A and B. generated formats Vertical spacing is six (6) lines to the inch. You may also refer to them as examples of how the guidelines in this revenue procedure may be used in specific cases. A combination of upper and lower case print fonts is acceptable in producing the computer-generated forms included in this procedure. This same logic for computer-generated forms can be applied to any IRS form that is normally reproducible as a substitute form, with the exception of tax return forms as discussed elsewhere. These examples are from a prior year and are not to be used as substitute forms.

Section 3.6 - Miscellaneous Information for Substitute Forms

3.6.1 Filing To be acceptable for filing, a substitute return or form must print out in a format that will allow the Substitute Forms party submitting the return to follow the same instructions as for filing official forms. These instructions are in the taxpayer’s tax package or in the related form instructions. The form must be on the appropriate size paper, be legible, and include a jurat where one appears on the published form.

3.6.2 Caution The IRS has received returns produced by software packages with approved output where either the to Software form heading was altered or the lines were spaced irregularly. This produces an illegible or unrecogPublishers nizable return or a return with the wrong number of pages. We realize that many of these problems are caused by individual printer differences but they may delay input of return data and, in some cases, generate correspondence to the taxpayer. Therefore, in the instructions to the purchasers of your product, both individual and professional, please stress that their returns will be processed more efficiently if they are properly formatted. This includes:

• Having the correct form numbers and titles at the top of the return, and

• Submitting the same number of pages as if the form were an official IRS form, with the line

items on the proper pages.

3.6.3 Use If you are a practitioner filling out a return for a client or a software publisher who prints instruction Preaddressed manuals, stress the use of the preaddressed label provided in the tax package the IRS sent to the tax IRS Label payer, when available. The use of this label (or its precisely duplicated label information) is extremely important for the efficient, accurate, and economical processing of a taxpayer’s return. Labeled returns indicate that a taxpayer is an established filer and permits us to automatically accelerate processing of those returns. This results in quicker refunds, more accurate names/addresses and postal deliveries, and less manual review by IRS functions.

Continued on next page

March 20, 2000 798 2000–12 I.R.B.

3.6.5 Programming Whenever applicable: to Print Forms

• Use only the following label information format for single filers:

JOHN Q. PUBLIC 310 OAK DRIVE HOMETOWN, STATE 94000

• Use only the following information for joint filers:

JOHN Q. PUBLIC MARY I. PUBLIC 310 OAK DRIVE HOMETOWN, STATE 94000

Chapter 4

Additional Resources

Section 4.1 - Guidance From Other Revenue Procedures

4.1.1 General Guidance for the substitute tax forms not covered in this revenue procedure and the revenue procedures that govern their use are as follows:

• Revenue Procedure 94-79, IRS Publication 1355, Requirements and Conditions for the

Reproduction, Private Design, and Printing of Substitute Forms 1040-ES.

• Revenue Procedures 99-24, IRS Publication 1141, General Rules and Specifications for Private

Printing of Substitute Forms W-2 and W-3.

• Revenue Procedure 99-34, IRS Publication 1179, Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096, 1098, 1099, 5498, and W-2G.

  • Revenue Procedure 98-44, IRS Publication 1187, Specifications for Filing Form 1042-S,

Foreign Person’s U.S. Source Income Subject to Withholding, on Magnetic Tape.

• Revenue Procedure 99-29, IRS Publication 1220, Specifications for Filing Forms 1098, 1099,

5498, and W-2G Magnetically or Electronically.

• Revenue Procedure 95-18, IRS Publication 1223, Specifications for Private Printing of

Substitute Forms W-2c and W-3c.

Section 4.2 - Ordering Publications

4.2.1 Sources of The publications listed below may be ordered by calling 1-800-TAX-FORM (1-800-829-3676). Publications Identify the requested document by IRS publication number:

• Pub. 1141, the revenue procedure on specifications for private printing for Forms W-2 and W-3.

• Pub. 1167, the revenue procedure on substitute printed, computer- prepared, and computer-generated tax forms and schedules. This publication is available from the IRS Internet website.

• Pub. 1179, the revenue procedure on paper substitute information returns (Forms 1096, 1098,

1099, 5498, and W-2G).

• Pub. 1192, Catalog of Reproducible Forms and Instructions.

• Pub. 1220, the revenue procedure on electronic or magnetic tape and magnetic diskette reporting for information returns (Forms 1098, 1099 series, 5498, and W-2G).

• Pub. 1223, the revenue procedure on substitute Forms W-2c and W-3c.

• Pub. 1239, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip

Income and Allocated Tips, on Magnetic Tape.

• Pub. 1245, Magnetic Tape Reporting for Forms W-4.

Continued on next page

2000–12 I.R.B. 799 March 20, 2000

• Pub. 1345, Handbook for Electronic Filers of Individual Income Tax Returns (Tax Year 1999).

(This is an annual publication; tax year is subject to change). This publication is available from the IRS Internet website.

• Pub. 1345-A, Handbook for Electronic Filers of Individual Income Tax Returns (Tax Year 1999)

(Supplement). This publication, printed in the late fall, supplements Publication 1345.

• Pub. 1355, the revenue procedure on the requirements for substitute Form 1040-ES.

4.2.2 Where If you are mailing your order, the address to use is determined by your location. To Order

Section 4.3 - Electronic Tax Products

4.3.1 The Copies of tax forms with instructions, publications, and other tax related materials may be obtained Internet via the Internet. Forms can be downloaded in several file formats (PDF- Portable Document Format, PS - PostScript, and PCL - Printer Control Language). Those choosing to use PDF files for viewing on a personal computer can also download a free copy of the Adobe Acrobat Reader.

• World Wide Web - http://www.irs.gov

Access to these sites is free but time on the Internet is subject to the fees charged by your Internet provider.

4.3.2 Fedworld The Internal Revenue Information Systems (IRIS) Bulletin Board can be reached via FedWorld, an (BBS) aggregation of federal BBS maintained by the Department of Commerce. IRIS can be reached directly by modem at (703) 321-8020; FedWorld’s main number is (703) 321-3339. These are toll calls.

4.3.3 Tax Fax The most frequently requested tax forms, instructions, and other information are available through IRS Tax Fax at (703) 368-9694. Call from your fax machine and follow the voice prompts. Your request will be transmitted directly back to you. Each call is limited to requesting three items; users pay the telephone line charges.

4.3.4 Report of The Service makes available a site on the Internet that shows print dates for forms used by taxpayers Print Dates in the preparation of returns and subsequent transactions. It is in three parts:

• Schedule of anticipated print dates of annual returns,

• Schedule of anticipated print dates of quarterly returns, and

• Schedule of last revision dates for continuous use only forms.

The site address is http://www.irs.gov/prod/bus_info/tax_pro/formsch.html. The site will be updated weekly during peak printing periods and as necessary at other times.

Section 4.4 - Federal Tax Forms on CD-ROM

4.4.1 Information The CD-ROM contains over 3,000 tax forms and publications for small businesses, return preparers, About Federal Tax and others who frequently need current or prior year tax products. Most current tax forms on the CDForms CD-ROM ROM may be filled in electronically, then printed out for submission and saved for recordkeeping.

March 20, 2000 800 2000–12 I.R.B.

Other products on the CD-ROM include the Internal Revenue Bulletins, Tax Supplements, and Internet resources for the tax professional with links to the World Wide Web.

All necessary software to view the files must be installed from the CD-ROM. Software for Adobe Acrobat Reader is included on the disk. The software will run under Windows 95/98/NT and MacIntosh System 7.5 and later. All products are presented in Adobe’s Portable Document Format (PDF). In addition, the TIPs are provided in the Standard Generalized Markup Language (SGML).

4.4.2 System For system requirements, contact the National Technical Information Service (NTIS) help desk at 703Requirements and 487-4608. How to Order the Federal Tax Forms The cost of the CD if purchased via the Internet at http://www.irs.gov/cdorders from NTIS is $16 (plus CD-ROM a $5 handling fee). If purchased using the following methods the cost is $23 (plus a $5 handling fee).

• by phone - 1-877-CDFORMS (1-877-233-6767)

• by fax - (703) 605-6900

• by mail using the order form contained in IRS Publication 1045 (Tax Professionals Program)

• by mail to:

National Technical Information Service 5285 Port Royal Road Springfield, VA 22161

There is a $7 discount per CD for orders of 50 or more copies, making the price $16 per CD plus a $5 handling fee.

Chapter 5

Requirements for Specific Tax Returns

Section 5.1 - Tax Returns (Form 1040, 1040A, 1120, Etc.)

5.1.1 Acceptable There are acceptable computer-generated versions of a tax return form (e.g., Form 1040, 1040A, 1120, Forms etc., which requires a signature and that establishes tax liability) that are permitted under the following conditions:

• These substitute returns must be printed on plain white paper.

• Substitute returns and forms must conform to the physical layout of the corresponding IRS form

although the typeface may differ. The text should match the text on the officially published form as closely as possible; condensed text and abbreviations will be considered on a case-by-case basis.

Exception : All jurats (perjury statements) must be reproduced verbatim. No text can be added, deleted, or changed in meaning. It must be readily identifiable as a valid tax return.

• Various computer-graphic print media such as laser printing, dot matrix addressable printing,

etc., may be used to produce the substitute forms.

• The substitute return must be the same exact number of pages, and contain the same line text as

the official return.

• All computer-generated tax returns MUST be submitted for approval prior to their original use.

Should you receive an approval letter for a return and the following year’s return has no changes except the preprinted year, the latter return is not subject to approval. Exception : If the approval letter specifies a one-time exception for your return, the next year’s return must be approved.

5.1.2 Computer- The accepted condensed print format version for individual returns is the 1040PC “answer sheet forGenerated mat” tax return. The approval process for Form 1040PC differs from that of traditional forms. See Condensed Chapter 7 for additional information. Format Versions

Continued on next page

2000–12 I.R.B. 801 March 20, 2000

5.1.3 Prohibited The following are prohibited: Forms - Tax returns (e.g., Forms 1040, etc.) computer-generated on lined or color-barred paper.

• Tax returns that differ from the official IRS forms in a manner that makes them not standard or

processable.

5.1.4 Changes Certain changes (listed in Section 5.2 through 5.4) are permitted to the graphics of the form without Permitted to prior approval, but these changes apply only to acceptable preprinted forms. Changes not requiring Forms 1040 prior approval are good only for the annual filing period, which is the current Tax Year. Such changes and 1040A are valid in subsequent years only if the official form does not change.

5.1.5 Other All changes not listed in Sections 5.2 through 5.4 require prior approval from the Service BEFORE Changes Not the form may be filed. Listed

Section 5.2 - Changes Permitted to Graphics (Forms 1040A and 1040)

5.2.1 Adjustments You may make minor vertical and horizontal spacing adjustments to allow for computer or word-processing printing. This includes widening the amount columns or tax entry areas so long as the adjustments do not exceed other provisions stated in revenue procedures. No prior approval is needed for these changes .

5.2.2 Name and The horizontal rules and instructions within the name and address area may be removed and the entire Address Area area left blank; no line or instruction can remain in the area. However, the statement regarding use of the IRS label should be retained. The heavy ruled border (when present) that outlines the name, address area, and social security number must not be removed, relocated, expanded, or contracted.

5.2.3 Required When the name and address area is left blank, the following format must be used when printing the Format taxpayer’s name and address. Otherwise, unless the taxpayer’s preprinted label is affixed over the information entered in this area, the lines must be filled in as shown:

• 1st name line (35 characters maximum)

• 2nd name line (35 characters maximum)

• In-care-of name line (35 characters maximum)

• City, State (25 char. max.), one blank char., & ZIP (five char.)

5.2.4 Conventional When there is no in-care-of name line, the name and address will consist of only three lines (single Name and filer) or four lines (joint filer). Address Data Name and address (joint filer) with no in-care-of name line:

JOHN Z. JONES MARY I. JONES 1234 ANYWHERE ST., APT 111 ANYTOWN, STATE 12321

5.2.5 Example of Name and address (single filer) with in-care-of name line: In-Care-Of Name Line JOHN Z. JONES C/O THOMAS A. JONES 4311 SOMEWHERE AVE. SAMETOWN, STATE 54345

5.2.6 Social Security The vertical lines separating the format arrangement of the SSN/EIN may be removed. When the verNumber (SSN) and tical lines are removed, the SSN and EIN formats must be 000-00-0000 or 00-0000000, respectively Employer Identification Number (EIN) Area

5.2.7 Cents Column - You may remove the vertical rule that separates the dollars from the cents.

• All entries in the amount column should have a decimal point following the whole dollar

amounts whether or not the vertical line that separates the dollars from the cents is present.

• You may omit printing the cents, but all amounts entered on the form must follow a consistent format. You are strongly urged to round off the figures to whole dollar amounts, following the official return instructions.

Continued on next page

March 20, 2000 802 2000–12 I.R.B.

• Where several amounts are summed together, the total should be rounded off subsequent to the

addition (i.e, individual amounts should not be rounded off for computation purposes).

• When printing money amounts, you must use one of the following ten- character formats: (a)

0,000,000. (b) 000,000.00

• When there is no entry for a line, leave the line blank.

5.2.8 “Paid On all forms, the paid preparer’s information area may not be rearranged or relocated. You may add Preparer’s Use three lines and remove the horizontal rules in the preparer’s address area. Only” Area

Section 5.3 - Changes Permitted to Form 1040A Graphics

5.3.1 General No prior approval is needed for the following changes (for use with computer-prepared forms only).

5.3.2 Line 4 of This line may be compressed horizontally (to allow for same line entry for the name of the qualifying Form 1040A child) by using the following caption: “Head of household; child’s name” (name field).

5.3.3 Other Lines Any line whose caption takes up two or more vertical lines may be compressed to one line by using contractions, etc., and by removing instructional references.

5.3.4 Page 2 of All lines must be present and numbered in the order shown on the official form. These lines may also Form 1040A be compressed.

5.3.5 Color It is not necessary to duplicate the colorscreening used on the official form. A substitute Form 1040A Screening may be printed in black and white only, with no color screening.

5.3.6 Other No other changes to the Form 1040A graphics are allowed without prior approval, except for the Changes Prohibited removal of instructions and references to instructions.

Section 5.4 - Changes Permitted to Form 1040 Graphics

5.4.1 General No prior approval is needed for the following changes (for use with computer-prepared forms only).

5.4.2 Line 4 of This line may be compressed horizontally (to allow for a larger entry area for the name of the qualiForm 1040 fying child) by using the following caption: “Head of household; child’s name” (name field).

5.4.3 Line 6c of The vertical lines separating columns (1) through (4) may be removed. The captions may be short Form 1040 ened to allow a one-line caption for each column.

5.4.4 Other Lines Any other line whose caption takes up two or more vertical lines may be compressed to one line by using contractions, etc., and by removing instructional references.

5.4.5 Line 21 - The fill-in portion of this line may be expanded vertically to three lines. Other Income The amount entry box must remain a single entry.

5.4.6 Line 40 of You may change the line caption to read “Tax” and computer print the words “Total includes tax from” Form 1040 - Tax and either “Form(s) 8814”, or “Form 4972”. If both forms are used, print both form numbers.

5.4.7 Line 47 of You may change the caption to read: “Other credits from Form” and computer-print only the form(s) Form 1040 that apply.

5.4.8 Color It is not necessary to duplicate the color screening used on the official form. A substitute Form 1040 Screening may be printed in black and white only, with no color screening.

5.4.9 Other No other changes to the Form 1040 graphics are permitted without prior approval except for the Changes Prohibited removal of instructions and references to instructions.

2000–12 I.R.B. 803 March 20, 2000

Chapter 6

Format and Content of Substitute Returns

Section 6.1 - Acceptable Formats for Computer-Generated Forms and Schedules

6.1.1 Exhibits and Exhibits of acceptable computer-generated formats for the schedules usually attached to the Form Use of Acceptable 1040 are shown in the Exhibits section of this revenue procedure. Computer- - If your computer-generated forms appear exactly like the exhibits, no prior authorization is needed. Generated Formats - Those who want to computer-generate forms not shown here may do so, but they must design such forms themselves by following the manner and style of those in the Exhibits section of this revenue procedure, and by taking care to observe other requirements and conditions stated here. The Service encourages the submission of all proposed forms covered by this revenue procedure.

6.1.2 Instructions The format of each substitute schedule or form must follow the format of the official schedule or form as to item captions, line references, line numbers, sequence, form arrangement and format, etc. Basically, try to make the form look like the official one, with readability and consistency being primary factors. You may use periods and/or other similar special characters to separate the various parts and sections of the form. DO NOT use alpha or numeric characters for these purposes. With the exceptions described in paragraph 6.1.3, all line numbers and items must be printed even though an amount is not entered on the line.

6.1.3 Line Numbers When a line on an official form is designated by a number or a letter, that designation (reference code) must be used on a substitute form. The reference code must be printed to the left of the corresponding captioned line and also immediately preceding the data entry field even if there is no reference code immediately preceding the data entry field on the official form. If an entry field contains multiple lines but shows the line references only one time on the left and right side of the form, do not use more than the same number of line references on the substitute return.

In addition, the reference code that is immediately before the data field must either be followed by a period or enclosed in parentheses. There also must be at least two blank spaces between the period or the right parenthesis and the first digit of the data field. (See example below.)

6.1.4 Decimal Points A decimal point (i.e., a period) should be used for each money amount regardless of whether the amount is reported in dollars and cents or in whole dollars, or whether or not the vertical line that separates the dollars from the cents is present. The decimal points must be vertically aligned when possible.

Example: 5 STATE & LOCAL INC. TAXES................5 495.00 6 REAL ESTATE TAXES................6 7 PERSONAL PROPERTY TAXES................7 198.00

or 5 STATE & LOCAL INC. TAXES................(5) 495.00 6 REAL ESTATE TAXES................(6) 7 PERSONAL PROPERTY TAXES................(7) 198.00

6.1.5 Multiple When submitting multiple page forms, send all pages of the form in the same package. If you are not Page Forms producing certain pages, please note that in your cover letter.

Section 6.2 - Additional Instructions for All Forms

6.2.1 Use of Your Internal control numbers and identifying symbols of the computer preparer may be shown on the sub Own Internal Control stitute, if the use of such numbers or symbols is acceptable to the taxpayer and the taxpayer’s repreNumbers and sentative. If shown, such information must not be printed in the top 1/2” clear area of any form or

Continued on next page

March 20, 2000 804 2000–12 I.R.B.

Identifying Symbols schedule requiring a signature. With the exception of the actual tax return form (i.e., Forms 1040, 1120, 940, 941, 5500 Series, etc.), you may print in the left vertical and bottom left margins. The bottom left margin you may use extends 3 1/2 inches from the left edge of the form.

6.2.2 Descriptions Descriptions for captions, lines, etc., appearing on the substitute forms may be limited to one print line for Captions, by using abbreviations and contractions, and by omitting articles, prepositions, etc. However, suffiLines, etc. cient key words must be retained to permit ready identification of the caption, line, or item.

6.2.3 Derivation Explanatory detail and/or intermediate calculations for derivation of final line totals may be included of Final Totals on the substitute. We prefer that such calculations be submitted in the form of a supporting statement. If intermediate calculations are included on the substitute, the line on which they appear may not be numbered or lettered. Intermediate calculations may not be printed in the right column. This column is reserved for official numbered and lettered lines that correspond to the ones on the official form. If a supporting statement is submitted, intermediate calculations or subtotals may be formatted at the preparer’s option.

6.2.4 Instructional Text prescribed for the official form, which is solely instructional in nature, e.g., “Attach this schedText Prescribed ule to Form 1040,” “See instructions,” etc., may be omitted from the substitute form. for the Official Form

6.2.5 Mixing of Information for more than one schedule or form may not be shown on the same printout page. Both Forms on the Same sides of the paper may be printed for multiple page official forms; but it is unacceptable to intermix Page Prohibited single page schedules of forms, except for Schedules A and B (Form 1040), which are printed back to back by the Service.

Schedule E can be printed on both sides of the paper, because the official form is multiple page, with page 2 continued on the back. However, do not print Schedule E on the front page and Schedule SE on the back, or Schedule A on the front and Form 8615 on the back, etc. Both pages of a substitute form must match the official form version it represents, except that the back page may be blank if the Service form only contains the instructions thereon.

6.2.6 Identifying Identify all computer-prepared substitutes clearly; print the form designation 1/2” from the top marComputer-Prepared gin and 1 1/2” from the left margin; print the title centered on the first line of print; and print the taxSubstitutes able year and, where applicable, the sequence number on the same line _ to 1” from right margin. Include the taxpayer’s name and SSN on all forms and attachments. Also, print the OMB number as reflected on the official form.

6.2.7 Negative Negative (or loss) monetary amount entries should be enclosed in brackets, or signed minus, to assist Amounts in the accurate computation and input of form data. On many official forms the Service preprints brackets in selected negative data fields, and these designations should be retained or inserted on affected substitute forms.

Chapter 7

OCR Forms

Section 7.1 - Special Form 1040EZ Optical Character Recognition/Image Character Recognition (OCR/ICR) Requirements

7.1.1 Form 1040EZ The Form 1040EZ is designed in OCR/ICR format. The IRS has the capability to machine read this Designed in form by optical character recognition/image character recognition (OCR/ICR) equipment. Form OCR/ICR Format 1040EZ data may also be filed electronically or on a 1040PC format return.

An acceptable substitute OCR/ICR Form 1040EZ must generally be an exact replica of the official OCR/ICR reproduction proof with respect to layout, content, and required OCR/ICR characteristics.

2000–12 I.R.B. 805 March 20, 2000

7.1.2 Paper The special paper requirements which must be met for the development of a substitute (privately print Requirements for ed) OCR/ICR Form 1040EZ include the following: OCR/ICR Form 1040EZ

Requirements

March 20, 2000 806 2000–12 I.R.B.

7.1.4 Typography Type must be substantially identical in both size and shape with corresponding type on the official form reproduction proof.

7.1.5 Proper To assure proper alignment and position of handprinted characters representing return lines 1 through Alignment and 10 tax data, they must be handprinted (entered) into the preprinted amount field boxes on the form. A Position of #2 lead wooden pencil, or blue, and/or black ink pen (ball point, fountain, or felt-tipped) is recomHandprinted mended as the writing tool that will consistently provide the required stroke width and print contrast Characters on entered characters.

7.1.6 Reading of Reading of handprinted characters requires adherence to the following techniques: Handprinted - Enter numeric amount digits carefully and clearly. Fill at least 2/3 of the individual character Character box height, keeping the character within the box with no overlapping or touching characters. Specific Techniques required constraints are shown below.

• When entering “fours”, keep the top open.

• When entering “ones”, do not use serifs.

• When entering “twos”, do not add extra loops.

• All character lines must be connected with no gaps.

7.1.7 Note: All the general and detailed provisions of this revenue procedure apply (in addition to this specific OCR/ICR Section) to the development of substitute OCR/ICR Forms 1040EZ.

Section 7.2 - Computer-Generated Alternative Returns, 1040PC Format Return

7.2.1 Introduction The Internal Revenue Service offers an electronic approach for filing individual income tax returns. The 1040PC Format Return is an alternative to th e conventional preprinted tax return. The 1040PC is an answer sheet return, generated on a personal computer in a three-column format, that prints only tax data that is input into the software. Tax returns are filed by tax preparers and taxpayers using commercially available tax preparation software packages that include the 1040PC Format Return print option.

7.2.2 1040PC 1040PC Format Returns are computer-prepared, printed on plain white paper, signed and mailed to the Format Returns designated processing center, and processed like any other conventionally filed return.

7.2.3 Software Preparers, or taxpayers, must purchase IRS-accepted tax preparation software packages that include Packages Must the 1040PC print option. All that is necessary to participate in 1040PC is a personal computer, acceptBe Purchased ed software, a printer, and plain white paper. The 1040PC is attractive to tax preparers and taxpayers who might not be interested or capable of electronic filing.

7.2.4 Options The Direct Deposit option is available to taxpayers filing 1040PC returns. Balance due returns may Available to also be filed using 1040PC. The payment may be forwarded to the Service Center with a separate Taxpayers payment voucher (Form 1040-V).

7.2.5 Use of the All software used to generate the 1040PC Format Return must be tested and accepted by the Internal 1040PC Program Revenue Service. Testing will validate 1040PC returns generated by the software and that the software program is in compliance with validity and consistency checks in the IRS 1040PC project specifications. Software developers who wish to participate in the 1040PC program must submit Form 9356, Application for Software Developers to Participate in the 1040PC Answer Sheet for Individual Income Tax Returns, to the 1040PC Filing Section.

7.2.6 Acceptance Upon successful completion of software acceptance testing, the software developer will be issued a Code software acceptance code that will be embedded into the software and print on every 1040PC return generated. This is not the same as the Source Code issued by the Substitute Forms Program or the approval number which is generated for OCR Scannable Application Forms for Employee Plans.

7.2.7 References/ The Internal Revenue Service believes that 1040PC will prove beneficial to taxpayers, tax preparers, Information on and the Service. For specific information about the alternative computer-generated 1040PC Format the 1040PC Return, refer to Publication 1678, Project 1040PC, Handbook for 1040PC Format Preparers and Format Return Publication 1630, Project 1040PC, Specifications for Software Developers. You may also call (202) 283-0823 or write:

2000–12 I.R.B. 807 March 20, 2000

Internal Revenue Service 1040PC Filing Office, OP:FS:S:P:S 5000 Ellin Rd Lanham, MD 20706

Section 7.3 - OCR Scannable Application Forms for Employee Plans

7.3.1 OCR Forms 4461, 4461-A, 4461-B, 5300, 5303, 5307, 5310-A, 5310-A, and 6406 are OCR scannable docScannable uments submitted to key district offices for employee plans matters. They may be submitted as comDocuments puter-generated substitute forms if the requirements of this section are satisfied.

7.3.2 OCR Data An OCR data sheet must be generated according to the following requirements: Sheet Requirements - Set at least 1” margin at top, bottom, and both sides.

• A data element consists of a less than sign (delimiter), information or at least 5 blank spaces, and

a greater than sign (delimiter). All data elements from page one of the application forms listed above must be printed on the OCR data sheet, even if no information is entered between the delimiters.

• Each data element must start at the left margin.

  • One line for each data field, except for employer and plan name fields which may be two lines.

However, only one set of delimiters may bracket the field, even if the field is on two lines.

• Each data element must appear on the OCR data sheet in the same sequence as printed on the

preprinted form, reading top to bottom and from left to right.

• Each data field must be sequentially numbered at left commencing with 1. See Notice 90-38 for

examples of the acceptable format.

• The data sheet must be printed on 8 _” x 11” white nonrecycled paper suitable for use with printing equipment and duplicating machines. A photocopy is not acceptable. Heavyweight bond

paper and onion skin paper are not acceptable.

• Use 10 pitch type in a standard business font (e.g., courier, elite, pica).

• Add at least two spaces before and after each less than and greater than sign (delimiters).

• Do not fold or staple the OCR data sheet. It may remain loose, or be paper or spring clipped to

the application.

• At the top of the OCR data sheet add the heading “OCR Data Sheet, File With Application Form

(Enter Form Number), Approval Number” (leave nine spaces for approval number).

7.3.3 Where To The OCR data sheet must be submitted for approval to EP OCR Forms Coordinator, OP:E:EP:FC, Send OCR Data Room 2232, 1111 Constitution Ave., NW, Washington, DC 20224. Sheet for Approval

7.3.4 Submission The OCR data sheet must be submitted with a complete word-for-word identical copy of the applicaRequirements tion form except as described below. This copy may be a photocopy or a computer-generated substitute form. Computer-generated substitute forms may be submitted for approval to the address above. However, except for the OCR data sheet, such approval is not required if the requirements of this revenue procedure are satisfied. If approval is requested, leave nine spaces for the approval number above the OMB approval number.

7.3.5 Procedures The OCR data sheet replaces the first copy of page 1 of the application which must otherwise be subfor Filing the mitted in duplicate. To avoid confusion when generating the OCR data sheet, the following wording OCR Data Sheet should be deleted from page 1 of the application: “File page 1 of the form in duplicate” and “Both copies of this page must be signed”. If the Procedural Requirements Checklist is being generated, the following line item statements should be modified as indicated. The question “Has page one been submitted in duplicate” should be modified to read, “Have you submitted the OCR data sheet?”, and the question “Have you signed both copies of page 1 of the application?” should be modified to read “Have you signed the application?”

7.3.6 Nonscannable Nonscannable EP application forms, e.g., Form(s) 5305 and 5306, may be computer generated. They EP Application need not be submitted for approval if the requirements of this revenue procedure are satisfied. If Forms approval is desired, these forms may be submitted to the Substitute Forms Coordinator.

March 20, 2000 808 2000–12 I.R.B.

Chapter 8

Miscellaneous Forms and Programs

Section 8.1 - Paper Substitutes for Form 1042-S

8.1.1 Paper Paper substitutes for Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, that Substitutes totally conform to the specifications contained in this procedure may be privately printed without prior approval from the Internal Revenue Service. Proposed substitutes not conforming to these specifications must be submitted for consideration.

8.1.2 Timeframe The request should be submitted by November 15 of the year prior to the year the form is to be used. for Submission This is to allow the Service adequate time to respond and the submitter adequate time to make any corof Form 1042-S rections. These requests should contain a copy of the proposed form, the need for the specific deviation(s), and the number of information returns to be printed.

8.1.3 Revisions Form 1042-S is subject to annual review and possible change. Withholding agents and form suppliers are cautioned against overstocking supplies of the privately printed substitutes.

8.1.4 Obtaining Copies of the official form for the reporting year may be obtained from most Service offices. The Copies Service provides only cut sheets (no carbon interleaves) of these forms. Continuous fan-fold/pin-fed forms are not provided.

8.1.5 Instructions Instructions for withholding agents: For Withholding - Only original copies may be filed with the Service. Carbon copies and reproductions are Agents not acceptable.

• The term “Recipient’s U.S. taxpayer identification number” for an individual means the social

security number (SSN) or individual taxpayer identification number (ITIN), consisting of nine digits separated by hyphens as follows: 000-00-0000. For all other recipients, the term means employer identification number (EIN). The EIN consists of nine digits separated by hyphen as follows: 00-0000000. The taxpayer identification number (TIN) must be in one of these formats.

• Withholding agents are requested to type or machine print whenever possible, provide quality

data entries on the forms (that is, use black ribbon and insert data in the middle of blocks well separated from other printing and guidelines), and take other measures to guarantee a clear, sharp image. Withholding agents are not required, however, to acquire special equipment solely for the purpose of preparing these forms.

• The “VOID” and “CORRECTED” boxes must be printed at the bottom left corner of the form,

and checked if applicable.

• Substitute forms prepared in continuous or strip form must be burst and stripped to conform to

the size specified for a single form before they are filed with the Service. The dimensions are found below. Computer cards are acceptable provided they meet all requirements regarding layout, content, and size.

8.1.6 Substitute Forms Format Requirements

Property Substitute Forms Format Requirements

Printing Privately printed substitute Forms 1042-S must be exact replicas of the official forms with respect to layout and contents. Only the dimensions of the substitute form may differ and the printing of the Government Printing Office symbol must be deleted. The exact dimensions are found below.

Line Entries Line 1 must be present, line 2 may be omitted if it is not needed. If line 2 is omitted, also omit line 3.

Columns None of the columns can be omitted. Each column (a through h) must be present and in the exact order. The column for each payment amount must contain the appropriate caption.

2000–12 I.R.B. 809 March 20, 2000

March 20, 2000 810 2000–12 I.R.B.

Section 8.2- Specifications for Filing Substitute Schedules K-1

8.2.1 Schedule K-1 Prior approval is NOT required for a substitute Schedule K-1 that accompanies Form 1065 (for partRequirements nership), a Form 1120S (for small business corporation), or a Form 1041 (for fiduciary) when the substitute Schedule K-1 meets all of the following requirements.

• The Schedule K-1 must contain the payer and recipient’s name, address and SSN/EIN.

• The Schedule K-1 must contain all the items required for use by the taxpayer.

  • The line items must be in the same order and arrangement as those on the official form.

  • Each taxpayer’s information must be on a separate sheet of paper. Therefore, all continuously

printed substitutes must be separated, by taxpayer, before filing with the Service.

• Schedule K-1 for recipients must have instructions for required line items attached.

• You may be subject to penalties if you file Schedules K-1 with the Service and furnish Schedules

K-1 to partners, shareholders, or beneficiaries that do not conform to the specifications of this revenue procedure.

• The amount of each partner’s shareholder’s or beneficiary’s share of each line item must be

shown. The furnishing of a total amount of each line item and a percentage (or decimal equivalent) to be applied to such total amount by the partner, shareholder, or beneficiary does not satisfy the law and the specifications of this revenue procedure.

• If you file Schedules K-1 not conforming to the above specifications, IRS may consider these as

not processable and return them to you to be filed correctly. You may also be subjected to the penalty as mentioned.

Section 8.3 - Procedures for Printing Internal Revenue Service Envelopes

8.3.1 Procedures Organizations are permitted to produce substitute tax return envelopes. Use of substitute return for Printing IRS envelopes that comply with the requirements set forth in this section will assist in delivery of mail by Envelopes the U.S. Postal Service and facilitate internal sorting once the envelopes are received at the Internal Revenue Service Centers.

8.3.2 Sorting of The sorting of returns by form type is accomplished by the preprinted bar codes on return envelopes Returns by that are included in each specific type of form or package mailed to the taxpayer. The 32 bit bar code Form Type located to the left of the address on each envelope identifies the type of form that person is filing and assists the Service in consolidating like returns for processing. Failure to use the envelopes furnished by the Service results in additional processing time and effort, and possibly delays the timely deposit of funds, processing of returns, and issuance of refund checks.

8.3.3 Sorting of The Internal Revenue Service will not furnish or sell bulk quantities of preprinted tax return envelopes Returns by ZIP+4 to taxpayers or tax practitioners. A suitable alternative has been developed that will accommodate the or 9 Digit ZIP Codes sorting needs of both the IRS and the U.S. Postal Service. The new alternative is based on the use of

2000–12 I.R.B. 811 March 20, 2000

8.3.4 Add-on Four Digits or + 4 Portion of the 9 Digit ZIP Codes

ZIP + 4 or 9 digit ZIP codes for mailing various types of tax returns to the different area service centers. Essentially, the Postal Service will utilize the last four digits to identify and sort the various form types into separate groups for processing. The list of add-on four digits or + 4 portion of the 9 digit ZIP codes with the related form designations is provided below and is to become a permanent part of the five digit service center ZIP codes shown above.

Forms 5500 and 5500-EZ for plan year 1999 will be printed in green drop-out ink. While it is not setting up a program to approve substitute (non-standard) forms, PWBA has announced that it will not reject during the first processing year any 1999 annual return/report filing submitted on an unofficial computer generated version of the form. They have however established the following criteria:

• The form should be the same size as the hand-print form.

• The layout on each page should be the same as the layout on the approved hand-print form.

• There should be no addition or deletion of words, and no misspellings or abbreviations (other

than exact duplication of abbreviations on the approved form).

• The font size, spacing, and boxes on the form should be substantially the same as those used on

the approved hand-print form.

Additional information is available on the PWBA website, http://www.efast.dol.gov.

March 20, 2000 812 2000–12 I.R.B.

8.3.6 Reproducible The Reproducible Program that in past years supplied the envelope Reproduction Proofs was abolProgram Is ished September 30, 1996. The IRS will no longer provide camera copy to practitioners for the proAbolished duction of envelopes. Practitioners must develop their own camera copy.

8.3.7 Guidelines Use of preparer company names, addresses, and logos is permissible as long as prescribed clear areas for Having are not invaded. The government recommends that the envelope stock have an average opacity not Envelopes less than 89 percent and contain a minimum of 50 percent waste paper. Use of carbon-based ink is Preprinted essential for effective address and bar code reading. Envelope construction can be of side seam or diagonal seam design. The government recommends that the size of the envelope should be 5-3/4” by 9”. Continuous pin-fed construction is not desirable but is permissible if the glued edge is at the top. This requirement is firm because mail opening equipment is designed to slice or otherwise open the bottom edge of each envelope.

8.3.7 Envelopes/ The above procedures or guidelines are written for the user having envelopes preprinted. Many pracZip Codes titioners may not wish to have volumes of the different envelopes with differing ZIP codes/form designations preprinted for reasons of low volume, warehousing, waste, etc. In this case, the practitioner can type or machine print the addresses with the appropriate ZIP codes to accommodate sorting. If the requirements/guidelines outlined in this section cannot be met, then use of only the appropriate five digit service center ZIP code is needed.

Section 8.4 - Procedures for Substitute Form 5471 and Form 5472

8.4.1 Form 5471 This section covers instructions for producing substitutes for: and Form 5472 - Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, and accompanying Schedules J, M, N, and O.

• Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign

Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code).

8.4.2 Paper and Paper and computer-generated substitutes for Form 5471 and the accompanying Schedules J, M, N, Computer-Generated and O, and Form 5472 that totally conform to the specifications contained in this procedure may be Substitutes privately printed, but must have prior approval and are subject to annual review from the Internal Revenue Service.

8.4.3 Official Forms Copies of the official forms for the reporting year may be obtained from most Service offices. The Can Be Obtained Service provides only cut sheets of these forms. Continuous fan-folded/pin-fed forms are not provided. From Most Service Offices

8.4.4 Quality The Service will accept quality substitute tax forms that are consistent with the official forms they repSubstitute Forms resent AND that do not have an adverse impact on our processing. Therefore, only those substitute forms that conform to, and do not deviate from, the corresponding official forms are acceptable.

8.4.5 Computer- If the substitute returns and schedules meet the guidelines prescribed herein, the Service will (for filPrepared Tax ing purposes) accept computer-prepared Forms 5471 and 5472 filled in by a computer, word processForms ing equipment or similar automated equipment or a combination of computer-prepared/generated and filled in information. They may be filed separately or attached to individual or business income tax returns.

8.4.6 Format The specifications for Form 5471 and 5472 are as follows: Arrangement

• The substitute must follow the design of the official form as to format, arrangement, item caption, line numbers, line references, and sequence. It must be an exact textual and graphic MIRROR image of the official form for it to be acceptable.

  • The filer must use one of the official ten character amount formats. All entries in the amount

column should have a decimal point following the whole dollar amounts whether or not the vertical line that separates the dollars from the cents is present. It must follow a consistent format.

• The reference code must be printed to the left of the corresponding captioned line and also

immediately preceding the data entry field EVEN if there is no reference code preceding the data entry field on the official form. The reference code that is immediately before the data field must either be followed by a period or enclosed in parentheses. There also must be at least two blank spaces between the period or the right parenthesis and the first digit of the data field.

2000–12 I.R.B. 813 March 20, 2000

• The size of the page must be the same as the official form (8 1/2” x 11”).

• The acceptable type is “Helvetica”.

• The spacing of the type must be 6 lines/inch vertical, 10 or 12 print characters per inch horizontally.

• A 1/2 to 1/4” margin must be maintained across the top, bottom, and both sides (exclusive of any

pin-fed holes).

• The substitute form must be of the same number of pages as the official one.

• The preprinted brackets in the money fields should be retained.

• The filer must COMPLETELY fill in all the specified numbers or referenced lines as they appear

on the official form (not just totals) BEFORE attaching any supporting statement.

• Supporting statements are NEVER to be used until the required official form they support are

first totally filled in (completed). A blank or incomplete form that refers to a supporting statement, in lieu of completing a tax return, is unacceptable.

• Descriptions for captions, lines, etc., appearing in the substitute forms may be limited to one

print line by using abbreviations and contractions, and by omitting articles, prepostitons, etc. However, sufficient key words must be retained to permit ready identification of the caption, line, or item.

• Text prescribed for the official form, which is solely instructional in nature, e.g., “Attach this

schedule to Form 1040”, “See instruction”, etc., may be omitted from the form.

8.4.7 Filing Instructions for filing substitute forms are the same as for filing official forms. Instructions

Chapter 9

Alternative Methods of Filing

Section 9.1 - Forms for Electronically Filed Returns

9.1.1 Electronic Electronic filing is a method by which qualified filers transmit tax return information directly to an Filing Program IRS Service Center over telephone lines in the format of the official Internal Revenue Service forms. The Service accepts both refund and balance due indiviual tax returns that are filed electronically.

9.1.3 Mailing Intructions

March 20, 2000 814 2000–12 I.R.B.

Form 9041 for Forms 5500 and 5500-EZ Internal Revenue Service Attn: EFU (EPMF), Stop 261 P.O. Box 30309, A.M.F. Memphis, TN 38310

9.1.4 Obtaining The taxpayer signature does not appear on the electronically transmitted tax return and is obtained by the Taxpayer the qualified electronic filer on Form 8453, U. S. Individual Income Tax Declaration for an IRS e-file Signature Return, for Forms 1040, 1040A, and 1040EZ. Form 8453, which serves as a transmittal for the associated non electronic (paper) documents, such as Forms W-2, W-2G, and 1099-R, is a one-page form and can only be approved through the Substitute Forms Program in that format. Forms 8453-OL and 8453-NR serve the same purpose for taxpayers filing through online services and Form 1040-NR filers, respectively. For specific information about electronic filing, refer to Publication 1345, Handbook for Electronic Filers of Individual Income Tax Returns. ( Note: For business returns, the electronic/magnetic media participants must use the official Form 8453-E, F or P, or an approved substitute that duplicates the official form in language, format, content, color, and size.)

9.1.5 Guidelines A participant in the electronic filing program who wants to develop a substitute form should follow for Preparing the guidelines for preparing substitute forms throughout this publication, and send a sample of the Substitute Forms form for approval to the Substitute Forms Coordinator at the address in Chapter 2. Forms 8453 prein the Electronic pared using a font where all IRS-approved wording will not fit on a single page will not be accepted Filing Program as a substitute form. This applies primarily to dot-matrix printers, although forms prepared similarly on laser and inkjet printers will also be rejected. PLEASE NOTE: Use of unapproved forms could result in suspension of the participant from the electronic filing program.

Section 9.2 - FTD Magnetic Tape Payments

9.2.1 Instructions Publication 1315 provides the requirements and instructions for reporting agents who sumit Federal for Reporting Tax Deposits (FTD) payment information on magnetic tape. Magnetic tape submissions for FTD can Agents be made for Forms 940, 941, 942, 943, 720, CT-1, 990-PF, 990-T, 990-C, 1042, and 1120,

9.2.2 Instructions Revenue Procedure 89–49 (Pub. 1374) provides the requirements and instructions for certain banks for Banks and fiduciaries to submit quarterly Form 1041-ES payments on magnetic tape through the Federal Tax and Fiduciaries Deposit (FTD) system.

Section 9.3 - Effect on Other Documents

9.3.1 Effect on This revenue procedure supersedes Revenue Procedure 98–65, I.R.B. 1998–52 . Other Documents

2000–12 I.R.B. 815 March 20, 2000

March 20, 2000 816 2000–12 I.R.B.

2000–12 I.R.B. 817 March 20, 2000

March 20, 2000 818 2000–12 I.R.B.

2000–12 I.R.B. 819 March 20, 2000

March 20, 2000 820 2000–12 I.R.B.

March 20, 2000 822 2000–12 I.R.B.

2000–12 I.R.B. 823 March 20, 2000

March 20, 2000 824 2000–12 I.R.B.

2000–12 I.R.B. 825 March 20, 2000

BACKGROUND

Section 809(a) provides that, in the case of any mutual life insurance company, the amount of the deduction allowable under § 808 for policyholder dividends is reduced (but not below zero) by the “differential earnings amount.” Any excess of the differential earnings amount over the amount of the deduction allowable under § 808 is taken into account as a reduction in the closing balance of reserves under subsections (a) and (b) of § 807. The “differential earnings amount” for any taxable year is the amount equal to the product of (a) the life insurance company’s average equity base for the taxable year multiplied by (b) the “differential earnings rate” for that taxable year. The “differential earnings rate” for the taxable year is the excess of (a) the “imputed earnings rate” for the taxable year over (b) the “average mutual earnings rate” for the second calendar year preceding the calendar year in which the taxable year begins. The “imputed earnings rate” for any taxable year is the amount that bears the same ratio to 16.5 percent as the “current stock earnings rate” for the taxable year bears to the “base period stock earnings rate.”

Section 809(f) provides that, in the case of any mutual life insurance company, if the “recomputed differential earnings amount” for any taxable year exceeds the differential earnings amount for that taxable year, the excess is included in life insurance gross income for the succeeding taxable year. If the differential earnings amount for any taxable year exceeds the recomputed differential earnings amount for that taxable year, the excess is allowed as a life insurance deduction for the succeeding taxable year. The “recomputed differential earnings amount” for any taxable year is an amount calculated in the same manner as the differential earnings amount for that taxable year, except that the average mutual earnings rate for the calendar year in which the taxable year begins is substituted for the average mutual earnings rate for the second calendar year preceding the calendar year in which the taxable year begins.

The stock earnings rates and mutual earnings rates taken into account under § 809 generally are determined by dividing statement gain from operations by the average equity base. For this purpose, the

Listed Transactions

Notice 2000–15

Transactions that are the same as or substantially similar to transactions described in the list below have been determined by the Internal Revenue Service to be tax avoidance transactions and are identified as “listed transactions” for purposes of § 1.6011–4T(b)(2) of the Temporary Income Tax Regulations and § 301.6111–2T(b)(2) of the Temporary Procedure and Administration Regulations. As a result, corporate taxpayers may need to disclose their participation in these listed transactions as prescribed in § 1.6011–4T, and promoters (or other persons responsible for registering tax shelter transactions) may need to register such transactions under § 301.6111–2T. In addition, promoters must maintain lists of investors with respect to these listed transactions pursuant to § 301.6112–1T.

(1) Rev. Rul. 90–105, 1990–2 C.B. 69 (transactions in which taxpayers claim deductions for contributions to a qualified cash or deferred arrangement or matching contributions to a defined contribution plan where the contributions are attributable to compensation earned by plan participants after the end of the taxable year);

(2) Notice 95–34, 1995–1 C.B. 309 (certain trust arrangements purported to qualify as multiple employer welfare benefit funds exempt from the limits of §§ 419 and 419A of the Internal Revenue Code);

(3) Notice 95–53, 1995–2 C.B 334 (certain multiple-party transactions intended to allow one party to realize rental or other income from property or service contracts and to allow another party to report deductions related to that income (often referred to as “lease strips”));

(4) Transactions described in Part II of Notice 98–5, 1998–1 C.B. 334 (transactions in which the reasonably expected economic profit is insubstantial in comparison to the value of the expected foreign tax credits);

(5) Transactions substantially similar to those at issue in ASA Investerings Part- nership v. Commissioner, No. 98–1583 (D.C. Cir. Feb. 1, 2000) and ACM Part- nership v. Commissioner, 157 F.3d 231 (3d Cir. 1998) (transactions involving contingent installment sales of securities by partnerships in order to accelerate and

allocate income to a tax-indifferent partner, such as a tax-exempt entity or foreign person, and to allocate later losses to another partner);

(6) Prop. Treas. Reg. § 1.643(a)–8 (transactions involving distributions described in

§ 1.643(a)–8 from charitable remainder trusts);

(7) Rev. Rul. 99–14, 1999–13 I.R.B. 3 (transactions in which a taxpayer purports to lease property and then purports to immediately sublease it back to the lessor (that is, lease-in/lease out or LILO transactions));

(8) Notice 99–59, 1999–52 I.R.B. 761 (transactions involving the distribution of encumbered property in which taxpayers claim tax losses for capital outlays that they have in fact recovered);

(9) Treas. Reg. § 1.7701(l)–3 (transactions involving fast-pay arrangements as defined in § 1.7701(l)–3(b)); and

(10) Rev. Rul. 2000–12, 2000–11 I.R.B. 744, dated March 13, 2000 (certain transactions involving the acquisition of two debt instruments the values of which are expected to change significantly at about the same time in opposite directions).

This notice is effective February 28, 2000, the date this notice was released to the public.

The principal author of this notice is Richard Castanon of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Richard Castanon on (202) 622-3080 (not a tollfree call).

Differential Earnings Rate for Mutual Life Insurance Companies

Notice 2000–16

This notice publishes a tentative determination under § 809 of the Internal Revenue Code of the “differential earnings rate” for 1999 and the rate that is used to calculate the “recomputed differential earnings amount” for 1998. (The latter rate is referred to in this notice as the “recomputed differential earnings rate” for 1998.) These rates are used by mutual life insurance companies to calculate their federal income tax liability for taxable years beginning in 1999.

March 20, 2000 826 2000–12 I.R.B.

term “statement gain from operations” means “the net gain or loss from operations required to be set forth in the annual statement, determined without regard to Federal income taxes, and ... properly adjusted for realized capital gains and losses....” See § 809(g)(1). The term “equity base” is defined as an amount determined in the manner prescribed by regulations equal to surplus and capital increased by the amount of nonadmitted financial assets, the excess of statutory reserves over the amount of tax reserves, the sum of certain other reserves, and 50 percent of any policyholder dividends (or other similar liability) payable in the following taxable year. See § 809(b)(2), (3), (4), (5) and (6). Section 1.809–10 of the Income Tax Regulations provides that the equity base includes both the asset valuation reserve and the interest maintenance reserve for taxable years ending after December 31, 1991.

Section 1.809–9(a) of the regulations provides that neither the differential earnings rate under § 809(c) nor the recomputed differential earnings rate that is used in computing the recomputed differential earnings amount under § 809(f)(3) may be less than zero.

Rev. Rul. 99–3, 1999–3 I.R.B. 4, provides that a life insurance subsidiary of a mutual holding company is not a mutual life insurance company for which the deduction for policyholder dividends is reduced pursuant to §§ 808(c)(2) and 809.

As described above, the differential earnings rate for 1999 and the recomputed differential earnings rate for 1998 affect the income and deductions reported by mutual life insurance companies on their federal income tax returns for the 1999 taxable year.

Data necessary to determine the tentative differential earnings rate for 1999 and the tentative recomputed differential earnings rate for 1998 have been compiled from returns filed by mutual life insurance companies and certain stock life insurance companies. The Internal Revenue Service is currently examining these returns. This examination will not be completed before the March 15, 2000, due date for filing 1999 calendar year returns.

NOTICE OF TENTATIVE RATES

This notice publishes a tentative determination of the differential earnings rate

for 1999 and of the recomputed differential earnings rate for 1998. This notice also publishes a tentative determination of the rates on which the calculation of the differential earnings rate for 1999 and the recomputed differential earnings rate for 1998 are based. The final determination of these rates is expected to be published before September 1, 2000.

The tentative determination of the differential earnings rate for 1999 and the tentative determination of the recomputed differential earnings rate for 1998 that are published in this notice should be used by mutual life insurance companies to calculate the amount of tax liability for taxable years beginning in 1999 (in the case of companies that file returns before publication of the final determination of these rates) or to calculate the amount of estimated unpaid tax liability for taxable years beginning in 1999 (in the case of companies that are allowed an extension of time to file returns). Companies that file returns before publication of the final determination of these rates should file amended returns after the final determination of these rates is published. If there is a failure to pay tax for a taxable year beginning in 1999 and the failure is attributable to a difference between (a) the tentative determination of the differential earnings rate for 1999 and recomputed differential earnings rate for 1998 and (b) the final determination of these rates, then any such failure through September 15, 2000, will be treated as due to reasonable

cause and will not give rise to any addition to tax under § 6651.

The tentative determination of the rates is set forth in Table 1.

DRAFTING INFORMATION

The principal author of this notice is Katherine A. Hossofsky of the Office of the Assistant Chief Counsel (Financial Institutions and Products). For further information regardingthis notice, contact Ms. Hossofsky on (202) 622-3477 (not a toll-free call).

Filing and Payment Due Date Requirements for Certain Northeastern Taxpayers Affected by Legal Holiday

Notice 2000–17

For taxpayers that reside in the northeastern states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, and New York (except New York City, and the New York counties of Nassau, Rockland, Suffolk, and Westchester), this notice provides guidance regarding the due dates for filing federal tax returns (whether paper or electronic) and making federal tax payments. Generally, these northeastern taxpayers are instructed to send their federal tax returns to the Internal Revenue Service Center in Andover, Massachusetts. However, northeastern taxpayers who are

Notice 2000–16 Table 1 Tentative Determination of Rates To Be Used For Taxable Years Beginning in 1999

Differential earnings rate for 1999 . . . . . . . . . . . . . . . 0.249

Recomputed differential earnings rate for 1998 . . . . . 0.182

Imputed earnings rate for 1998 . . . . . . . . . . . . . . . . . . 16.193

Imputed earnings rate for 1999 . . . . . . . . . . . . . . . . . . 15.815

Base period stock earnings rate . . . . . . . . . . . . . . . . . 18.221

Current stock earnings rate for 1999 . . . . . . . . . . . . . 17.465

Stock earnings rate for 1996 . . . . . . . . . . . . . . . . . . . . 17.238

Stock earnings rate for 1997 . . . . . . . . . . . . . . . . . . . . 19.321

Stock earnings rate for 1998 . . . . . . . . . . . . . . . . . . . . 15.836

Average mutual earnings rate for 1997 . . . . . . . . . . . . 15.566

Average mutual earnings rate for 1998 . . . . . . . . . . . . 16.011

2000–12 I.R.B. 827 March 20, 2000

making a payment with their federal tax return or automatic extension of time to file are instructed to send these documents and payments to Pittsburgh, Pennsylvania, and not to the Andover Service Center. These instructions may cause some confusion for the 2000 filing season because the due date for filing tax returns and making payments is Saturday, April 15, 2000, and Monday, April 17, 2000, is Patriots’ Day, a legal holiday in Massachusetts and Maine, but not elsewhere.

To eliminate this confusion for these northeastern taxpayers for the 2000 filing season, federal tax returns (including the 1999 Form 1040, U.S. Individual Income Tax Return), automatic extensions of time to file, and federal tax payments (including the payment of the first installment of estimated tax for 2000), which are due April 15, 2000, will be treated as timely if they are sent by April 18, 2000, to either the Andover Service Center or Pittsburgh, Pennsylvania, as instructed. This special

treatment for the 2000 filing season is distinguished from the general Service position on due dates for filing and paying federal taxes set forth in Rev. Rul. 90–5, 1990–1 C.B. 189. See also Notice 95–17, 1995–1 C.B. 300. The principal author of this notice is Charles A. Hall of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this notice contact Charles A. Hall at (202) 622-4940 (not a toll-free call).

March 20, 2000 828 2000–12 I.R.B.