SEC. 2. REQUIREMENTS FOR — Internal Revenue Bulletin 2001-17

SUBSTITUTE FORMS FUNISHED TO EMPLOYEES (COPIES B, C, AND 2 OF FORMS W-2)

.01 All employers (including those who file on magnetic media or electronically) must furnish employees with at least two copies of the Forms W-2 (three or more for employees required to file a state, city, or local income tax return). The dimensions of these copies (Copies B, C, and 2), but not Copy A, may be expanded from the dimensions of the official form to allow space for conveying additional information, including additional entries for Box 14, such as withholding from pay for health insurance, union dues, bonds, or charity. The limitation that a maximum of four items are permitted in Box 12 of Form W-2 applies only to the paper Copy A that is filed with the SSA. Also, on these copies (Copies B, C, and 2), the size of these boxes may be adjusted. (However, see the minimum sizes for certain boxes, below). This may permit the employer to eliminate other statements or notices that would otherwise be furnished to employees.

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

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

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

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

(a) 2.67 inches deep by 4.25 inches wide;

(b) Horizontal or vertical format is permitted. NOTE: These maximum and minimum size specifications are for the Tax Year 2001 only and may change in future

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years. The maximum width of 8.5 inches is for employee copies of Form W-2 only. The width of the paper Copy A, submitted to the SSA, is specified in Part B, Sec.1. A.05 above. Also, the electronic tax logo has been added to the employee copies; however, the logo is not required on any of the substitute forms copies.

.02 The paper for all copies must be white. The substitute Copy B (or its equal), which employees are instructed to attach to their Federal income tax return, must be at least 12 pound paper (basis 17 x 22-500), while the other copies furnished the employee must be at least 9 pound paper (basis 17 x 22-500).

.03 Interleaved carbon and chemical transfer paper for employee copies must meet the following standards:

All copies must be CLEARLY LEGIBLE,
All copies must have the capability to be photocopied, and
Fading must not be of such a degree as to preclude legibility and the ability to photocopy. .04 The following requirements govern the private printing of employee copies of Forms W-2. All substitutes must be a form that contains boxes, box numbers, and box titles that, when applicable, match the IRS printed form. The employee copy of Forms W-2 (Copy C) must con- tain the note “ This information is being furnished to the Internal Revenue Ser- vice. If you are required to file a tax re- turn, a negligence penalty or other sanction may be imposed on you if this income is taxable and you fail to report it. ” The placement, numbering, and size of certain boxes (the “core” information) is specified as follows:
The items and box numbers that constitute the core data are:

Box 1 - Wages, tips, other compensation, Box 2 - Federal income tax withheld, Box 3 - Social security wages, Box 4 - Social security tax withheld, Box 5 - Medicare wages and tips, and Box 6 - Medicare tax withheld.

NOTE: Railroad employees may not be subject to social security coverage but are subject to Railroad Retirement Tax Act (RRTA) Tier 1 and Tier 2 coverage. Railroad employers covered by RRTA Tier 1 and Tier 2 must report taxes withheld in box 14 of Form(s) W-2 and mark check

box “CT-1” within box b of Form W-3.

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

The Tax Year (2001 ) must be clearly printed (in non-reflective black ink) on all copies of substitute Forms W-2. It is recommended (but not required) that this information be located to the right of the

The “core” boxes must be printed in the exact order shown on the IRS printed form (see the Exhibits at the end of this revenue procedure). Boxes 1 and 2 must be next to each other, with boxes 3 and 4 below on the next line, and boxes 5 and 6 on the line below boxes 3 and 4.

The block of core data (boxes 1 through 6) must be placed in the upper right of the form. Substitute employee copies of Form(s) W-2 that are printed using a vertical format with dimensions smaller than the IRS printed form may have the core data entirely on the top of the form (see Exhibit F). In no instance will boxes or other information be permitted to the right of the core data. Standard margins or a small amount of other blank space may appear to the top or right of this data.

The form title, number, or copy (Copy B, C, or 2) may be at the top of the form. Also, a reversed or blocked-out area to accommodate a postal permit number or other postal considerations is permitted at the upper right of the form.

Boxes 1 through 6 each must be a minimum of 1 3/8 inches wide and 1/4 inch deep.
Other required boxes:

Employer identification number

(EIN),

Employer’s name, address, and ZIP

code,

Employee’s social security number,

and

Employee’s name, address, and ZIP

code.

form title on the lower left of the Form W-2. The use of 24 pt. OCR-A font is recommended but not required.

If applicable, box 7, “ Social security tips ”, must be shown separately from “Social security wages.” A separate box is not required unless social security tips are to be reported. Boxes 1 and 2 on Copy B are required to be outlined in bold 2-point rule (see Exhibit E) or highlighted in some manner to distinguish these boxes.
If box 9 for “Advance EIC” payment (Advance Earned Income Credit) is present, the box must be outlined in bold 2-point rule or highlighted in some manner to distinguish this box. However, if no amounts are paid for “Advance EIC”, this box is not required and may be omitted by printers. Do not use box 9 for any other purpose than reporting Advance EIC payments.
If box 8 “Allocated tips” are being reported for an employee (or class of employees that are being provided Forms W-2), it is recommended (but not required) that this box also be outlined in bold 2-point rule or highlighted on Copy B. However, if allocated tips are not being reported, this box may be omitted by printers.
Employers who are required to withhold and report state income tax information are required to include the following boxes on substitute Forms W-2:

Box 15 - State and Employer’s state I.D. number. Box 16 - State wages, tips, etc. Box 17 - State income tax.

Employers who are required to withhold and report local income tax information are required to include the following boxes on substitute Forms W-2:

Box 18 - Local wages, tips, etc. Box 19 - Local income tax. Box 20 - Locality name.

If state or local tax information is required, this information is also considered “core data.” The state and local information must be placed at the bottom of the form. See the exhibits at the end of this revenue procedure.
Other boxes on the IRS printed form (boxes 7 through 14) need not appear on substitute Forms W-2 provided to employees unless an employer has that item of information to report to an employee. For example, if an employee did

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not have Social security tips (box 7), Allocated tips (box 8), or Advance EIC payment (box 9), the form could be printed without those boxes. However, if the employer provided amounts for (box 10) Dependent care benefits, those amounts would be required to be reported separately and shown in a box labeled “Dependent care benefits” as on the IRS printed form and the exhibits in this revenue procedure.

Employers may provide multiple entries in box 12, but each entry must use the same code as assigned by the IRS for that type of item. ( See the “Reference Guide for Box 12 Codes ” in the 2001 Instructions for Forms W-2 and W-3.) For example, employers reporting elective deferrals to a section 401(k) plan must enter in box 12 “D” and not “A”, even though it is the first or only item to go in this box. Use the codes shown with the dollar amount. Employers may enter more than four codes in box 12 of Copies 1, 2, B, C, and D of Forms W-2. Do not report in box 12 any items that are not listed as Codes A-T or the new Code “V” in the 2001 Instructions for Forms W-2.
For codes D, E, F, G, H, and S, if any elective deferrals, salary reduction amounts, or non-elective contributions to a section 457(b) plan during the year are make-up amounts under the Uniformed Services Employment and Reemploy- ment Rights Act of 1994 (USERRA) for a prior year, you must enter the prior year contributions separately. You must enter the code, the year (two positions only), and the amount. For example, elective deferrals under USERRA to a section 401(k) plan are reported in box 12 as follows: D 00 2250.00, D 99 1250.00. The 2001 contribution does not require a year designation; enter it as D 7000.00.
If you are a military employer and provide your employee with basic housing, subsistence allowances, and combat zone compensation, report the amount in box 12, Form W-2, using code Q .
Employer contributions to an employee’s Medical Savings Accounts (MSA), must be reported in box 12, Form W-2, using code R .
An employee elective contribution to a salary reduction SIMPLE retirement account must be included in box 12, Form W-2, using code S . However, if the amount is contributed to a SIMPLE retirement that

is part of a section 401(k) arrangement, that amount must be reported in box 12, Form W-2, using code D .

Amounts paid or expenses incurred on behalf of an employee for qualified adoption expenses must be reported in box 12, Form W-2, using code T .
Code V (optional) for 2001, shows the spread (i.e., fair market value of stock over the exercise price of option(s) granted to your employee with respect to that stock) from your employee’s exercise of nonstatutory stock option(s). The spread is to be included in boxes 1, 3 (up to the social security wage base), 5, and 12.
Employers may use box 14 for any other information they wish to give their employee. Each item must be labeled. Examples are union dues, health insurance premiums deducted, nontaxable income, voluntary after-tax contributions, or educational assistance payments.
If you are reporting prior year contributions under USERRA (see item 14 above), you may report in box 14 makeup amounts for nonelective employer contributions, voluntary after-tax contributions, required employee contributions, and employer matching contributions. Report such amounts separately for each year.
If the employer has employees who are subject to any of the three categories/check boxes within box 13, the entire box 13 (ballot boxes) is required to be reported with the proper check mark designation. For example, if an employer provides a retirement plan, box 13 must be reported and check marked for retirement plan designation.

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

All copies of Form W-2 must clearly show the form number, the form title, and the tax year prominently displayed together in one area of the form. The title of Form W-2 is “Wage and Tax Statement.” It is recommended (but not required) that this be located on the bottom left of Form W-2. The reference to the “Department of the Treasury - Internal Revenue Service” must be on all copies of Form W-2 provided to the employee. It is recommended (but not required) that this be located on the bottom right of Form W-2.
If the substitute forms are not la-

beled as to the disposition of the copies, then written notification must be provided to each employee as specified below:

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

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

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

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

“Copy B, To Be Filed With Employee’s FEDERAL Tax Return,” and “Copy C, for EMPLOYEES RECORDS.” It is recommended (but not required) that this be located on the lower left of Form W-2. “Copy 2, To Be Filed with Employee’s State, City, or Local Income Tax Return”.

Instructions similar to those contained on the back of Copies B and C of the official Form W-2 must be provided to each employee. Employers may modify or delete certain information in these instructions (such as modification for employees of railroads to cover Railroad Retirement Tier 1 and Tier 2 compensation and taxes). Employers are allowed to delete instructions that do not apply to the employee. For example, if none of the employees have dependent care benefits (box 10), the employer may delete the instructions for that item. Also, if an employer will only be reporting amounts for a 401(k) plan in box 13, those instructions may be modified to cover only Code D and its instructions.
Employers must notify employees who have no income tax withheld that they may be able to claim a tax refund because of the earned income credit (EIC). You will meet this notification requirement if you issue the official IRS Form W-2 with the EIC notice on the back of the Copy B, or a substitute Form W-2 with the same statement. You may also meet the requirement by providing a substitute Form W-2 without the EIC notification by including Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. You may change the font on

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Copy C (back page only) so that the EIC notification and W-2 instructions fit entirely on the back of Copy C. For more information about notification requirements, see Notice 1015 (formerly Pub. 1325), Have You Told Your Employees About the Earned Income Credit (EIC)?

NOTE: Printers are cautioned that the rules set forth here (Part B., Sec. 2) apply to employee copies (Copies B, C, and 2) only. Paper filers who send Copy A of Form W-2 to the SSA must follow the requirements in Parts B, Sec. 1 and Sec. 3, for those paper submissions.