Part 7 Miscellaneous Forms and Programs

Section 7.1 – Specifications for Substitute Schedules K-1

2009–7 I.R.B. 546 February 17, 2009

7.1.1 Requirements for Schedules K-1 That Accompany Forms 1041, 1065, 1065-B, and 1120S

Because of significant changes to improve processing, prior approval is now required for substitute Schedules K-1 that accompany Form 1041 (for estates and trusts), Form 1065 (for partnerships), Form 1065-B (for electing large partnerships), or Form 1120S (for S corporations). Substitute Schedules K-1 should be as close as possible to exact replicas of copies of the official IRS schedules and follow the same process for submitting other substitute forms and schedules. Before releasing their substitute forms, software vendors are responsible for making any subsequent changes that have been made to the final official IRS forms after the draft forms have been posted.

You must include all information on the form. Submit Schedules K-1 to the IRS at Substituteforms@irs.gov with “Attn: PDF Submissions” on the subject line or at:

Internal Revenue Service Attn: Substitute Forms Program SE:W:CAR:MP:T:T:SP 1111 Constitution Avenue, NW Room 6526 Washington, D.C. 20224

Include the 6-digit form ID code in the upper right of Schedules K-1 of Forms 1041, 1065, and 1120S.

Please allow white space around the 6-digit code.

Schedules K-1 that accompany Forms 1041, 1065, 1065-B, or 1120S must meet all specifications. The specifications include, but are not limited to, the following requirements.

that taxpayers are required to use. All lines must be included.

lower right hand side on Schedules K-1 of Forms 1041, 1065, and 1120S.

international standard (A4) of 8.27” x 11.69” may be substituted).

separate all continuously printed substitutes, by recipient, before filing with the IRS.

tate, trust, partnership, or S corporation) and the recipient (beneficiary, partner, or shareholder).

the related form number (1041, 1065, 1065-B, or 1120S), and the official schedule name in substantially the same position and format as shown on the official IRS schedule.

the instructions, if any are printed on the back of the official Schedule K-1.

of each item and a percentage (or decimal equivalent) to be applied to such total amount by the recipient does not satisfy the law and the specifications of this revenue procedure.

form to specifications.

February 17, 2009 547 2009–7 I.R.B.

7.1.2 Special Requirements for Recipient Copies of Schedules K-1

as not being able to be processed and may return Forms 1041, 1065, 1065-B, or 1120S to the filer to be filed correctly.

Schedules K-1 that are 2-D bar-coded will continue to require prior approval from the IRS (see Sections 7.1.3 through 7.1.5).

Standardization for reporting information is required for recipient copies of substitute Schedules K-1 of Forms 1041, 1065, 1065-B, and 1120S. Uniform visual standards are provided to increase compliance by allowing recipients and practitioners to more easily recognize a substitute Schedule K-1. The entity must furnish to each recipient a copy of Schedule K-1 that meets the following requirements.

Please allow white space around the 6-digit code.

that taxpayers are required to use. All lines must be included.

lower right hand side on Schedules K-1 of Forms 1041, 1065, and 1120S.

the related form number (1041, 1065, 1065-B, or 1120S), and the official schedule name in substantially the same position and format as shown on the official IRS schedule.

in the same manner as shown on the official IRS schedule. The line items or boxes must be in the same order and arrangement and must be numbered like those on the official IRS schedule.

to the schedule must identify the line or box number and code, if any, for each item as shown in the official IRS schedule.

of each line item and a percentage (or decimal equivalent) to be applied to such total amount by the recipient does not satisfy the law and the specifications of this revenue procedure.

official IRS schedule must be provided to aid in the proper reporting of the items on the recipient’s income tax return. Where items are not reported to a recipient because they do not apply, the related instructions may be omitted.

clearly legible documents. In general, black chemical transfer inks are preferred.

8.5” x 11” (the international standard (A4) of 8.27” x 11.69” may be substituted.)

that the average recipient can easily decipher the information on each page.

Schedules K-1. All non-tax-related information should be separated from the tax information on the substitute schedule to avoid confusion for the recipient.

spicuous manner on the outside of the envelope that contains the substitute recipient copy of Schedule K-1.

2009–7 I.R.B. 548 February 17, 2009

7.1.3 Requirements for Schedules K-1 with Two-Dimensional (2-D) Bar Codes

7.1.4 2-D Bar Code Specifications for Schedules K-1

does not conform to the specifications of this revenue procedure and results in impeding processing.

In an effort to reduce the burden of manually transcribing tax documents, improve quality, and increase government efficiency, the IRS is pleased to provide specifications for 2-D bar-coded substitute Schedules K-1 for Forms 1041, 1065, and 1120S. The IRS encourages voluntary participation in adding 2-D barcoding.

Note. If software vendors do not want to produce bar-coded Schedules K-1, they may produce the official IRS Schedules K-1 but cannot use the expedited process for approving bar-coded K-1s and their parent returns as outlined in Section 7.1.6.

In addition to the requirements in Sections 7.1.1 and 7.1.2, the bar-coded Schedules K-1 must meet the following specifications.

The entire bar code must print within the “For IRS Use Only” box surrounded by a white space of at least ¹ /4 inch.

least a field delimiter (carriage return). Leaving out a field in a bar code will cause every subsequent field to be misread.

Please allow white space around the 6-digit code.

Follow these general specifications for preparing all 2-D bar-coded Schedules K-1.

amount ends in 00 to 49 cents, drop the cents; if it ends in 50 to 99 cents, truncate the cents and increment the dollar amount by one. Use the same rounding technique for the bar-coded and the printed K-1s.

positions or the software program does not support that many positions, put in the bar code only those positions actually used.

February 17, 2009 549 2009–7 I.R.B.

7.1.5 Approval Process for Bar-Coded Schedules K-1

7.1.6 Procedures for Reducing Testing Time

zeroes (for percentages less than 100%) and no decimal point (decimal point is assumed between 3rd and 4th positions). Examples: 25.32% expressed as “025320”; 105% expressed as “105000”; 8.275% expressed as “008275”; 10.24674% express as “010247”.

K-1. Failure to do this will result in each K-1 for a parent return having the same bar code as the document before it.

Prior to releasing commercially available tax software that creates bar-coded Schedules K-1, the printed schedule and the bar code must both be tested. Bar code testing must be done using the final official IRS Schedule K-1. Bar code approval requests must be resubmitted for any subsequent changes to the official IRS form that would affect the bar code. Below are instructions and a sequence of events that will comprise the testing process.

on the IRS.gov website (see http://www.irs.gov/efile/article/0,,id=129860,00.html ).

preparation software to create bar codes in the correct format.

IRS and one to a contracted testing vendor.

developer of the reason for noncompliance.

the software developer directly informing them of the reason for noncompliance.

passed the bar-code test and the IRS will issue an overall approval for both the substitute form and the bar code.

for tax preparation as long as any subsequent revisions to the schedules do not change the fields.

to the IRS and the vendor will reduce testing time.

In order to help provide incentives to the software development community to participate in the Schedule K-1 2-D project, the IRS has committed to expediting the testing of bar-coded Schedules K-1 and their associated parent returns. To receive this expedited service, follow the instructions below.

2009–7 I.R.B. 550 February 17, 2009

K-1 to the appropriate address below in a separate package from all other approval requests.

Internal Revenue Service Attn: Bar-Coded K-1 SE:W:CAR:MP:T:T:SP 1111 Constitution Avenue, NW Room 6526 Washington, D.C. 20224

the testing vendor at the address below.

Northrop Grumman Information Tech Attn: Cecilia Siamundo, Quality Assurance Lead 1800 Alexander Bell Drive Suite 300 Reston, VA 20191 Phone: 703-453-1200

it cannot expedite the approval of non-associated tax returns.

Section 7.2 – Procedures for Printing IRS Envelopes

7.2.1 Procedures for Printing IRS Envelopes

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

Use the following 5-digit ZIP codes when mailing returns to the IRS Service Centers:

February 17, 2009 551 2009–7 I.R.B.

7.2.2 Sorting Returns by Form Type

7.2.3 ZIP+4 or 9-Digit ZIP Codes

7.2.4 Guidelines for Having Envelopes Preprinted

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

The IRS will not furnish or sell bulk quantities of preprinted tax return envelopes to taxpayers or tax practitioners. A suitable alternative has been developed that will accommodate the sorting needs of both the IRS and the United States Postal Service (USPS). The alternative is based on the use of ZIP+4, or 9-digit ZIP codes, for mailing various types of tax returns to the IRS Service Centers. The IRS uses the last four digits to identify and sort the various form types into separate groups for processing. The list of 4-digit extensions with the related form designations is provided below.

You may use the preparers’ company names, addresses, and logos as long as you do not interfere with the clear areas. The government recommends that the envelope stocks have an average opacity of not less than 89 percent and contain a minimum of 50 percent waste paper. Use of carbon based ink is 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 inches by 9 inches. 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 open the bottom edge of each envelope.

2009–7 I.R.B. 552 February 17, 2009

7.2.5 Envelopes/ZIP Codes

The above procedures or guidelines are written for the user having envelopes preprinted. Many practitioners may not wish to have large quantities of envelopes with differing ZIP codes/form designations preprinted due to 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 only the appropriate 5-digit service center ZIP code.

Section 7.3 – Guidelines for Substitute Forms 8655

7.3.1 Increased Standardization for Forms 8655

7.3.2 Requirements for Substitute Forms 8655

Increased standardization for reporting information on substitute Forms 8655 is now required to aid in processing and for compliance purposes. Please follow the guidelines in Section 7.3.2.

Please follow these specific requirements when producing substitute Forms 8655.

theses under the title. “State” must be the first word within the parentheses.

the reporting agent company supports need to be listed.

form. Preferably this information will be in the same area as line 19 of the official form.

the Form 8655 specifications in Publication 1167.

your substitute form is submitted for approval. This source code should be included in the lower left corner of the form.

February 17, 2009 553 2009–7 I.R.B.