IRS PUBLISHES RULES FOR PAPER SUBSTITUTES OF FORMS W-2 AND W-3.

Rev. Proc. 99-24

PART A. GENERAL

SECTION 1. PURPOSE

.01 The purpose of this revenue procedure is to provide the general rules for filing and to state the requirements of the Internal Revenue Service (IRS) and the Social Security Administration (SSA) for reproducing paper substitutes for Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, for amounts paid during the 1999 calendar year. The information reported on Forms W-2 and W-3 is required to establish tax liability for employees and their eligibility for social security and Medicare benefits.

.02 Forms W-2 and W-3 have only minor changes for 1999. Please see "Nature of Changes" (Section 2, below) and the exhibits at the end of this revenue procedure for changes to Forms W-2 and W-3.

.03 For the purpose of this revenue procedure, a substitute form is one that is not printed by the IRS. A substitute Form W-2 or W-3 MUST conform to the specifications in this revenue procedure to be acceptable to the IRS. No IRS office is authorized to allow deviations from this revenue procedure. Preparers should also refer to the separate instructions for Forms W-2 and W-3 for details on how to complete these forms. See Part C, Sec. 4.01, for information on obtaining the official IRS forms and instructions. See Part B, Sec. 2, for requirements for substitute forms furnished to employees.

.04 IRS has a centralized call site at the IRS Martinsburg Computing Center (IRS/MCC) to answer questions related to information returns (Forms W-2, W-3, 1099, etc.). The Call-Site phone number is (304) 263-8700 (not a toll-free number). The number for Telecommunication Device for the Deaf (TDD) is (304) 267-3367 (not a toll-free number). The hours of operation are Monday through Friday from 8:30 A.M. to 4:30 P.M. eastern time.

.05 This revenue procedure supersedes Rev. Proc. 98-33, 1998-19 I.R.B., dated May 11, 1998. (Reprinted as Publication 1141).

SECTION 2. NATURE OF CHANGES

.01 The text and exhibits were updated for tax year 1999.

.02 Eliminated pages 2 and 3 of Form W-3 including the second copy titled "YOUR COPY".

.03 Box 13 of Form W-3 has been opened to allow third-party payers of sick pay to enter "Third-Party Sick Pay Recap" therein.

.04 Added additional information to the bottom of Form W-3. The "Purpose of Form" and "When To File" information has been added, and "Need Help?" information has been deleted and is now located in the 1999 Instructions for Forms W-2/W-3.

.05 Added reference to extended due date for electronically filed forms W-2.

.06 Various editorial changes were made.

SECTION 3. GENERAL RULES FOR FILING PAPER FORMS W-2

.01 Employers MUST use magnetic media or electronic for filing with the SSA if they prepare and file 250 or more 1999 Forms W-2 (Copy A). This requirement applies unless:

1. The employer can establish that filing on magnetic media or electronically will result in undue hardship, AND

2. The employer is granted a waiver of the requirement by the IRS.

To request a waiver of the magnetic media or electronic filing requirement, for the current tax year only, submit Form 8508,

Request for Waiver From Filing Information Returns on Magnetic Media, to:

     If by Postal Service:

Form 8508 may be obtained through electronic options on the Internet at http://www.irs.ustreas.gov, or by calling 1-800-829-3676. Form 8508 also may be obtained directly from the IRS Martinsburg Computing Center (IRS/MCC) at the above address or by calling (304) 263-8700 (not a toll-free number). The number for Telecommunication Device for the Deaf (TDD) is (304) 267-3367 (not a toll-free number). It is recommended that completed requests for waivers (Form 8508) be submitted at least 45 days before but no later than the due date of the return (see Sec. 3.06, below). The requestor will receive an approval or denial letter from IRS, but must allow at least 30 days for IRS to respond. If you have any questions concerning Form 8508, contact IRS/MCC at the address or phone number shown above. Employers who do not comply with the magnetic media or electronic filing requirements for Form W-2 and who are not granted a waiver may be subject to certain penalties. Since many states and local governments accept Form W-2 data on magnetic media or electronically, savings may be obtained if magnetic media or electronic data is used for filing with both the SSA and state or local governments. In many instances, the state or local government is willing to accept the data format specifications set out in the SSA's Technical Information Bulletin (TIB) No. 4, Magnetic Media Reporting. You must contact each individual state or local taxing agency to receive approval and make arrangements to file on magnetic media (or Magnetic Media Reporting and Electronic Filing Publication Number ICN (MMREF-1)).

EMPLOYERS WHO FILE FORM W-2 INFORMATION ON MAGNETIC MEDIAOR ELECTRONICALLY WITH THE SSA MUST NOT SEND THE SAME DATA TO THE SSA ON PAPER FORMS W-2. This would result in duplicate reporting and may subject the filer to an unnecessary contact by the IRS.

.02 TIB-4, Magnetic Media Reporting, Submitting Annual W-2 Copy A Information to the Social Security Administration, (SSA Pub. No. 42- 007, revised Oct., 1998) contains the specifications and procedures for filing Form W-2 information on magnetic media or electronically with the SSA. Specifications for both tape and diskette reporting for Forms W-2 are included in the TIB-4.

.03 TIB-4 may be obtained by writing to:

     Social Security Administration

.04 Employers not filing on magnetic media or electronically must file a paper Copy A of Form W-2 with the SSA on either the IRS printed official form or a privately printed substitute paper form that exactly meets the specifications shown in Parts B and C.

.05 Employers may design their own statements to give to employees. This applies to employers who file with the SSA on magnetic media, electronically, or on paper. Employee statements designed by employers must comply with the requirements shown in Parts B and C, below.

NOTE: Copy A must not be filed on paper with the SSA when the same Form W-2 information is filed electronically or on magnetic media. Therefore, magnetic media or electronic filers who use the official IRS printed form or any other preprinted form are advised not to print Copy A to prevent duplicate information from being submitted to the SSA.

.06 Employers terminating their businesses, must provide their employees with Forms W-2 on or before the due date of the final Form 941 filed by the employer. Employers must also file Forms W-2 and W- 3 with the SSA on or before the last day of the month following the due date of the final Form 941. See Rev. Proc. 96-57, 1996-2 O.B. 389, Automatic Extensions for Forms W-2, Internal Revenue Cumulative Bulletin 1996-2, page 389, dated 12/30/96, for more information.

Note: Use of a reporting agent or other third-party payroll service provider does not relieve an employer of the responsibility to ensure that Forms W-2 are sent out and filed correctly and on time.

.07 Employers who file electronic Forms W-2 for 1999 have until March 31, 2000. Forms W-2 for 1999, whether filed on magnetic media or paper, must be submitted to the SSA on or before February 29, 2000. In addition, the employee copies must be furnished to the employee on or before February 1, 2000. If employment ended before December 31, 1999, the employee may be furnished his/her copy any time after employment ends, but no later than February 1, 2000. However, if the employee requests Form W-2, you must furnish him or her the completed copies within 30 days of the request or of the final wage payment, whichever is later. This requirement is met if the form is properly addressed, mailed, and postmarked on or before the due date. Failure to timely file with the SSA or to timely provide the employee copies may subject the employer to penalties. Employers needing additional time to file Form W-2 information (paper or magnetic media) with the SSA may request an extension of time to file by submitting Form 8809, Request for Extension of Time to File Information Returns, to the IRS/MCC at the address (or alternative address) listed in Sec. 3.01, above. The extension request should be filed as early as possible, but must be postmarked no later than the due date of the forms (February 29, 2000). DO NOT SEND FORM 8809 TO THE SSA.

NOTE: APPROVAL OF THE EXTENSION IS NOT AUTOMATIC. Approval or denial is based on administrative criteria and guidelines. The requestor will receive an approval or denial letter from the IRS and must allow at least 30 days from the date of the request for the IRS to respond. You do not have to wait for a response before filing your return. File your return as soon as they are ready. If you have received a response, do not send a copy of the letter or Form 8809 with your return. Form 8809 may be obtained using electronic options on the Internet at http://www.irs.ustreas.gov; by modem to IRIS (703) 321- 8020; or by using the IRS Fax Forms Program (703) 368-9694, or by calling 1-800-829-3676. You can also contact IRS/MCC. (See the address and phone number in Sec. 3.01, above.)

.08 When requesting extensions of time for more than 10 employers, the IRS encourages filers to submit the request on tape, tape cartridge, 3 1/2-inch diskette, or electronically. Transmitters requesting an extension of time to file for more than 50 payers are required to file the extension request on magnetic media or electronically. Transmitters who submit requests for multiple payers will receive one approval letter with an attached list of payers covered under that approval. Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Magnetically or Electronically,provides information on how to file requests for extensions of time on tape, tape cartridge/ quarter inch cartridge, 3 1/2inch diskette, or electronically.

NOTE: To file a request for extensions of time, magnetically or electronically for multiple payers, third party filers/transmitters must have an IRS Transmitter Control Code (Authorization to file information returns.)

SECTION 4. GENERAL RULES FOR FILING FORM W-3

.01 Employers submitting Form W-2 (Copy A) on paper to the SSA must send the Forms W-2 with a Form W-3.

.02 Form W-3 must be the same width (7 inches) as the Forms W-2 filed.

.03 Form W-3 pages 2 and 3 have been eliminated including the second "your copy" of the form. Separate instructions for the Form W- 3 are provided in the "Instructions for Forms W-2 and W-3." Form W-3 is now a single cut sheet including only essential filing information. Be sure to make a copy of the complete form for your records.

.04 The bottom of Form W-3 has been redesigned. The "Need Help?" paragraph has been deleted and inserted within the "Instructions for Forms W-2 and W-3." The "Purpose of Form" and "When To File" paragraphs have been added to restate the purpose of the Form W-3 which can also be found within the "Instructions for Forms W-2 and W- 3," while also providing due date on the actual form itself.

.05 Form W-3 should be used only to transmit paper Forms W-2 (Copy A). Magnetic media or electronic filers do not file Form W-3. Employers submitting magnetic media using the TIB-4 format must transmit Form W-2 data with Form 6559, Transmitter Report and Summary of Magnetic Media, (and Form 6559-A, Continuation Sheet for Form 6559,if necessary). These forms may be obtained by calling either your SSA ESLO (see listing in Appendix) or the IRS at 1-800-829-3676. Employers submitting W-2 information electronically using OWRRB need not submit a Form 6559.

PART B. REQUIREMENTS FOR FILING PAPER SUBSTITUTES

SECTION 1. REQUIREMENTS FOR SUBSTITUTE "PRIVATELY PRINTED" FORMS SUBMITTED TO THE SSA (FORM W-2, COPY A, AND FORM W-3)

.01 Employers may file privately printed substitute Forms W-2 and W-3 with the SSA. The substitute form must be an exact replica of the IRS printed form (or official reproduction proof) with respect to layout and contents because it will be read by machine. The Government Printing Office (GPO) symbol must be deleted (see Sec. 1.15, below). The specifications and allowable tolerances for Copy A of substitute Forms W-2 are provided later in this revenue procedure. See Exhibit A for Form W-2 specifications. The specifications for Forms W-3 are provided in Exhibit B.

.02 Paper used for substitute Forms W-2, Copy A, and Form W-3 (cut sheets and continuous pinfeed forms) that are to be filed with the SSA must be white 100% bleached chemical wood, 18-20 pound paper only, optical character recognition (OCR) bond produced in accordance with the specifications shown as follows:

      Paper                               Requirements

.03 All printing for Copy A of Forms W-2 and Form W-3 will be in red OCR drop-out ink, except as specified below. The following must be printed in non-reflective black ink:

1. Identifying control number '22222' (Exhibit C) at the top of Form W-2.

2. Tax year at the bottom of the Form W-2 (see Exhibit C).

3. Identifying control number '33333' (Exhibit D) at the top of Form W-3.

4. Tax year at the bottom of Form W-3 (Exhibit D).

5. Form identification 'W-3'at the bottom of Form W-3 (Exhibit D).

All other printing on Forms W-2, Copy A, and W-3 must be in red OCR drop-out Flint Ink J-6983 (formerly Sinclair and Valentine) or an exact match. This is the same ink that is used for Copy A of the Form 1099 series (see Pub. #1179). The use of this is required for 1999 Forms W-3 and W-2 (Copy A.)

NOTE: Printing in any other red OCR drop-out ink must be cleared by contacting Banc-Tech Corp., Attn: Forms Designer & Analysis, 27011 East Grauwyler, Bldg #1, Mail-stop #69, Irving, TX 75061 (972-579- 6088).

.04 Type must be substantially identical in size and shape with corresponding type on the official form. The form identifying number MUST be printed in non-reflective black ink using an OCR-A font; 10 characters per inch.

1. On Form W-3 and Copy A of Forms W-2, all the perimeter rules must be 1-point (0.014 inch), while all other rules must be one- half point (0.007 inch).

2. Vertical rules must be parallel to the left edge of the form; horizontal rules parallel to the top edge.

.05 Two official Forms W-2 (Copy A), or one official Form W-3 is contained on a single page that is 7 inches wide (exclusive of any snap-stubs) by 11 inches deep. The form identifying control number for the official forms (7 inches wide) is '22222'(5 digits) for Form W-2 and '33333'(5 digits) for Form W-3. The top margin for 1999 Forms W-3 and W-2, Copy A is .375 inch (3/8 inch). The right margin must be .15 inch and the left margin .35 inch (plus or minus .0313 inch). The margins are unchanged from 1998. Margins must be free of all printing. No printing should appear anywhere near the Form ID control number (33333, or 22222). For Forms W-2, Copy A, the combination width of Box a, 'Control number,'and the box containing the form identifying number (22222) must always be 2.0 inches. For Form W-3, the combined width of these boxes must always be 2.2 inches.

NOTE: All form identifying numbers must be printed in non- reflective black ink, using OCR-A font, printed 10 characters per inch.

.06 The depth of the individual scannable image on a page must be the same as that on the IRS printed forms. For Form W-2, the depth is 4.92 inches (see Exhibit A). The scannable image depth of the Form W-3 on a page must be 4.47 inches (see Exhibit B).

.07 The words "Do Not Cut, Staple, or Separate Forms on This Page" must be printed twice in red OCR drop-out ink between the two Forms W-2 on Copy A only (see Exhibit A). Perforations are required on all copies (except Copy A) to enable the separation of individual forms. Continuous pinfeed Copy A forms must be separated at the page perforation into individual 11" deep pages before submission to the SSA. The pinfeed strips must also be removed. However, the two W-2 documents contained on the 11" deep page must not be separated.

.08 The words "For Privacy Act and Paperwork Reduction Act Notice, see separate instructions," must be printed in red OCR drop- out ink on Forms W-2, Copy A (see Exhibit A for format and location). The Forms W-2 and W-3 instructions contain the Privacy Act Notification previously shown on the Form W-3.

.09 The Office of Management and Budget (OMB) Number must be printed on each ply of Forms W-2 and on W-3 (see Exhibits A and B for format and location).

.10 The instructions on the official Form W-3, must be printed in their entirety on all substitute Forms W-3 (see Exhibit B).

Household employers filing Forms W-2 for household employees should send the forms to the same address listed in the instructions.

Note: Household employers, even those with only one household employee, must file a Form W-3 with Form W-2. On Form W-3 mark the "Hshld Emp." box in Box b.

.11 Privately printed continuous substitute Forms W-2, Copy A, must be perforated at each 11" page depth. No perforations are allowed between the individual forms (5 1/2 inch Forms W-2) on a single copy page of Copy A. Continuous pinfeed Copy A forms must be separated at the page perforation prior to submitting them to the SSA. Two Copy A forms are contained on one page. The two copies must remain together on the page. Only the pages are to be separated (burst). Perforations are required between all the other individual copies on a page (Copies 1, B, C, 2, and D) included in the set.

.12 The back of a substitute Forms W-2, Copy A, and Form W-3 must be free of all printing.

.13 Spot carbons are NOT permitted for Copy A of Forms W-2 or for Form W-3. Interleaved carbon should be black and must be of good quality to assure legibility of information on all copies and to preclude smudging.

.14 Chemical transfer paper is permitted for Form W-2, Copy A, and Form W-3 only if the following standards are met:

1. Only chemically backed paper is acceptable for Copy A.

2. Carbon coated forms are not permitted. Front and back chemically treated paper cannot be processed properly by machine.

3. Chemically transferred images must be black in color.

.15 The GPO symbol must not be placed on substitute Copy A of Forms W-2.

.16 The Catalog Number, shown on the 1999 Form W-2 as "Cat. No. 10134D", and the Catalog Number shown on the 1999 Form W-3 as "Cat. No. 10159Y", are used for IRS distribution purposes and should not be printed on substitute forms.

SECTION 2. REQUIREMENTS FOR SUBSTITUTE FORMS FURNISHED TO EMPLOYEES (COPIES B, C, AND 2 OF FORMS W-2)

.01 All employers (including those who file on magnetic media or electronically and do not file a paper Copy A) must furnish employees with at least two copies of the Forms W-2 (three or more for employees required to file a state, city, or local income tax return). The dimensions of these copies (Copies B, C, 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 required for Boxes 13 or 14, such as withholding from pay for health insurance, union dues, bonds, or charity. The requirement that a maximum of three items are permitted in Box 13 of Form W-2 ap plies only to the paper Copy A that is filed with the SSA. As long as sufficient space is provided on the substitute employee copies, as many items as needed may be placed in Box 13 or Box 14. Also, on these copies (Copies B, C, 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.

1. 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.

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

(a) 2.67 inches deep by 5.0 inches wide.

(b) horizontal or vertical format is permitted.

NOTE: These minimum and maximum size specifications are for 1999 only and may change for future years. The maximum width of 8.5 inches is for employee copies of Form W-2 only. The width of the paper Copy A, submitted to the SSA, is specified in Part B, section 1.05 above.

.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 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:

1. All copies must be CLEARLY LEGIBLE;

2. All copies must have the capability to be photocopied; and

3. Fading must not be of such a degree as to preclude legibility and the ability to photocopy.

In general, black chemical transfer inks are preferred; other colors are permitted only if the above standards are met. "Spot carbons" are NOT permitted (See Part B, Sec. 1.14, above, for standards for chemical transfer paper for Copy A.)

.04 The following requirements govern the private printing of employee copies of Forms W-2. All substitutes must be a form, 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 contain the note " This information is being furnished to the Internal Revenue Service. If you are required to file a tax return, 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:

1. 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/Railroad retirement compensation,

Box 4 - Social security tax withheld/Railroad retirement tax withheld,

Box 5 - Medicare wages and tips/Railroad retirement tips, and

Box 6 - Medicare tax withheld/Railroad retirement 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 may make the above modifications to Forms W-2 but only for substitute Forms W-2 furnished to employees and not for any Copy A forms to be filed with the SSA.

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

2. The block of core data (boxes 1 through 6) must be placed in the upper right of the form. Substitute employee copies of Form W-2, 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.

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

4. Other required boxes:

o Employer identification number (EIN),

o Employer's name, address, and ZIP code,

o Employee's social security number, and

o Employee's name, address, and ZIP code.

These items are required to be present on the form and must be in boxes similar to those on the IRS printed form. However, they may be placed in any location, other than the top or upper right. The lettering system used on the IRS printed form ("a" through "f") need not be used. The employer 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.

5. The Tax Year (1999) 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 form title on the lower left of the Form W-2. The use of 24 pt OCR-A font is recommended but not required.

6. If applicable, "Social security tips" MUST be shown separately from "Social security wages." A separate box is not required unless social security tips are to be reported. Boxes 1 and 2 on Copy B are required to be outlined in bold 2-point rule (see Exhibit E) or highlighted in some manner to distinguish these boxes.

7. If a box for "Advance EIC" (Advance Earned Income Credit) payment (box 9) is present, the box must be outlined in bold 2-point rule or highlighted in some manner to distinguish this box. However, if no amounts are paid for "Advance EIC", this box is not required and may be omitted by printers. Do not use box 9 for any other purpose than reporting Advance EIC payments.

8. If "Allocated tips" (box 8) are being reported for the individual employee (or class of employees that are being provided Forms W-2), it is recommended (but not required) that this box also be outlined in bold 2-point rule or highlighted on Copy B. However, if allocated tips are not being reported, this box may be omitted by printers.

9. If Form W-2 contains additional data concerning payroll deductions (e.g., saving bonds withholding, retirement withholding, or payroll savings), there should be a special highlighting of the areas pertaining to Federal income tax withheld; wages, tips, and other compensation; or Advance EIC payments that are related to those items.

10. Employers who are required to report or withhold state income tax information are required to include the following boxes on substitute Forms W-2:

     Box 16 - State and Employer's state identification number,

     Box 19 - Locality name

13. Other boxes on the IRS printed form (boxes 7 through 15) need not appear on substitute Forms W-2 provided to employees unless an employer has that item of information to report to an employee. For example, if an employee did not have social security tips (box 7), Allocated tips (box 8), or Advance EIC payment (box 9), the form could be printed without those boxes. However, if the employer had provided amounts for dependent care benefits, those amounts would be required to be reported separately and shown in a box labeled "Box 10, Dependent care benefits," as on the IRS printed form and the exhibits in this revenue procedure.

14. Employers may provide multiple entries in box 13, but each entry must use the same code as assigned by the IRS for that type of item. (See the Reference Guide for Box 13 Codes in the 1999 Instructions for Forms W-2 and W-3. For example, employers reporting elective deferrals to a section 401(k) plan must enter in box 13 "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. On Copy A, Form W- 2, do not enter more than three codes in this box. If more than three items need to be reported in box 13, use a separate Form W-2 to report the additional items (see Multiple forms in the 1999 Instructions for Forms W-2 and W-3.) However, employers may enter more than three codes in box 13 of Copies 1, 2, B, C, and D of Form W-2. Do not report in box 13 any items that are not listed as Codes A-T in the Form W-2 instructions. Do not report the same Federal tax data to the SSA on more than one Copy A, Form W-2.

15. 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 Service Employment and Reemployment Rights Act of 1994 (USERRA) for a prior year, you must enter prior year contributions separately. You must enter the code, the year, and the amount. For example, elective deferrals to a section 401(k) plan are reported in box 13 as follows: D 1997 2250.00, D 1998 1250.00. The 1999 contribution does not require a year designation, enter it as D 7000.00. 16. If you are a military employer and provide your employee with basic housing, subsistence allowances, and combat zone compensation, report the amount in box 13, Form W-2, using code Q.

17. Employers contributions to an employees' Medical Savings Account's (MSA), must be reported in box 13, Form W-2, using code R.

18. An employee elective contribution to a salary reduction SIMPLE retirement account must be included in box 13, Form W-2, using code S. However, if the amount is contributed to a SIMPLE retirement that is part of a section 401(k) arrangement, that amount must be reported in box 13, Form W-2, using code D.

19. Amounts paid or expenses incurred by an employer to or for an employee for qualified adoption expenses must be reported in box 13, Form W-2, using code T.

20. Form W-3 box 13 has been opened to allow third-party payers of sick pay to enter "Third-Party Sick Pay Recap". This will help identify and expedite processing of those forms.

21. 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.

22. If you are reporting prior year payments contributions under USERRA (see item 15 above), you may report box 14 make-up amounts for non-elective employer contributions, voluntary after-tax contributions, required employee contributions, and employer matching contributions. Report such amounts separately for each year.

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

1. All copies of Form W-2 must clearly show the form number, the form title, and the tax year prominently displayed 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.

2. If the substitute forms are not labeled as to the disposition of the copies, then written notification must be provided to each employee as specified below:

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

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

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

3. If the substitute forms are labeled, the forms must contain the applicable description: "Copy B, To Be Filed With Employee's Federal Tax Return," and "Copy C, for employee's records." It is recommended (but not required) that this be located on the lower left of Form W-2. The designation "Form W-2," is recommended (but not required) to be located on the lower left of Form W-2. "Department of the Treasury - Internal Revenue Service" is recommended (but not required) that this be located on the lower right of Form W-2.

4. 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 section 401(k) contributions.

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

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

SECTION 3. GENERAL RULES FOR FILING "PAPER SUBSTITUTES" FOR FORMS W-2 AND W-3

.01 Paper substitutes that conform totally to the specifications contained in this revenue procedure may be privately printed without the prior approval of the IRS. Please do not mail your paper Forms W- 2 or W-3 tax year submissions to the IRS address below. The address below is for correspondence, or questions relating to specifications in this publication. Penalties may be assessed for not complying with the form specifications set forth in this publication. SUBSTITUTE FORMS THAT DO NOT CONFORM TOTALLY TO THESE SPECIFICATIONS ARE NOT ACCEPTABLE. This applies to both paper substitutes that are filed with the SSA and those that are given to employees. Forms cannot be submitted to the IRS or the SSA for specific approval. However, if you are uncertain of any specification set forth herein and want that specification clarified, you may submit a letter citing the specification in question, your interpretation of that specification, and an example of how the form would appear if produced using your understanding of the specification. Any questions pertaining to Copies B, C, and 2 of Forms W-2 should be sent to:

     Internal Revenue Service

.02 Forms W-2 and W-3 are subject to annual review and possible change. Employers are cautioned against overstocking supplies of privately printed substitutes.

.03 Copies of the current year's IRS printed Forms W-2 and W-3 and the instructions for these forms may be obtained using electronic options on the Internet at http://www.irs.ustreas.gov, or from most IRS offices, or by calling 1-800-829-3676. The IRS provides only cut- sheet sets.

.04 Substitute Forms W-2 and W-3 transmitted to the SSA should contain only data that is required by the Form W-2 or Form W-3, the Forms W-2 and W-3 instructions, and this revenue procedure.

.05 Substitute Forms W-2, Copy A, and W-3 are machine imaged and scanned by the SSA, therefore, these forms must meet the same specifications as Forms W-2 and W-3 produced by the IRS. The vertical and horizontal spacing for all Federal payment and data boxes on Form W-2 must be in compliance with the specifications contained herein.

.06 The ballot boxes on Forms W-2, Copy A(box 15), must be point-1 boxes (See Exhibit A), and the "Void box" is point-14. The spacing on each side of the "Void box" is point-8 (See Exhibit A). The W-3 box b must be point-11 boxes (See Exhibit B). The spacing and box sizes have been corrected this year. Please insure you adhere to the dimensions provided in the exhibits. NOTE: If a box is marked, more than 50 percent of the applicable ballot box must be covered by an "X".

.07 Copy A of Forms W-2 and Form W-3 must have the form producer's EIN entered to the left of "Department of Treasury."

PART C. ADDITIONAL INSTRUCTIONS

SECTION 1. INSTRUCTIONS FOR FORMS PRINTERS

.01 Except as provided below, if magnetic media/electronic is not used for filing with the SSA, the substitute copies of Forms W-2 assembly should be arranged in the same order as the IRS printed Forms W-2. Copy A should be first, followed sequentially by perforated sets (Copies 1, B, C, 2, and D). The substitute form to be filed by the employer with the SSA must carry the designation "Copy A."

NOTE: Magnetic media/electronic filers do not submit Copy A of Form W-2 or Form W-3. TIB-4 specifications require Form 6559 transmittal for magnetic media filers of Form W-2 data.

1. Privately printed substitute forms are not required to contain a copy to be retained by employers (Copy D). However, employers must be prepared to verify or duplicate this information if it is requested by the IRS or the SSA. Paper filers that do not keep Copy D should be able to generate a facsimile of Copy A in case of loss.

2. Except as provided in the arrangement of the official assemblies, additional copies that may be prepared by employers shall not be placed ahead of the copy "For EMPLOYEE'S RECORDS," on Form W-2 (Copy C).

3. Instructions similar to those contained on the back of Copies B and C of the official form MUST be provided to each employee. These instructions may be printed on the back of the substitute Copies B and C or may be provided to employees on a separate statement. Do not print these instructions on the back of Copies 1 or 2 that is to be filed with the employee's state or local income tax return.

.02 All privately printed Forms W-3 and Forms W-2 (Copy A), must have the tax year, form number, and form title printed on the bottom face of each form using identical type to that of the official format. The tax year must be printed in non-reflective black ink using 24 pt OCR-A font (copy A), of Forms W-2, and Forms W-3. The form title, e.g., "Wage and Tax Statement" must be printed in red OCR-A drop-out ink on Form W-2, Copy A, and Form W-3. The form identifying control number of Forms W-2 and Form W-3, must be printed in non-reflective black ink, using OCRA-font, printed 10 characters per inch. The word "Form" on the W-2 and W-3 must be printed in red OCR-A drop-out ink.

.03 The substitute Form W-2, Copy B, which employees attach to their Federal income tax return, must be printed on at least 12-pound paper (basis 17 x 22-500) while the other copies furnished to employee's should be at least 9-pound paper (basis 17 x 22-500).

.04 Employee copies of Forms W-2 (Copies B, C, etc.), including those that are printed on a single sheet of paper, MUST be produced so as to be easily separated by the employee. Perforations between the individual copies that are printed on a single sheet of paper satisfy this requirement.

.05 The Form W-2, Copy A, and the OCR bond Form W-3 that are filed with the SSA must have no printing on the reverse side.

.06 Instructions similar to those provided as part of the official form must be provided as part of any substitute Form W-2 or W-3.

SECTION 2. INSTRUCTIONS FOR EMPLOYERS

.01 Only originals or ribbon copies of Copy A (Forms W-2) and Form W-3 may be filed with the SSA.

CARBON COPIES AND PHOTOCOPIES ARE NOT ACCEPTABLE.

.02 Employers should type or machine print entries on forms whenever possible and provide good quality data entries by using a high quality type face, inserting data in the middle of blocks that are well separated from other printing and guidelines, and taking any other measures that will guarantee clear, sharp images. THE PRINT CHARACTER SIZE MUST BE NO SMALLER THAN 12 CHARACTERS PER INCH. Omit dollar signs but include decimal points for all cents amounts. The employer must provide a machine scannable Form W-2, Copy A. The employer must refrain from printing any data in the top margin of the forms. UNLESS ABSOLUTELY NECESSARY, DO NOT PRINT ANYTHING IN THE CONTROL NUMBER BOX ON THE FORM W-2 OR W-3. The employer must also provide payee copies (Copies B, C, and 2) that are legible and capable of being photocopied (by the employee). When Forms W-2 or W- 3 are typed, black ink must be used with no script type, inverted font, italics or dual case alpha characters used.

.03 The Employer Identification Number (EIN) may be entered in the Employer's name and address box on Copy A of Forms W-2 (box c on the IRS printed Form W-2). If this is done, the EIN need not be entered in the box provided for the EIN (box b on the IRS printed Form W-2). The EIN must be entered in box e of the Form W-3. Note: The EIN entered on Form W-3 in box e must be the same EIN entered on Forms W-2 in box b, and on Forms 941, 943, CT-1, Schedule H (Form 1040), or any other forms filed with the IRS.

.04 The employer's name, address, and EIN may be preprinted.

.05 The optional employer's state number may be pre-printed in the employer's name, address, and ZIP code box. If this is done, the 'employer's state I.D. number' section in box 16 of Forms W-2 need not be completed as long as the applicable state taxing authority does not object. Please check with the appropriate state taxing authority before doing this.

.06 Generally, an agent that has an approved Form(s) 2678, Employer Appointment of Agent, should enter its name as the employer in box c of Form W-2, and file one Form W-2. However, if the agent is acting as an agent for two or more employers, or is an employer and is acting as an agent for another employer, and pays social security wages in excess of the wage base to an individual, special reporting for payments to that individual is needed. The agent should file separate Forms W-2 reflecting the wages paid by each employer. Box "c" of Forms W-2 should include the name of the agent, agent for (name of employer), and address of agent. Each Form W-2 should reflect the EIN of the agent in box b. In addition the employer's EIN should be shown in box h of Form W-3.

.07 The preparation and filing instructions for Forms W-2 and W- 3 are included in the 1999 Instructions for Forms W-2 and W-3.

.08 To avoid confusion and questions by employees, employers are encouraged to delete the following items from the employee copies of Forms W-2 that are provided to employees:

     1. Form identifying number (e.g., 22222),

SECTION 3. OFFICE OF MANAGEMENT AND BUDGET (OMB) REQUIREMENTS FOR SUBSTITUTE FORMS

.01 The Paperwork Reduction Act requires: (1) OMB approval of IRS tax forms, (2) that each form (all copies) show the OMB approval number and, when appropriate, the form's expiration date, and (3) that the form (or its instructions) state why the IRS is collecting the information, how we will use it and whether it must be given to us. The official IRS form (or instructions) will contain this information.

.02 As it applies to substitute IRS forms, this means:

1. All substitute forms (all copies) must show the OMB number as it appears on the official IRS printed form (see Exhibits A and B).

2. The OMB number must be in one of the following formats:

                   OMB No. 1545-0008 (preferred),

SECTION 4. FORMS and PUBLICATIONS

.01 Electronic access to IRS tax forms, instructions, publications, and other tax data is available through the following:

     Modem: IRIS at FedWorld (703)

.03 ACD-ROM containing over 2,000 tax forms, instructions, and publications may be purchased from the Government Printing Office (GPO), Superintendent of Documents. Current tax year materials, and tax year forms for each year beginning with 1991 and publications beginning with 1994, are included on the disc. Please be advised when ordering via CD-ROM, Copy A cannot be used to file with the SSA. Copy A must be in red dropout ink to be acceptable to the SSA. To order the CD-ROM, call Superintendent of Documents at (202) 512-1800 (select Option #1), or by computer through GPO's Internet Web Site (http;//www.access. gpo.gov/su docs).

.04 A list of the Social Security Administrations ESLO Coordinators is included in the Appendix.

SECTION 5. EFFECT ON OTHER REVENUE PROCEDURES

.01 Rev. Proc. 98-33, 1998-19, dated May 11, 1998 (Reprinted as Publication 1141, Revised 4-98), is superseded.

[Exhibits can be obtained from Tax Analysts' Access Service as Doc. 1999-18405 (16 pages.)]