IRS Updates Requirements For Substitute Tax Forms And Schedules.

Rev. Proc. 2003-73

                       TABLE OF CONTENTS

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

• IRS tax forms and their related schedules.

• Worksheets as they appear in instruction packages.

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

• Powers of Attorney.

• Over-the-counter estimated tax payment vouchers.

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

• W-2 and W-3 (see Publication 1141 for information on these forms).

• W-2c and W-3c (see Publication 1223 for information on these forms).

• 1096, 1098 series, 1099 series, 5498 series, and W-2G (see Publication 1179 for information on 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.

• Forms 5500, 5500-EZ, and associated schedules (see the Department of Labor web site (www.dol.gov) for information on these forms).

• Requests for information or documentation initiated by the IRS.

• Forms used internally by the IRS.

• State tax forms.

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

• General and Specific Instructions are not reviewed by Substitute Forms Program Unit.

      Form                                    Office and Address

For questions about Forms W-2 and W-3, refer to IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3. For Forms W-2c and W-3c, refer to IRS Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c. For Forms 1096, 1098, 1099, 5498, W-2G, and 1042-S refer to Internal Revenue Service Publication 1179, General Rules and Specifications Substitute Forms 1096, 1098, 1099, 5498, W-2G and 1042-S.

• The Substitute Forms Program office symbols have changed to W:CAR:MP:T:T:SP.

• Chapters 1 through 8 have been renamed Parts.

• Part 7, Section 7.1 Paper Substitutes for Form 1042-S has been deleted. This information can be found in Publication 1179.

• Part 7, Sections 7.1.1 through 7.1.5 have been revised to include requirements for Schedules K-1 with two-dimensional (2-D) bar-codes.

Exception: All jurat (perjury statements) must be reproduced verbatim.

Note: A supporting statement is not a tax form and does not take the place of an official form unless specifically permitted elsewhere in this procedure.

• The IRS presumes the changes are made in accordance with these procedures and will not be disruptive 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 IRS's 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, e-mail, or phone contact and may include the return of unacceptable forms for re-submission of acceptable forms.

There are methods of reproducing IRS printed tax forms suitable for use as substitutes 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, snap sets, and marginally punched, pin-fed forms as 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.

• 1040 family - 30;

• 940/940-EZ - 10;

• 941 - 01;

• 943 - 11;

• 945 - 16; and

• 2290 - 60.

• Form 1040 family - 0; and

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

You cannot adjust any of the graphics on Forms 1040, 1040A, and 1040EZ (except in those areas specified in Part 5 of this revenue procedure) without prior approval from the IRS Substitute Forms Unit.

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

www.irs.gov/bus_info/tax_pro/dftform.html

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. 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 IRS. 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 Part 1, Section 1.2 -- IRS Contacts) is desired, a sample of the proposed substitute form should be forwarded for consideration by letter to the Substitute Forms Unit at the address shown in Section 1.2.

• 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 attachments should be submitted separately from Forms 1120 and 1065 if 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 associated. Also, all pages of multi-page forms or returns should be submitted in the same package.

The Substitute Forms Unit is primarily concerned with the pre-filing quality review of the final forms, produced by whatever means, that are expected to be processed by IRS field offices. For these, you should submit forms without including any taxpayer information such as names, addresses, monetary amounts, etc.

When requesting approval, please include a checklist. Checklists expedite the approval process. The checklist may look like example Exhibit D displayed in the back of this procedure or may be one of your own design. Please include your fax number on the checklist.

• The requester has asked for a formal letter; or

• Significant corrections to the submitted forms are required.

Because changes are made to a form every year, each new filing season generally requires a new submission of a form. Very rarely is updating the preprinted year the only change made to a form.

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. It is the responsibility of each vendor who has been granted permission to use substitute forms to monitor and revise forms to mirror any revisions to official forms made by the Service. If there are any questions, please contact the Substitute Forms Unit.

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

• However, the new substitute form 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.

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

• An approved change is authorized only for the period from a prior tax year substitute form to a current tax year substitute form.

• Using the prescribed print paper, font size, legibility, state tax data deletion, etc.

• Informing all users of substitute forms of the legal requirements of the Paperwork Reduction Act Notice, which is generally found in the instructions for the official IRS forms.

The source code:

• Consists of three alpha characters.

• Should be printed at the bottom left margin area on the first page of every approved substitute form.

• Should not be used on optically scanned (OCR) 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 the IRS needs the information, how it will be used, and whether or not the information is required to be furnished.

• All substitute forms must contain in the upper right corner the OMB number that is on the official form.

• The required format is: OMB No. XXXX-XXXX (Preferred) or OMB # XXXX-XXXX (Acceptable).

• If you provide your users or customers with the official IRS instructions, each form must retain either the Paperwork Reduction Act Notice (or Disclosure, Privacy Act, and 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).

• This notice reads, in part, "We ask for the information on this form 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 . . ."

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 separated with an asterisk.

• The actual number may be printed without labeling it the "Attachment Sequence Number."

         IF the form is . . .          THEN the sequence is . . .

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 order, processing may be delayed.

• 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).

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.

Exception: The words "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 Notice.

• A 1/2-inch to 1/4-inch margin must be maintained across the top, bottom, and both sides of all substitute forms.

• The marginal, perforated strips containing the pin-fed holes must be removed from all forms prior to filing with the IRS.

• With the exception of the actual tax 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.

• Printing is never allowed in the top right margin of the tax form (i.e., Forms 1040, 1040A, 1040EZ, 1120, 940, 941, etc.). The Service uses this area to imprint a Document Locator Number for each return. There are no exceptions to this requirement.

The same logic may be applied to any IRS form that is normally reproducible as a substitute form, with the exception of the tax return forms as discussed elsewhere. These exhibits may be from a prior year and are not to be used as current substitute forms.

• 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.

• 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

   

• Revenue Procedure 94-79, IRS Publication 1355, Requirements and Conditions for the Reproduction, Private Design, and Printing of Substitute Forms 1040-ES.

• Revenue Procedure 2002-53, IRS Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.

• Revenue Procedure 2003-28, IRS Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W-2G and 1042-S.

• Revenue Procedure 2001-40, IRS Publication 1187, Specifications for Filing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding Electronically or Magnetically.

• Revenue Procedure 2002-34, IRS Publication 1220, Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically or Magnetically.

• Revenue Procedure 2003-31, IRS Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c.

• 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.

• Pub. 1179, the revenue procedure on paper substitute information returns (Forms 1096, 1098, 1099, 5498, W-2G and 1042-S).

• Pub. 1220, the revenue procedure on electronic or magnetic 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, Magnetically/Electronically.

• Pub. 1245, electronic and magnetic reporting for Forms W-4.

• Pub. 1345, Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns. (This is an annual publication; tax year is subject to change).

• Pub. 1345-A, Filing Season Supplement For Authorized IRS e-file Providers. This publication, printed in the late fall, supplements Publication 1345.

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

      IF you live in the . ..       THEN mail your order to . . .

• Anticipated print dates of annual returns,

• Anticipated print dates of quarterly returns, and

• Last revision dates for continuous use only forms.

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 versions of these programs. All products are presented in Adobe's Portable Document Format (PDF). In addition, tax publications are provided in the Hyper Text Markup Language (HTML).

The cost of the CD if purchased via the Internet at http://www.irs.gov/cdorders from NTIS, is $22 (with no handling fee).

If purchased using the following methods, the cost for each CD is $22 (plus a $5 handling fee). These methods are:

• 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

   

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

• Substitute 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.

• Various computer-graphic print media such as laser printing, inkjet printing, etc., may be used to produce the substitute forms.

• The substitute form must be the same number of pages and contain the same line text as the official form.

• All substitute forms must be submitted for approval prior to their original use. You do not need approval for a substitute form if its only change is the preprinted year and you had received a prior year approval letter.

• Computer-generated tax forms (e.g., Form 1040, etc.) on lined or color barred paper.

• Tax forms that differ from the official IRS forms in a manner that makes them non-standard or that we are unable to process them.

• 1st name line (35 characters maximum).

• 2nd name line (35 characters maximum).

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

• City, state (25 characters maximum), one blank character, & ZIP code.

• 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 form instructions.

• When several amounts are summed together, the total should be rounded off after 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) 0,000,000.00

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

• If your computer-generated forms appear exactly like the exhibits, no prior authorization is needed.

• You may computer-generate forms not shown here, but you must design them by following the manner and style of those in the exhibits section. Take care to observe other requirements and conditions in this revenue procedure. The IRS encourages the submission of all proposed forms covered by this revenue procedure.

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.)

      Example:

For instance, Schedule E can be printed on both sides of the paper because the official form is multi-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. The back page may be left blank if the official form contains only the instructions.

• The Schedule K-1 must contain the name, address, and SSN or EIN of both the entity (estate, trust, partnership, or S corporation) and the recipient (beneficiary, partner, or shareholder).

• The Schedule K-1 must contain the tax year, the OMB number, the schedule number (K-1), 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 Schedule K-1 must contain all the items required for use by the recipient.

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

• Each recipient's information must be on a separate sheet of paper. Therefore, all continuously-printed substitutes must be separated, by recipient, before filing with the IRS.

• The amount of each recipient's share of each line item must be shown. Furnishing a total amount 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.

• State or local tax-related information may not be included on the Schedules K-1 filed with the IRS.

• The entity may have to pay a penalty if substitute Schedules K-1 are filed that do not conform to the above specifications. In addition, the IRS may consider the Schedules K-1 as not processable and return Forms 1041, 1065, 1065-B, or 1120S to the entity to be filed correctly.

• The Schedule K-1 must contain the name, address, and SSN or EIN of both the entity and recipient.

• The Schedule K-1 must contain the tax year, the OMB number, the schedule number (K-1), 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.

• All applicable amounts and information required to be reported must be titled and numbered in the same manner as shown on the official IRS schedule. Line numbers are to be shown in the same order as those on the official schedule.

• The Schedule K-1 must contain all items required for use by the recipient, but line items that are not required for the particular recipient may be omitted. If line items are omitted or skipped, the remaining line items must be labeled in the same manner and shown in the same order as they are on the official IRS schedule. The instructions to the schedule must clearly indicate that the number and order of the items relate to the official IRS schedule.

• The amount of each recipient's share of each line item must be shown. Furnishing a total amount 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.

• Instructions to the recipient that are substantially similar to those on the official IRS schedule must be provided to aid in the proper reporting of the items on the recipient's income tax return. Where items have been omitted because they are not required for use by a recipient, the related instructions may also be omitted.

• The quality of the ink or other material used to generate recipients' schedules must produce clearly legible documents. In general, black chemical transfer inks are preferred.

• In order to assure uniformity of substitute Schedules K-1, the paper size must fall within the following dimensions:

• • Minimum dimensions: 8.5" x 3.67"

  • Maximum dimensions: 8.5" x 11" (The international standard (A4) of 8.27" x 11.69" may be substituted for the maximum dimensions.)

• The paper weight, paper color, font type, font size, font color, and page layout must be such that the average recipient can easily decipher the information on each page.

• Entity logos are permitted on substitute Schedules K-1 provided the placement of the logos does not interfere with the purpose of the schedules.

• State or local tax-related information may be included on a substitute Schedule K-1. All non-tax-related information should be separated from the tax information on the substitute schedule to avoid confusion for the recipient.

• The legend "Important Tax Return Document Enclosed" must appear in a bold and conspicuous manner on the outside of the envelope that contains the substitute recipient copy of Schedule K-1.

• The entity may have to pay a penalty if a substitute Schedule K-1 furnished to any recipient does not conform to the specifications of this revenue procedure.

Note: If software vendors do not want to produce bar-coded Schedules K-1, they may produce the official IRS Schedules K-1 without leaving a space for bar-codes and without using the expedited process for approving bar-coded K-1's and their parent returns as outlined in Section 7.1.5.

In addition to the above requirements, the bar-coded Schedules K-1 must meet the following specifications.

• The bar code should print in the space labeled "For Official Use Only" in the upper right corner of the schedule. The entire bar code must print within the "For Official Use Only" box surrounded by a white space of at least 1/4-inch.

• Bar codes will print in PDF 417 format.

• Although substitute Schedules K-1 generally allow omitting unused lines, the bar codes must always be in the specified format with every field represented by at least a field delimiter (carriage return). Leaving out a field in a bar code will cause every subsequent field to be misread.

• The IRS will release the final Schedule K-1 bar-code specifications in a news release or in the Internal Revenue Bulletin. The exact release or bulletin number will be determined after this revenue procedure is published.

• The IRS will publish a set of test documents (based on e-File PATS) that will be used to test the ability of tax preparation software to create bar codes in the correct format.

• Software developers will submit two identical copies of the test documents -- one to the IRS and one to a contracted testing vendor.

• The IRS will use one set to ensure the printed schedules comply with standard substitute forms specifications.

• • If the printed forms fail to meet the substitute form criteria, the IRS will inform the software developer of the reason for non-compliance.

  • The software developer must resubmit the Schedule(s) K-1 until they pass the substitute forms criteria.

• The testing vendor will review the bar codes to ensure they meet the published bar-code specifications.

• • If the bar code(s) does not meet published specifications, the testing vendor will contact the software developer directly informing them of the reason for noncompliance.

  • Software developers must submit new bar-coded schedules until they pass the bar-code test.

  • When the bar code passes, the testing vendor will inform the IRS that the developer has passed the bar-code test and the IRS will issue an overall approval for both the substitute form and the bar-code.

• After receiving this consolidated response, the software vendor is free to release software for tax preparation as long as any subsequent revisions to the schedules do not change the fields.

• The mailing address for the testing vendor will be supplied in the news release or Internal Revenue Bulletin as mentioned above. Separate mailings to the IRS and the vendor will reduce testing time.

• Mail the parent returns (Forms 1065, 1120S, 1041) and associated bar-coded Schedule(s) K-1 to the address below in a package separate from all other approval requests.

• Internal Revenue Service

   

  Attn: Bar-Coded K-1

   

  W:CAR:MP:T:T:SP

   

  1111 Constitution Avenue, NW

   

  Room 6411

   

  Washington, D.C. 20224

   

• While the IRS can expedite bar-coded Schedules K-1 and their associated parent returns, it cannot expedite the approval of non-associated tax returns.

• Mail one copy of the parent form(s) and Schedule(s) K-1 to the IRS and a copy of the bar-coded Schedule(s) K-1 only to the testing vendor.

• Include multiple e-mail and phone contact points in the packages.

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

           Service Center              ZIP Code

            ZIP+FOUR                   Package

• 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.

• 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.

• 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.

• The size of the page must be the same as the official form (81/2" x 11").

• The acceptable type is Helvetica.

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

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

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

• The preprinted parentheses 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 completely filled in. 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, prepositions, 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 (e.g., "Attach this schedule to Form 1120," "See instructions", etc.) may be omitted from the form.

Note: For business returns, prospective participants must submit a Form 9041, Application for Electronic/Magnetic Media Filing of Business Returns.

Note: Use of unapproved forms could result in suspension of the participant from the electronic filing program.