Rp 96-60

the qualified higher education expense
exclusion for tax years beginning in
1997.
.07 1988 Base Year Adjustments. The
CPI for 1996 is 155.2416666667 and the
CPI for 1988 is 116.6166666667. This
results in an inflation adjustment factor
of 1.3312133772. This factor applies to
the personal exemption for tax years
beginning in 1997.
.08 1987 Base Year Adjustments. The
CPI for 1996 is 155.2416666667 and the
CPI for 1987 is 111.9833333333. This
results in an inflation adjustment factor
of 1.3862926031. This factor applies to
the ‘‘kiddie tax’’ (including the election
to report on the parent’s return) and the
limitation on the alternative minimum
tax exemption for ‘‘kiddie tax’’ reported
on a parent’s return, the standard deduction amounts, and the insubstantial benefit limitations for charitable contributions for tax years beginning in 1997.
SECTION 6. EFFECT ON OTHER
DOCUMENTS
.01 Rev. Proc. 95–53. Rev. Proc. 95–
53, 1995–2 C.B. 445, is amplified and
modified as follows:
(1) Kiddie Tax. For tax years beginning in 1996, the amount in effect
under § 1(g)(4)(A)(ii)(I) for purposes of
the election to report on a parent’s
return is the same as that provided in
section 3.02(b) of this revenue procedure for tax years beginning in 1997.
(2) Alternative Minimum Tax Exemption for ‘‘Kiddie Tax’’ Reported on
Parent’s Return. For tax years beginning
in 1996, the amount in effect under
§ 63(c)(5)(A) is the same as that provided in section 3.04 of this revenue
procedure for tax years beginning in
1997.
(3) Income from United States Savings Bonds for Taxpayers Who Pay
Qualified Higher Education Expenses.
For tax years beginning in 1996, the
amounts of modified adjusted gross income above which the § 135 exclusion
begins to phase out and the amounts at
which the phaseout is complete, are as
follows:
Threshold
Completed
Phaseout
Phaseout
Filing Status
Amount
Amount
Code § 1(a)
$74,200
$104,200
Others
$49,450
$ 64,450
(4) Treatment of Dues Paid to Agricultural or Horticultural Organizations. For tax years beginning in 1996,
no portion of annual dues required by

an agricultural or horticultural organization described in § 501(c)(5) is treated
as derived from an unrelated trade or
business by reason of any benefits or
privileges to which members are entitled
if the amount of required annual dues
from each member does not exceed
$103.
.02 Rev. Proc. 94–72. Rev. Proc. 94–
72, 1994–2 C.B. 811, is modified as
follows: For tax years beginning in
1995, the amounts of modified adjusted
gross income above which the § 135
exclusion begins to phase out and the
amounts at which the phaseout is complete, are as follows:
Threshold
Completed
Phaseout
Phaseout
Filing Status
Amount
Amount
Code § 1(a)
Others

$72,150
$48,100

$102,150
$ 63,100

.03 Rev. Proc. 93–49. Rev. Proc. 93–
49, 1993–2 C.B. 581, is modified as
follows: For tax years beginning in
1994, the amounts of modified adjusted
gross income above which the § 135
exclusion begins to phase out and the
amounts at which the phaseout is complete, are as follows:
Threshold
Completed
Phaseout
Phaseout
Filing Status
Amount
Amount
Code § 1(a)
Others

$70,350
$46,900

$100,350
$ 61,900

.04 Rev. Proc. 92–102. Rev. Proc.
92–102, 1992–2 C.B. 579, is modified
as follows: For tax years beginning in
1993, the amounts of modified adjusted
gross income above which the § 135
exclusion begins to phase out and the
amounts at which the phaseout is complete, are as follows:

Filing Status

Threshold
Phaseout
Amount

Completed
Phaseout
Amount

Code § 1(a)
Others

$68,250
$45,500

$98,250
$60,500

SECTION 7. EFFECTIVE DATE
.01 General Rule. Except as provided
in sections 6 and 7.02, this revenue
procedure applies to tax years beginning
in 1997.
.02 Calendar Year Rule. This revenue
procedure applies to transactions or
events occurring in calendar year 1997
for purposes of section 3.12 (the expatriation tax), section 3.13 (the excise tax

24

on luxury automobiles), and section 3.16
(the hourly limit on attorney fee
awards).
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is John Moran of the Office
of Assistant Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, contact Mr. Moran on (202) 622–4940 (not
a toll-free call).
The economist responsible for development of the factors set forth in this
revenue procedure is David Ludlum of
the Research Division of the Internal
Revenue Service. For further information regarding these factors, contact Mr.
Ludlum on (202) 874–0026 (not a tollfree call).
26 CFR 601.602: Forms and instructions.
(Also Part I, §§ 6011, 6051, 6071; 31.6011(a)–4,
31.6051–1, 31.6071(a)–1.

Rev. Proc. 96–60
SECTION 1. PURPOSE
.01 This revenue procedure modifies
and supersedes Rev. Proc. 84–77,
1984–2 C.B. 753. This revenue procedure explains both the standard procedure and an alternate procedure for
preparing and filing Form W–2, Wage
and Tax Statement; Form W–3, Transmittal of Income and Tax Statements;
Form 941, Employer’s Quarterly Federal
Tax Return; Form W–4, Employee’s
Withholding Allowance Certificate; and
Form W–5, Earned Income Credit Advance Payment Certificate in certain
acquisitions. This revenue procedure applies when an employer (successor) acquires substantially all the property (1)
used in a trade or business of another
employer (predecessor), or (2) used in a
separate unit of a trade or business of a
predecessor, and in connection with, or
immediately after the acquisition (but
during the same calendar year) the successor employs individuals who immediately prior to the acquisition were employed in the trade or business of the
predecessor. (The term ‘‘trade or business,’’ for purposes of this revenue
procedure, may include the activity of a
nonprofit organization or of a federal or
state agency.)
.02 This revenue procedure does not
apply to the situation described in Rev.
Rul. 62–60, 1962–1 C.B. 186, which
relates to the absorption of one corpora-

tion by another in a statutory merger or
consolidation, where the resultant entity
is regarded as the same taxpayer and the
same employer as the absorbed corporation.
SECTION 2. CHANGES
.01 Section 4.01, which provided the
time frame for a predecessor to furnish
Forms W–2 under the standard procedure, has been modified to explain that
the predecessor must furnish Forms
W–2 to its former employees, and file
Forms W–2 and W–3 with the Social
Security Administration (SSA) on an
expedited basis, if the predecessor has
ceased to pay wages and is required to
file a final Form 941.
.02 Section 5.01, which provided the
alternate procedure for furnishing Forms
W–2, has been modified to provide that
the expedited furnishing and filing requirements do not apply to the successor.
.03 Section 5.02, which provided the
alternate procedure for the predecessor
to submit Form 941, has been modified
to provide that if the predecessor is
required to file a final Form 941, the
predecessor must both furnish Forms
W–2 to its employees who are not
acquired by the successor and file
Forms W–2 and W–3 with SSA on an
expedited basis.
.04 Section 5.06 has been added to
provide procedures for transferring electronically filed Forms W–4 from the
predecessor to the successor.
SECTION 3. BACKGROUND
.01 Section 6011(a) of the Internal
Revenue Code provides that any person
made liable for any tax, or for the
collection of the tax, must make a return
or statement according to the forms or
regulations prescribed by the Secretary.
.02 Section 31.6011(a)–1 of the Employment Tax Regulations prescribes
Form 941 as the form to use for persons
required to make a quarterly return
under the Federal Insurance Contributions Act.
.03 Section 31.6011(a)–4 prescribes
Form 941 as the form to use for persons
required to make a quarterly return of
income tax withheld from wages.
.04 Section 31.6011(a)–6 provides
that an employer who ceases to pay
wages reportable on Form 941 shall file
a final Form 941.
.05 Section 31.6071(a)–1 provides
that the Form 941 generally must be
filed on or before the last day of the

first calendar month following the quarter for which it is made.
.06 Section 6051(a) provides that (1)
every person required to deduct and
withhold income tax, or who would
have been required to deduct and withhold if the employee had claimed no
more than 1 withholding exemption, or
(2) every employer engaged in a trade
or business who pays remuneration for
services performed by an employee,
must furnish a written statement to an
employee regarding the remuneration
paid to the employee during the calendar year. Section 31.6051–1(a) provides
that the statement is Form W–2. Form
W–2 must be furnished to the employee
on or before January 31 of the following
calendar year. If the employee’s employment is terminated before the close of
the calendar year, however, and the
employee requests the Form W–2 in
writing, the Form W–2 must be furnished to the employee within 30 days
of the later of the written request from
the employee or the last payment of
wages, provided such 30-day period
ends before January 31.
.07 Section 31.6051–1(d)(1)(ii) provides that, effective January 1, 1997, an
employer who is required to file a final
Form 941 must furnish Forms W–2 to
its employees on or before the date
required for filing the final Form 941. If
the final Form 941 is a monthly return
as described in § 31.6011(a)–5, the
Forms W–2 must be furnished on or
before the last day of the month in
which the final Form 941 is required to
be filed.
.08 Section 31.6071(a)–1(a)(3)(ii)
provides that, effective January 1, 1997,
an employer who is required to file a
final Form 941 must file Forms W–2
and W–3 on or before the last day of
the second calendar month following the
period for which the final Form 941 is
filed.
.09 Section 31.3402(f)(5)–1(c) provides that an employer may establish a
system for its employees to file Form
W–4 electronically.
SECTION 4. STANDARD
PROCEDURE
.01 In general. Under the standard
procedure, the predecessor performs all
the reporting duties for the wages and
other compensation it pays. These duties
include the filing of quarterly Forms
941 and the furnishing and filing of
Forms W–2 and W–3. In connection
with the successor’s acquisition of prop-

25

erty and hiring of employees from the
predecessor, as described in section
1.01, the predecessor may cease to pay
any wages required to be reported on
Form 941 (for example, the predecessor
may go out of business). In that case,
the predecessor must file the Form 941
for the quarter of the acquisition as a
final Form 941. If the predecessor does
not cease to pay any wages required to
be reported on Form 941, (for example,
the predecessor remains in business) a
final Form 941 is not required. Instead,
the predecessor would file its quarterly
Form 941 for the quarter of the acquisition. The successor, under the standard
procedure, performs all the reporting
duties for the wages and other compensation it pays.
.02 Forms W–2.
(1) In general. If, under the circumstances described in section 1.01,
the predecessor is not required to file a
final Form 941, the predecessor and
successor both must furnish Forms W–2
to their respective employees no later
than January 31 of the following calendar year. If an employee requests the
Form W–2 earlier, however, the Form
W–2 must be furnished within 30 days
of the written request, or within 30 days
after the final payment of wages to the
employee, whichever is later, provided
the 30 day period ends before January
31. The predecessor and successor must
file Forms W–2 and W–3 for their
respective employees with SSA no later
than the last day of February of the
following calendar year.
(2) Expedited Forms W–2. If, under the circumstances described in section 1.01, the predecessor is required to
file a final Form 941, the predecessor
must furnish Forms W–2 to its former
employees on an expedited basis. The
Forms W–2 are due on or before the
date required for filing the final Form
941. If the predecessor is required to file
Form 941 on a monthly basis, the Forms
W–2 are due on or before the last day
of the month in which the final Form
941 is required to be filed. The predecessor must also file Forms W–2 and
W–3 with SSA on an expedited basis.
The Forms W–2 and W–3 are due on or
before the last day of the second calendar month following the period for
which the final Form 941 is required to
be filed.
.03 Forms W–4. The predecessor
must keep on file the Forms W–4
provided by its former employees. The
transferred employees must provide the
successor with new Forms W–4 as the

successor now becomes responsible for
deducting and withholding tax from
wages paid to the transferred employees.
.04 Forms W–5. The predecessor
must also keep on file the Forms W–5
provided by its former employees. The
transferred employees must provide the
successor with new Forms W–5 for the
current year.
SEC. 5. ALTERNATE PROCEDURE
.01 In general. If, in connection with
the circumstances described in section
1.01, the predecessor and successor so
agree, the predecessor will be relieved
from furnishing Forms W–2 to any
employees who will be employed in the
same calendar year by the successor
(acquired employees). In such circumstances the acquired employees presumably will be paid wages by the successor in the same calendar year and the
Forms W–2 furnished to the acquired
employees by the successor for the year
will include wages paid, and taxes withheld, by both the predecessor and the
successor. The predecessor will also be
relieved from filing Forms W–2 with
SSA for the acquired employees. The
predecessor’s entire Form W–2 reporting
obligations for the acquired employees
will be assumed by the successor. The
predecessor remains responsible for the
Form W–2 reporting obligations for
those employees who are not employed
by the successor.
.02 Forms W–2.
(1) In general. If, under the circumstances described in section 1.01,
the predecessor is not required to file a
final Form 941, the predecessor must
furnish Forms W–2 to employees who
are not employed by the successor by
January 31 of the following calendar
year. Forms W–2 and W–3 filed by the
predecessor with SSA for employees
who are not employed by the successor
are due the last day of February of the
following calendar year. If the successor
assumes the predecessor’s obligation to
furnish Forms W–2 to the acquired
employees for a calendar year, the successor must assume the predecessor’s
entire Form W–2 reporting obligation.
Thus, Forms W–2 furnished by the
successor to the acquired employees
must include the wages paid and the
taxes withheld by both the predecessor
and the successor. The successor must
include on the Forms W–2 any amount
reportable by the predecessor, including
‘‘Other compensation’’ or uncollected
employee tax on tips, if applicable.

Forms W–2 must be furnished by the
successor to its employees (both the
acquired employees and any other employees of the successor) by January 31
of the following calendar year. Forms
W–2 and W–3 must be filed by the
successor with SSA by the last day of
February of the following calendar year.
(2) Expedited Forms W–2. If, under the circumstances described in section 1.01, the predecessor is required to
file a final Form 941, the predecessor
must furnish Forms W–2 to the employees who are not employed by the successor on an expedited basis. Forms
W–2 and W–3 filed with SSA by the
predecessor must also be filed on an
expedited basis. The successor is not
required to either furnish Forms W–2 to
the acquired employees or to file the
Forms W–2 and W–3 with SSA on an
expedited basis.
.03 Form 941 filed by predecessor.
To the extent the wages paid and the
taxes withheld by the predecessor are to
be included in the Forms W–2 furnished
to the acquired employees by the successor, there will be a difference between the amounts shown on the predecessor’s Form W–3 and its Form 941.
When the predecessor files its Form
941, it should attach a statement explaining the discrepancy and include the
name, address, and identification number of the successor and a reference to
this revenue procedure. This Form 941
cannot be filed electronically. See Rev.
Proc. 96–19, 1996–4 I.R.B. 80, section
3.03.
.04 Form 941 filed by successor.
There will be a corresponding difference
between the amounts shown on the
successor’s Form W–3 and its Form
941. When the successor files its Form
941, it should also attach a statement to
its Form 941 explaining the discrepancy,
and include the name, address, and
identification number of the predecessor
and a reference to this revenue procedure. This Form 941 cannot be filed
electronically. See Rev. Proc. 96–19,
1996–4 I.R.B. 80, section 3.03. For
instructions relating to annual wage
limitations, see § 31.3121(a)(1)–1.
.05 Forms W–4. The predecessor
must transfer to the successor all current
Forms W–4 that were provided to the
predecessor by the acquired employees.
The successor must keep the transferred
Forms W–4 on file and deduct and
withhold from the wages it pays to the
acquired employees according to the
information supplied on those forms
until an employee submits a revised

26

form. The successor employer must submit to the Service, in accordance with
§ 31.3402(f)(2)–1(g), copies of the
Forms W–4 received by the predecessor
during the current calendar quarter and
the preceding calendar quarter.
.06 Transfer of Forms W–4 furnished
electronically. If the predecessor and
successor both maintain an electronic
system for use by employees in filing
Forms W–4, and the systems are compatible, the predecessor may electronically transfer the Forms W–4 of the
acquired employees to the successor.
The successor may also choose to acquire and maintain the predecessor’s
system. If these options do not apply,
the transferred employees must provide
the successor with a new Form W–4,
either electronically or on paper, as
prescribed by the successor.
.07 Forms W–5. The predecessor
must transfer to the successor all Forms
W–5 for the current year that were
provided to the predecessor by the acquired employees.
SECTION 6. EFFECT ON OTHER
REVENUE PROCEDURES
Rev. Proc. 84–77 is modified and
superseded.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective
January 1, 1997.
SECTION 8. PAPERWORK
REDUCTION ACT
The collections of information contained in this revenue procedure have
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control
number 1545–1510.
An agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information displays a valid control number.
The collections of information in this
revenue procedure are in sections 5.03
and 5.04. This information is required to
explain the discrepancy between the
amounts reported on Forms 941 and
W–3 filed by both the predecessor and
successor who use the Alternate Procedure. This information will be used to
assist the IRS in reconciling Forms 941
and W–3. The collections of information
are required to use the Alternate Procedure. The likely respondents are business or other for-profit institutions.

The estimated total annual reporting
burden is 110,700 hours.
The estimated annual burden per respondent is 12 minutes. The estimated
number of respondents is 553,500.
The estimated annual frequency of
responses is on occasion.
Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal revenue law. Generally tax returns
and tax return information are confidential, as required by 26 U.S.C. 6103.
SECTION 9. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Jean M. Casey of the Office of the Associate Chief Counsel
(Employee Benefits and Exempt Organizations). For further information regarding this revenue procedure, contact Ms.
Casey on (202) 622–6040 (not a tollfree call).
26 CFR 601.602: Tax forms and instructions.
(Also Part I, Sections 6012, 6061; 1.6012–5,
1.6061–1.)

Rev. Proc. 96–61
CONTENTS
SECTION 1 PURPOSE
SECTION 2 BACKGROUND AND
CHANGES
SECTION 3 ELECTRONIC FILING
PARTICIPANTS—DEFINITIONS
SECTION 4 ACCEPTANCE IN THE
ELECTRONIC FILING PROGRAM
SECTION 5 RESPONSIBILITIES OF
AN ELECTRONIC FILER
SECTION 6 PENALTIES
SECTION 7 FORM 8453, U.S. INDIVIDUAL INCOME TAX DECLARATION FOR ELECTRONIC FILING
SECTION 8 INFORMATION AN
ELECTRONIC FILER MUST PROVIDE TO THE TAXPAYER
SECTION 9 DIRECT DEPOSIT OF
REFUNDS
SECTION 10 REFUND ANTICIPATION LOANS
SECTION 11 BALANCE DUE RETURNS
SECTION 12 ADVERTISING STANDARDS FOR ELECTRONIC FILERS AND FINANCIAL INSTITUTIONS
SECTION 13 MONITORING AND
SUSPENSION OF AN ELECTRONIC FILER

SECTION 14 ADMINISTRATIVE REVIEW PROCESS FOR DENIAL OF
PARTICIPATION IN THE ELECTRONIC FILING PROGRAM
SECTION 15 ADMINISTRATIVE REVIEW PROCESS FOR SUSPENSION FROM THE ELECTRONIC
FILING PROGRAM
SECTION 16 VITA AND TCE SPONSORED ELECTRONIC FILING
SECTION 17 EMPLOYER SPONSORED ELECTRONIC FILING
SECTION 18 EFFECT ON OTHER
DOCUMENTS
SECTION 19 EFFECTIVE DATE
SECTION 20 INTERNAL REVENUE
SERVICE OFFICE CONTACT
SECTION 21 PAPERWORK REDUCTION ACT
SECTION 1. PURPOSE
This revenue procedure informs those
who participate in the 1997 Electronic
Filing Program for Form 1040 and Form
1040A, U.S. Individual Income Tax Return, and Form 1040EZ, Income Tax
Return for Single and Joint Filers With
No Dependents, of their obligations to
the Internal Revenue Service, taxpayers,
and other participants. This revenue procedure updates Rev. Proc. 95–49,
1995–2 C.B. 419.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 1.6012–5 of the Income
Tax Regulations provides that the Commissioner may authorize the use, at the
option of a person required to make a
return, of a composite return in lieu of
any form specified in 26 CFR Part 1
(Income Tax), subject to the conditions,
limitations, and special rules governing
the preparation, execution, filing, and
correction thereof as the Commissioner
may deem appropriate.
.02 For purposes of this revenue procedure, an electronically filed Form
1040, Form 1040A, or Form 1040EZ is
a composite return consisting of electronically transmitted data and certain
paper documents. The nonelectronic portion of the return consists of Form 8453,
U.S. Individual Income Tax Declaration
for Electronic Filing, and other paper
documents that cannot be electronically
transmitted. Form 8453 must be received by the Service before any electronically filed return is complete (see
section 5.08 of this revenue procedure).
An electronically filed return must contain the same information that a return
filed completely on paper contains. See

27

section 7 of this revenue procedure for
procedures for completing Form 8453.
.03 The Service will periodically issue a publication that lists the forms and
schedules associated with a Form 1040
that can be electronically transmitted.
.04 A Form 1040, a Form 1040A, or
a Form 1040EZ cannot be electronically
filed after October 15, 1997, notwithstanding the fact that the taxpayer has
been granted an extension to file a
return beyond that date.
.05 An amended tax return cannot be
electronically filed. A taxpayer must file
an amended tax return on paper in
accordance with the instructions for
Form 1040X, Amended U.S. Individual
Income Tax Return.
.06 A tax return that has a foreign
address for the taxpayer cannot be electronically filed. Army/Air Force (APO)
and Fleet (FPO) post offices are not
considered foreign addresses.
.07 A tax return for a decedent cannot be electronically filed. The decedent’s
spouse or personal representative must
file a paper tax return for the decedent.
.08 This revenue procedure updates
Rev. Proc. 95–49, which applied to the
Electronic Filing Program for the 1996
filing season. The updates include
changes in the Electronic Filing Program for the 1997 filing season, clarifications of prior Electronic Filing Program statements, and additional guidance derived from other Service documents that relate to the Electronic Filing
Program. Some of the updates are:
(1) in certain circumstances, a letter may be submitted in lieu of a revised
Form 8633 (section 4.04);
(2) the application period to submit
a new application for an applicant that
purchases an Electronic Filer on or after
November 1, 1996, is 30 days after the
date of the purchase (section 4.05(2));
(3) the time period to submit a
revised Form 8633 is extended to 30
days (section 4.06);
(4) a Principal for a firm or organization is defined (section 4.10);
(5) certain Responsible Officials
may be listed on a maximum of ten or
twenty Forms 8633 (sections 4.12);
(6) an Electronic Filer’s foreign location no longer has to have an APO or
FPO address and additional information
is required on Form 8633 for a foreign
location (section 4.14);
(7) a nonparticipating ERO may be
dropped from the Electronic Filing Program (section 4.16);
(8) a fee for the electronic transmission of a tax return may not be