Internal Revenue Bulletin 2010-42 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 201
0-42
October 18, 2010
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
REG–153340–09, page 469.
Proposed regulations under section 6302 of the Code relate to
Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT)
and provide rules requiring depositors to use EFT for all FTDs
and eliminate rules regarding FTD coupons.
Rev. Proc. 2010–36, page 439.
This procedure provides a safe harbor that treats certain dam-
age resulting from corrosive drywall as a casualty loss and pro-
vides a formula for determining the amount of the loss. This
procedure applies to any individual who pays to repair damage
to his or her personal residence or household appliances that
results from corrosive drywall.
EXEMPT ORGANIZATIONS
REG–153340–09, page 469.
Proposed regulations under section 6302 of the Code relate to
Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT)
and provide rules requiring depositors to use EFT for all FTDs
and eliminate rules regarding FTD coupons.
Announcement 2010–79, page 475.
The IRS has revoked its determination that the Coach Ken
Carter Foundation of Richmond, CA; and First Step, Inc., of
Manahawkin, NJ, qualify as organizations described in sections
501(c)(3) and 170(c)(2) of the Code.
EMPLOYMENT TAX
REG–153340–09, page 469.
Proposed regulations under section 6302 of the Code relate to
Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT)
and provide rules requiring depositors to use EFT for all FTDs
and eliminate rules regarding FTD coupons.
SELF-EMPLOYMENT TAX
REG–153340–09, page 469.
Proposed regulations under section 6302 of the Code relate to
Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT)
and provide rules requiring depositors to use EFT for all FTDs
and eliminate rules regarding FTD coupons.
EXCISE TAX
REG–153340–09, page 469.
Proposed regulations under section 6302 of the Code relate to
Federal Tax Deposits (FTDs) by Electronic Funds Transfer (EFT)
and provide rules requiring depositors to use EFT for all FTDs
and eliminate rules regarding FTD coupons.
(Continued on the next page)
Finding Lists begin on page ii.

ADMINISTRATIVE
Notice 2010–66, page 437.
Refundable adoption credit.This notice advises taxpayers
that adoption credit amounts a taxpayer carries forward from
earlier taxable years are refundable in 2010, and that taxpayers
must attach certain documents to their tax returns to substan-
tiate claims for the adoption credit.
Rev. Proc. 2010–35, page 438.
Adoption credit inflation adjustments.This procedure up-
dates the provisions relating to the adoption credit in Rev. Proc.
2009–50, 2009–45 I.R.B. 617, which provides the inflation
adjustments for 2010, to reflect the increased credit amount
allowed under the Patient Protection and Affordable Care Act.
Rev. Proc. 2009–50 modified.
Rev. Proc. 2010–37, page 440.
This procedure contains revisions to Publication 1239,Speci-
fications for Filing Form 8027, Employer’s Annual Information
Return of Tip Income and Allocated Tips,Electronically(revised
10–2010). Rev. Proc. 2009–46 superseded.
Rev. Proc. 2010–39, page 459.
Per diem allowances.This procedure provides optional rules
for deeming substantiated the amount of certain business ex-
penses of traveling away from home reimbursed to an em-
ployee or deductible by an employee or self-employed individ-
ual. Rev. Proc. 2009–47 superseded.
Announcement 2010–82, page 476.
This announcement contains corrections and clarifications to
Publication 1220,Specifications for Filing Forms 1097-BTC,
1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electroni-
cally(revised 8–2010).
October 18, 20102010–42 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top-quality service by helping
them understa
nd and meet their tax responsibilities and en-
force the law wi
th integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2010–42 I.R.B.October 18, 2010

October 18, 20102010–42 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 62.—A
djusted
Gross Income Defined
26 CFR 1.62–2: Reimbursements and other expense
allowance arrangements.
Rules are provided under which a reimbursement
or other expense allowance arrangement for the cost
of lodging, meal, and incidental expenses, or of
meal and incidental expenses only, incurred by an
employee while traveling away from home, satisfies
the requirements of section 62(c) of the Code for
substantiation of the amount of the expenses. See
Rev. Proc. 2010-39, page 459.
Section 162.—
Trade or
Business Expe
nses
26 CFR 1.162–1
7: Reporting and substantiation of
certain busin
ess expenses of employees.
Rules are prov
ided for substantiating the amount
of a deductio
n for an expense for meal and incidental
expenses, or
for incidental expenses only, incurred
while travel
ing away from home. See Rev. Proc.
2010-39, pag
e 459.
Section 274.—
Disallowance
of Certain Ent
ertainment,
Etc., Expenses
26 CFR 1.274–5: Substantiation requirements.
Rules are provided for substantiating the amount
of a deduction for an expense for meal and incidental
expenses, or for incidental expenses only, incurred
while traveling away from home. See Rev. Proc.
2010-39, page 459.
2010–42 I.R.B.436October 18, 2010

Part III. Administrative, Procedural, and Miscellaneous
Refundable Adoption Credit
Notice 2010–66
SECTION 1. PURPOSE
This notice provides interim guidance
on the adoption credit. Section 10909 of
the Patient Protection and Affordable Care
Act, Pub. L. 111–148, 124 Stat. 119
(PPACA)amended§23oftheInternal
Revenue Code to make the adoption credit
refundable, redesignated § 23 as § 36C,
and made certain other changes, effective
for taxable years beginning after Decem-
ber 31, 2009. Pending the publication of
regulations, this notice provides rules for
computing the adoption credit for a taxable
year beginning in 2010 and for substanti-
ating claims for the adoption credit.See
Notice 97–9, 1997–1 C.B. 365, and Notice
97–70, 1997–2 C.B. 332, for general guid-
ance on the adoption credit.
SECTION 2. BACKGROUND
Section 36C allows a refundable tax
credit for qualified adoption expenses
(QAE). QAE are the reasonable and nec-
essary adoption fees, court costs, attorney
fees, and other expenses directly related to,
and for the principal purpose of, adopting
an eligible child. For example, a taxpayer
may claim traveling expenses (including
amounts expended for meals and lodging
while away from home) paid or incurred
to adopt an eligible child. A taxpayer may
claim QAE paid or incurred for an unsuc-
cessful domestic adoption.
For both domestic and foreign adop-
tions, if a taxpayer pays or incurs QAE dur-
ing or after the taxable year in which the
adoption is final, the credit is allowable in
the taxable year in which the taxpayer pays
or incurs the QAE.
For domestic adoptions, the credit is al-
lowable for QAE that a taxpayer pays or
incurs in a taxable year before the adop-
tion is final. However, a taxpayer may not
claim the credit for those QAE until the
next taxable year.
For foreign adoptions, the credit is al-
lowable only in the taxable year in which
the adoption is final or in a later year. QAE
that a taxpayer pays or incurs in a taxable
year before the adoption is final are treated
as paid or incurred in the taxable year in
which the adoption is final.SeeRev. Proc.
2010–31, 2010–40 I.R.B. 413, for deter-
mining the finality of foreign adoptions
subject to the Hague Convention on Pro-
tection of Children and Co-operation in
Respect of Intercountry Adoption (Hague
Convention) and the Intercountry Adop-
tion Act of 2000, Pub. L. 106–279, 114
Stat. 825, 42 U.S.C. §§ 14901–14954.See
Rev. Proc. 2005–31, 2005–1 C.B. 1374,
for determining finality of foreign adop-
tions from countries not party to the Hague
Convention.
For a taxable year beginning in 2010,
the credit is limited to $13,170 of the ag-
gregate QAE that a taxpayer pays or in-
curs for all taxable years. For 2011 this
dollar limitation willbe adjusted as neces-
sary for inflation. Expenses for an unsuc-
cessful domestic adoption of an identified
child are aggregated with the expenses of
a successful adoption of another child in
applying the dollar limitation.SeeNotice
97–9, section 1.G., Example 3.
Under §§ 36C(a)(3) and 36C(d)(3), a
taxpayer may claim the credit up to the
full amount of the dollar limitation for an
adoption of a child with special needs, as
determined by the state where the adoption
occurs, in the year in which the adoption is
final without regard to the amount of QAE
the taxpayer pays or incurs.
The credit is subject to an income limi-
tation based on the taxpayer’s modified ad-
justed gross income (MAGI). The income
limitation applies to QAE in the first tax-
able year the taxpayer claims the credit
for that QAE. For taxable years beginning
after December 31, 2009, the allowable
credit begins to phase out for taxpayers
with MAGI of $182,520 and is completely
eliminated for taxpayers with MAGI of
$222,520. The income limitation may be
adjusted in future years for inflation.
Prior to amendment under PPACA, the
credit was not refundable. Former § 23(c)
allowed a taxpayer to carry forward the
amount of the credit in excess of the tax-
payer’s tax liability to five subsequent tax-
able years. The income limitation did not
apply to an amount carried forward to a
later taxable year.
Section 36C(f)(2)(B) authorizes the
Secretary of the Treasury to require tax-
payers to provide information substantiat-
ing claims for the adoption credit.
SECTION 3. INTERIM GUIDANCE
1.Amounts Carried Over from Earlier
Taxable Years to a Taxable Year Beginning
in 2010
An amount of an adoption credit
claimed in an earlier taxable year that
a taxpayer carries forward to a taxable
year beginning in 2010 is allowable as a
refundable tax credit. An amount that a
taxpayer carries forward to a taxable year
beginning in 2010 is not subject to an
income limitation in that taxable year.
The following examples illustrate these
rules.
Example 1. (i) In 2008, Taxpayer pays $2,000 of
QAE to adopt an eligible child who is a citizen of the
United States. In 2009, Taxpayer pays an additional
$8,000 of QAE and the adoption becomes final. The
adoption credit for $10,000 of QAE is allowable in
2009.
(ii) Taxpayer’s tax liability for taxable year 2009
is $6,000, and Taxpayer applies $6,000 of the $10,000
credit against Taxpayer’s 2009 tax liability. Taxpayer
carries forward $4,000 of the credit to 2010.
(iii) In 2010, Taxpayer’s tax liability is $3,000.
Taxpayer applies $3,000 of the $4,000 carried for-
ward adoption credit against Taxpayer’s 2010 tax lia-
bility. Taxpayer is entitled to a refund of the remain-
ing credit.
Example 2. (i) The facts are the same as inEx-
ample 1, except that in 2010, Taxpayer pays an ad-
ditional $2,000 of QAE. Taxpayer’s income exceeds
the upper income limitation for 2010.
(ii) Because of the income limitation, the adop-
tion credit is not allowable for the $2,000 of QAE
Taxpayer pays in 2010. However, Taxpayer may ap-
ply the $4,000 adoption credit carried forward to re-
duce Taxpayer’s tax liability for 2010 and may re-
ceive a refund of any carried forward credit that ex-
ceeds Taxpayer’s tax liability.
2.Substantiation Requirements
A taxpayer must provide a copy (un-
less otherwise specified) of the applicable
documents described in paragraph a. or b.
below to substantiate the taxpayer’s adop-
tion or attempted adoption of an eligible
child. A taxpayer also must comply with
paragraph c. below for a special needs
adoption. The taxpayer attaches the doc-
ument(s) to the taxpayer’s income tax re-
turn for the taxable year that the taxpayer
October 18, 20104372010–42 I.R.B.

claims the credit, beginning after Decem-
ber 31, 2009.
a.Domestic and foreign adoptions that
have been finalized
(1) For a domestic or foreign adoption
finalized in the United States, an adoption
order or decree.
(2) For a foreign adoption governed by
the Hague Convention and finalized in an-
other country:
A. A Hague Adoption Certificate
(Immigrating Child),
B. An IH–3 visa, or
C. A foreign adoption decree, trans-
lated into English.
(3) For a foreign adoption from a coun-
try that is not party to the Hague Conven-
tion:
A. A foreign adoption decree, trans-
lated into English, or
B. An IR–2 or IR–3 visa.
b.Domestic adoptions that are not final
(1) An adoption taxpayer identification
number, obtained by the taxpayer for the
child, included on the taxpayer’s income
tax return (instead of attaching a docu-
ment),
(2) A home study completed by an au-
thorized placement agency,
(3) A placement agreement with an au-
thorized placement agency,
(4) A document signed by a hospital of-
ficial authorizing the release of a newborn
child from the hospital to the taxpayer for
legal adoption,
(5) A court document ordering or ap-
proving the placement of a child with the
taxpayer for legal adoption, or
(6) An original affidavit or notarized
statement signed under penalties of perjury
from an adoption attorney, government of-
ficial, or other person, stating that the sig-
nor:
A. Placed or is placing a child with the
taxpayer for legal adoption, or
B. Is facilitating the adoption process
for the taxpayer in an official capacity,
summarizing the facilitation.
c. Adoptions of special needs children
In addition to the documentation re-
quired under paragraph 2.a. of this notice,
a taxpayer claiming the adoption credit
for a child with special needs must attach
a copy of the state determination of spe-
cial needs to the taxpayer’s income tax re-
turn for the taxable year that the taxpayer
claims the adoption credit for a child with
special needs.
d.Information to be included in
documentation
An order or decree must include infor-
mation that establishes that the taxpayer’s
adoption of the eligible child has been fi-
nalized and the date finalized, and a spe-
cial needs determination must include in-
formation that establishes that the state
has made a determination of special needs
for the eligible child. A taxpayer may
redact sensitive personal information from
an adoption order or decree or a special
needs determination. However, the Inter-
nal Revenue Service may require the tax-
payer to provide an unredacted copy of
the document if needed to substantiate the
claim for the credit.
SECTION 4. EFFECTIVE DATE
This notice is effective for taxab
le years
beginning after December 31, 200
9.
DRAFTING INFORMATION
The principal author of this notice is
Marilyn E. Brookens of the Office of
Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this announcement, contact
Ms. Brookens at (202) 622–4920 (not a
toll-free call).
26 CFR 601.602. Tax forms and instructions.
(Also Part I, §§ 23, 36C, 137.)
Rev. Proc. 2010–35
SECTION 1. PURPOSE
This revenue procedure modifies and
supersedes sections 3.03 and 3.14 of Rev.
Proc. 2009–50, 2009–45 I.R.B. 617, to re-
flect the statutory amendments by the Pa-
tient Protection and Affordable Care Act,
Pub. L. 111–148, 124 Stat. 119 (PPACA)
to the adoption credit under § 36C (for-
merly § 23) and the exclusion for adoption
assistance programs under § 137.
SECTION 2. BACKGROUND
For taxable years beginning in 2010,
§10909(a)(1) of PPACA increased the
maximum adoption credit and the maxi-
mum adoption assistance exclusion from
$12,170 to $13,170.
SECTION 3. MODIFICATION OF REV.
PROC. 2009–50
To reflect the statutory amendments by
PPACA to §§ 36C and 137, sections 3.03
and 3.14 of Rev. Proc. 2009–50 are modi-
fied to read as follows:
.03Adoption Credit. For taxable years
beginning in 2010, under § 36C(a)(3)
the credit allowed for an adoption of a
child with special needs is $13,170. For
taxable years beginning in 2010, under
§ 36C(b)(1) the maximum credit allowed
for other adoptions is the amount of quali-
fied adoption expenses up to $13,170. The
available adoption credit begins to phase
out under § 36C(b)(2)(A) for taxpayers
with modified adjusted gross income in
excess of $182,520 and is completely
phased out for taxpayers with modified
adjusted gross income of $222,520 or
more. (See section 3.14 of this revenue
procedure for the adjusted items relating
to adoption assistance programs.)
.14Adoption Assistance Programs.For
taxable years beginning in 2010, under
§ 137(a)(2) the amount that can be ex-
cluded from an employee’s gross income
for the adoption of a child with special
needs is $13,170. For taxable years be-
ginning in 2010, under § 137(b)(1) the
maximum amount that can be excluded
from an employee’s gross income for the
amounts paid or expenses incurred by an
employer for qualified adoption expenses
furnished pursuant to an adoption assis-
tance program for other adoptions by the
employee is $13,170. The amount exclud-
able from an employee’s gross income be-
gins to phase out under § 137(b)(2)(A) for
taxpayers with modified adjusted gross in-
come in excess of $182,520 and is com-
pletely phased out for taxpayers with mod-
ified adjusted gross income of $222,520 or
more. (See section 3.03 of this revenue
procedure for the adjusted items relating to
the adoption credit.)
2010–42 I.R.B.438October 18, 2010

SECTION 4. EFFECT ON OTHER
DOCUMENTS
Sections 3.03 and 3.14 of Rev. Proc.
2009–50 are modified and superseded
effective for taxable years beginning in
2010.
SECTION 5. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Marilyn E. Brookens of the
Office of Associate Chief Counsel (In-
come Tax & Accounting). For further
information regarding this revenue pro-
cedure, contact Ms. Brookens at (202)
622–4920 (not a toll-free call.
26 CFR 601.105: Examination of returns and claims
for refund, credit or abatement; determination of cor-
rect tax liability.
(Also Part I, §§ 165; 1.165–7(a)(2), 1.165–7(b).)
Rev. Proc. 2010–36
SECTION 1. PURPOSE
This revenue procedure provides guid-
ance to individuals regarding the federal
income tax treatment of amounts paid to
repair damage to their personal residences
resulting from corrosive drywall building
materials.
SECTION 2. BACKGROUND
.01 Reported problems have occurred
with certain imported drywall installed in
homes between 2001 and 2008. Home-
owners have reported blackening or corro-
sion of copper electrical wiring and copper
components of household appliances, as
well as the presence of sulfur gas odors.
In November 2009, the Consumer Product
Safety Commission (CPSC) reported that
an indoor air study of a sample of 51 homes
found a strong association between the
problem drywall and levels of hydrogen
sulfide in those homes and corrosion of
metals in those homes.Seethe Commis-
sion’s Drywall Information Center web-
site,http://www.cpsc.gov/info/drywall.
On January 28, 2010, the CPSC and
the Department of Housing and Urban
Development released interim guidance
advising interested parties how to
identify homes with problem drywall.
See http://www.cpsc.gov/info/drywall/
InterimIDGuidance012810.pdf.
.02 The Internal Revenue Service has
received numerous inquiries from taxpay-
ers about whether a loss resulting from cor-
rosive drywall constitutes a deductible ca-
sualty loss within the meaning of § 165
of the Internal Revenue Code, the taxable
year any such loss would be deductible,
and how the amount of the loss would be
computed.
.03 Section 165(a) of the Internal Rev-
enue Code generally allows taxpayers to
deduct losses sustained during the taxable
year that are not compensated by insurance
or otherwise. For personal-use property
(such as a taxpayer’s personal residence
and household appliances), § 165(c)(3)
limits an individual’s deduction to losses
arising from fire, storm, shipwreck, or
other casualty, or from theft. A casualty
is damage, destruction, or loss of property
that results from an identifiable event that
is sudden, unexpected, and unusual. Rev.
Rul. 72–592, 1972–2 C.B. 101. Damage
or loss resulting from progressive dete-
rioration of property through a steadily
operating cause is not a casualty loss.See
Matheson v. Commissioner,54F.2d537
(2d Cir. 1931).
.04 A casualty loss is allowed as a de-
duction only for the taxable year in which
the loss is sustained. However, if the tax-
payer has a claim for reimbursement of
the loss (from insurance or otherwise) for
which there is a reasonable prospect of re-
covery, no portion of the loss is deductible
until it can be ascertained with reasonable
certainty whether or not such reimburse-
ment will be received.See§ 1.165–1(c)(4)
of the Income Tax Regulations.
.05 The amount of a taxpayer’s casu-
alty loss generally is the decrease in the
fair market value of the property as a re-
sult of the casualty, limited to the tax-
payer’s adjusted basis in the property.See
§ 1.165–7(b). To simplify the computation
of a casualty loss deduction, existing reg-
ulations permit taxpayers to use the cost to
repair the damaged property as evidence of
the decrease in value of the property.See
§ 1.165–7(a)(2)(ii).
.06 Section 165(h)(1)-(2) imposes two
limitations on casualty loss deductions for
personal use property. First, a casualty loss
deduction is allowable only for the amount
of the loss that exceeds $100 per casualty
($500 for taxable years beginning in 2009
only). Second, the net amount of all of
a taxpayer’s casualty losses (in excess of
casualty gains, if any) is allowable only
for the amount of the losses that exceed
10 percent of the taxpayer’s adjusted gross
income (AGI) for the year.
.07 In view of the unique circumstances
surrounding damage resulting from corro-
sive drywall, the Service and Treasury De-
partment conclude that it is appropriate to
provide a safe harbor method that treats
certain damage resulting from corrosive
drywall as a casualty loss and provides a
formula for determining the amount of the
loss. Accordingly, for an individual within
the scope of this revenue procedure, the
Service will not challenge the individual’s
treatment of damage resulting from corro-
sive drywall as a casualty loss if the loss
is determined and reported as provided in
this revenue procedure.
SECTION 3. SCOPE
This revenue procedure applies to any
individual who pays to repair damage to
that individual’s personal residence or
household appliances that results from
corrosive drywall.
SECTION 4. APPLICATION
.01 An individual who pays to repair
damage to that individual’s personal res-
idence or household appliances that re-
sults from corrosive drywall may treat the
amount paid as a casualty loss in the year
of payment. For purposes of this rev-
enue procedure, the term “corrosive dry-
wall” means drywall that is identified as
problem drywall under the two-step iden-
tification method published by the CPSC
and the Department of Housing and Ur-
ban Development in their interim guid-
ance dated January 28, 2010. As of the
date of publication of this revenue proce-
dure, the interim guidance can be found
athttp://www.cpsc.gov/info/drywall/Inter-
imIDGuidance012810.pdf.
.02 The amount of a loss resulting
from corrosive drywall may be limited
depending on whether the taxpayer has a
pending claim for reimbursement (or in-
tends to pursue reimbursement) of the loss
through property insurance, litigation, or
otherwise. A taxpayer who does not have
a pending claim for reimbursement (and
does not intend to pursue reimbursement)
October 18, 20104392010–42 I.R.B.

may claim as a loss all unreimbursed
amounts paid during the taxable year to
repair damage to the taxpayer’s personal
residence and household appliances that
results from corrosive drywall. A taxpayer
who has a pending claim for reimburse-
ment (or intends to pursue reimbursement)
may claim a loss for 75 percent of the
unreimbursed amounts paid during the
taxable year to repair damage to the tax-
payer’s personal residence and household
appliances that resulted from corrosive
drywall. A taxpayer who has been fully
reimbursed before filing a return for the
year the loss was sustained may not claim
a loss. A taxpayer who has a pending
claim for reimbursement (or intends to
pursue reimbursement) may have income
or an additional deduction in subsequent
taxable years depending on the actual
amount of reimbursement received.See
§ 1.165–1(d).
.03 Amounts paid for improvements or
additions that increase the value of the tax-
payer’s personal residence above its pre-
loss value are not allowed as a casualty
loss. Only amounts paid to restore the tax-
payer’s personal residence to the condition
existing immediately prior to the damage
qualify for loss treatment.
.04 Where a household appliance is re-
placed rather than repaired, the amount of
the loss attributable to the appliance is the
lesser of the current cost to replace the
original appliance or the basis of the orig-
inal appliance (generally its cost).
.05 A taxpayer claiming a casualty loss
under this revenue procedure must report
the amount of the loss on Form 4684 (“Ca-
sualties and Thefts”) and must mark “Rev-
enue Procedure 2010–36” at the top of that
form. Taxpayers are subject to the $100
($500 for taxable years beginning in 2009
only) limitation imposed by § 165(h)(1)
and the 10-percent-of-AGI limitation im-
posedby§165(h)(2).
.06 Taxpayers who choose not to apply
the safe harbor treatment provided by this
revenue procedure are subject to all of the
generally applicable provisions governing
the deductibility of losses under § 165.
Accordingly, these taxpayers must estab-
lish that the damage, destruction, or loss
of property resultedfrom an identifiable
event that is sudden, unexpected, and un-
usual, and was not the result of progressive
deterioration through a steadily operating
cause.SeeRev. Rul. 72–592, 1972–2
C.B. 101;Matheson v. Commissioner,54
F.2d 537 (2d Cir. 1931). These taxpay-
ers also must prove that the loss is prop-
erly deductible in the taxable year claimed
by the taxpayer and not in some other year.
Further, these taxpayers must prove the
amount of the claimed loss and must prove
that no claim for reimbursement of any
portion of the loss exists for which there
is a reasonable prospect of recovery.
SECTION 5. EFFECTIVE DATE
This revenue procedure is effective
for federal income tax returns (including
amended federal income tax returns) filed
after September 29, 2010.
SECTION 6. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Alan S. Williams of the Office
of Associate Chief Counsel (Income Tax
& Accounting). For further information
regarding this revenue procedure, contact
Alan S. Williams at 202–622–4950 (not a
toll-free call).
IMPORTANT NOTES:
IRS/IRB offers an Internet connection at h
ttp://fire.irs.govfor electronic filing of Form 8027. The Filing Information
Returns Electronically (FIRE) System will be down from2 p.m. ET December 21, 2010 through January 3, 2011 for
upgrading and will not be operational during this time for submissions.In addition, the FIRE System may be down every
Wednesday from 3:00 a.m. to 5:00 a.m. ET for maintenance.
The Form 4419 is subject to review before the approval to transmit electronically is granted and may require additional
documentation at the request of the IRS.If a determination is made concerning the validity of the documents transmitted
electronically, IRS has the authority torevoketheTransmitterControlCode(TCC)andterminatethereleaseofthefiles.
26 CFR 601.206: Tax forms and instructions.
Rev. Proc. 2010–37
TABLE OF CONTENTS
Part A. General
SEC. 1. PURPOSE................................................................................................. 441
SEC. 2. NATURE OF CHANGES..................................................................................... 442
SEC. 3. WHERE TO FILE AND HOW TO CONTACT THE IRS, INFORMATION RETURNS BRANCH (IRB).................. 442
SEC. 4. FILING REQUIREMENTS AND DUE DATES.................................................................. 443
SEC. 5. FORM 8508, REQUEST FOR WAIVERFROM FILING INFORMATION RETURNS
ELECTRONICALLY
................................................................................... 443
2010–42 I.R.B.440October 18, 2010

SEC. 6. FORM 4419, APPLICATION FOR FILING INFORMATION RETURNS ELECTRONICALLY
(FIRE)
................................................................................................ 444
SEC. 7. STATE ABBREVIATIONS................................................................................... 444
SEC. 8. PENALTIES............................................................................................... 445
SEC. 9. CORRECTED RETURNS, PAPER FORMS, AND COMPUTER-GENERATED FORMS.............................. 445
SEC. 10. VALIDATION OF FORM 8027 AT IRS/IRB.................................................................... 446
SEC. 11. DEFINITION OF TERMS.................................................................................. 446
Part B. Electronic Filing Specifications
SEC. 1. GENERAL................................................................................................. 447
SEC. 2. ELECTRONIC FILING APPROVAL PROCEDURE............................................................. 447
SEC. 3. TEST FILES............................................................................................... 447
SEC. 4. ELECTRONIC SUBMISSIONS............................................................................... 447
SEC. 5. PIN REQUIREMENTS...................................................................................... 448
SEC. 6. ELECTRONIC FILING SPECIFICATIONS.................................................................... 448
SEC. 7. CONNECTING TO THE FIRE SYSTEM....................................................................... 448
SEC. 8. COMMON PROBLEMS AND QUESTIONS ASSOCIATE
D WITH ELECTRONIC FILING
.........
.................. 450
PART C. FILING SPECIFICATIONS AND RECORD LAYOUT
SEC. 1. RECORD FORMAT AND LAYOUT........................................................................... 452
PART D. EXTENSIONS OF TIME
SEC. 1. GENERAL................................................................................................. 456
SEC. 2. SPECIFICATIONS FOR FILINGEXTENSIONS OF TIME ELECTRONICALLY...................................... 458
SEC. 3. RECORD LAYOUT — EXTENSION OF TIME................................................................... 458
SEC. 4. EXTENSION OF TIME FOR RECIPIENT COPIES OF INFORMATION RETURNS................................... 459
Part A. General
Sec. 1. Purpose
.01Form 8027 is used by large food or beverage establishments when the employer is required to make annual reports to the IRS
on receipts from food or beverage operations and tips reported by employees.
Note: All employees receiving $20.00 or more a month in tips must report 100% of their tips to their employer.
.02The Internal Revenue Service, Information Returns Branch (IRS/IRB), is responsible for processing Forms 8027 submitted
electronically. The purpose of this revenue procedure is to provide the specifications for filing Form 8027, Employer’s Annual Infor-
mation Return of Tip Income and Allocated Tips, electronically. This revenue procedure is updatedwhen legislative changes occur
or reporting procedures are modified.
.03This revenue procedure supersedes: Rev. Proc. 2009–46 published in Internal Revenue Bulletin 2009–42, dated October 19,
2009, Specifications for Filing Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, Electronically.
This revenue procedure is effective for Forms 8027 due the last day of February, 2011 and any returns filed thereafter.
October 18, 20104412010–42 I.R.B.

Sec. 2. Nature of Changes
.01There are major changes to the extension process. A new Part D wasadded, detailing the process of filing extension requests
electronically. Requests for more than 10 employers are required to submit the extension requests online via the fill-in form or in a file
electronically (see Sec. 3, for the record layout). Review this Part of the Publication thoroughly if you wish to request an extension
of time for Form 8027. In addition, read the publication carefully and in its entirety beforeattempting to prepare your electronic file
for submission.
.02Change in contact name from IRS/ECC-MTB to IRS/IRB (Information Returns Branch), Information Reporting Program to
Information Returns Branch and added Mail Stop 4360 to mailing address.
Sec. 3. Where to File and How to Contact the IRS, Information Returns Branch (IRB)
.01All correspondence concerning Forms 8027 processed at IRS/IRB should be sent to the following address:
Internal Revenue Service
Information Returns Branch
230 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430
.02Paper forms and publications should be requested by calling the toll-free number1–800–TAX–FORM (1–800–829–3676).
.03Questions pertaining to electronic filing of Forms W–2mustbe directed to the Social Security Administration (SSA). Filers
can call 1–800–SSA–6270 to obtain the telephone number of the SSA Employer Services Liaison Officers for their area.
.04A taxpayer or authorized representative may request a copy of a tax return or a Form W–2 filed with a return by submitting
Form 4506, Request for Copy of Tax Return, to IRS. This form may be obtained by calling1–800–TAX–FORM (1–800–829–3676).
.05Electronic Products and Services Support,Information Returns Branch, Customer Service Section (IRB/CSS) answers elec-
tronic, paper filing, and tax law questions from the payer community relating to the correct preparation and filing of business infor-
mation returns (Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, 8027, and W–2G). IRB/CSS also answers questions relating to the
electronic filing of Forms 1042-S and 8955-SSA and to the tax law criteria and paperfiling instructions for Forms W–2 and W–3.
Inquiries dealing with backup withholding and reasonable cause requirements due to missing and incorrect taxpayer identification
numbers are also addressed by IRB/CSS. Assistance is available year-round to payers, transmitters, and employers nationwide, Mon-
daythroughFriday,8:30a.m.to4:30p.m. Eastern Time, by calling toll-free1–866–455–7438or via e-mail at m
ccirp@irs.gov. SSNs
or EINs must not be included in e-mails or attachments since this is not a secure line.The Telecommunications Device for the
Deaf (TDD) toll number is304–579–4827.Filers should call as soon as questions arise to avoid the busy filing season call volume
at the end of January and February. Recipients of information returns (payees) should continue to contact 1–800–829–1040 with any
questions on how to report the information returns data on their tax returns.
.06The telephone numbers and web addresses for questionsabout specifications for electronic submissions are:
Information Reporting Program Customer Service Section
TOLL-FREE 1–866–455–7438 or outside the U.S. 1–304–263–8700
e-mail at m
ccirp@irs.gov
304–579–4827 — TDD
(Telecommunication Device for the Deaf)
Fax Machine
Toll-free within the U.S. — 877–477–0572
Outside the U.S. — 304–579–4105
Electronic Filing — FIRE System
h
ttp://fire.irs.gov
TO OBTAIN FORMS:
1–800–TAX–FORM (1–800–829–3676)
w
ww.irs.gov—IRS website access to forms
2010–42 I.R.B.442October 18, 2010

Sec. 4. Filing Requirements and Due Dates
.01Section 6011(e)(2)(A) of the Internal Revenue Code requires that any person, including corporations, partnerships, individuals,
estates, and trusts, required to file 250 or more information returns must file suchreturns electronically.
.02The filing requirements apply separately to both original and corrected returns.
.03The above requirements do not apply if you establish undue hardship (see Part A, Sec. 5).
.04 FILERS MUST NOT SUBMIT THE SAME INFORMATION ON PAPER FORMS THAT ARE SUBMITTED ELEC-
TRONICALLY, SINCE THIS WILL RESULT IN DUPLICATE FILING.This does not mean that corrected documents are not
to be filed. If a return has been prepared and submitted improperly,a corrected return must be filed as soon as possible. Refer to Part
A, Sec. 9, for requirements and instructions for filing corrected returns.
.05When an allocation of tips is based on a good faith agreement, a copy of this agreement must be submitted within 3 business
days after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Fax to 859–669–5372 or mail a copy
of this agreement to Internal Revenue Service, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011. In
the fax transmittal or cover letter, the filer must include the words “Form 8027 attachment(s)” and the following information: name
of establishment, EIN (Employer Identification Number), establishment number, TCC and the tax year of the Form 8027.
.06Employers can request a lower rate (but not lower than 2%) for tip allocation purposes by submitting an application to the
IRS. See Sec. 31.6053–3(h)(4) of Employment Tax Regulations. Detailed instruction for requesting a lower rate can be found in the
Instructions for Form 8027. The IRS will issue a determination letter to notify the employer when and for how long a reduced rate
is effective. If a lower rate is used on the Form 8027 based on the IRS determination letter, a copy of this letter must be submitted
within 3 business days after receiving acknowledgement that IRS has accepted the electronically filed Form 8027. Filers must mail a
copy of this agreement to Internal RevenueService, Attn: ICO ERS Stop 36101, 201 West Rivercenter Blvd., Covington, KY 41011.
In the transmittal (e.g., fax transmittal or cover letter), filers must includethe words “Form 8027 attachment(s)” and the following
information: name of establishment, establishment number, TCC and the tax year of the Form 8027.
.07Electronic reporting to IRS for Form 8027 must be on a calendar year basis. The due date for paper reported Forms 8027 is the
last day of February. However, Forms 8027 filedelectronicallyare due March 31.
.08If the due date falls on a Saturday, Sunday, or legal holiday, filing Form 8027 on the next day that is not a Saturday, Sunday, or
legal holiday will be considered timely.
Sec. 5. Form 8508, Request for Waiver from Filing Information Returns Electronically
.01If an employer is required to file electronically but fails to do so, and does not havean approved waiver on record, the employer
will be subject to a penalty of $50 per return in excess of 250.
.02If employers are required to file original or corrected returns electronically, but such filing would create a hardship, they may
request a waiver from these filing requirements by submitting Form 8508, Request for Waiver from Filing Information Returns Elec-
tronically, to IRS/IRB. Form 8508 can be obtained on the IRS website at w
ww.irs.govor by calling toll-free 1–800–829–3676.
.03Even though an employer may submit as many as 249 corrections on paper, IRS encourages electronic filing of corrections.
Once the 250 threshold has been met, filers are required to submit any additional returns electronically. However, if a waiver for an
original filing is approved, any corrections for the same type of returns will be covered under that waiver.
.04Generally, only the employer may sign the Form 8508. A transmitter may sign if given power of attorney; however, a letter
signed by the employer stating this fact must be attached to the Form 8508.
.05A transmitter must submit a separate Form 8508 for each employer. Do not submit a list of employers.
.06All information requested on the Form 8508 must be provided to IRS for the request to be processed.
.07The waiver, if approved, will provide exemption from electronic filing for the current tax year only. Employers may not apply
for a waiver for more than one tax year.
.08Form 8508 may be photocopied or computer-generated as long as itcontains all the information requested on the original form.
.09Filers are encouraged to submit Form 8508 to IRS/IRB at least 45 days before the due date of the returns.
.10All requests for a waiver should be sent using the following address:
Internal Revenue Service
Information Returns Branch
Attn: Extension of Time Coordinator
240 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430
.11 Form 8508 for Forms W–2 must be filed with IRS/IRB, not SSA.
.12Waivers are evaluated on a case-by-case basis and are approved or denied based on criteria set forth under section 6011(e) of
the Internal Revenue Code. The transmitter must allow a minimum of 30 days for IRS/IRB to respond to a waiver request.
.13If a waiver request is approved, the transmitter should keep the approval letter on file.
October 18, 20104432010–42 I.R.B.

.14An approved waiver from filing Forms 8027 electronically does not provide exemption from all filing. The employer must
timely file Form 8027 on acceptable paper forms with the Cincinnati Service Center.The transmitter should also send a copy of
the approved waiver to the Cincinnati Service Center where the paper returns are filed.
Sec. 6. Form 4419, Application for Filing Information Returns Electronically (FIRE)
.01For the purposes of this revenue procedure, the EMPLOYER is the organization supplying the information and the TRANS-
MITTER is the organization preparing the electronic file and/or sending the file to IRS/IRB. The employer and the transmitter may
be the same entity. Employers or their transmitters are required to complete Form 4419, Application for Filing Information Returns
Electronically (FIRE). The Form 4419 is subject to review before the approval to transmit electronically is granted and may require
additional documentation at the request of the IRS. If a determination is made concerning the validity of the documents transmitted
electronically, IRS has the authority to revoke the Transmitter Control Code (TCC) and terminate the release of files.
.02Form 4419 can be submitted at any time during the year; however, it should be submitted to IRS/IRB at least 30 days before the
due date of the return(s). IRS will act on an application and notify the applicant, in writing, of authorization to file. A five-character
alpha/numeric Transmitter Control Code (TCC) will be assignedand included in an acknowledgment letter within 15 to 45 days of
receipt of the application. Electronic returns may not be filed with IRS until the application has been approved and a TCC assigned.
The TCC must be included in any correspondence with IRS/IRB.
.03If transmitters file information returns other than Form 8027 electronically, they must obtain a separate TCC for those types of
returns. The TCC assigned for Forms 8027 is to be used for the processing of these forms only.
.04After approval to file electronically has been received, transmitters do not reapply each year; however, notify IRS in writing if:
(a)You change your name or the name of the organization, so that the files may be updated to reflect the proper name;
(b)You discontinue filing for two years (your TCC may have been reassigned).
.05IRS/IRB encourages filers who plan to submit for multiple employers to submit one application and to use one TCC for all
employers.
.06Approval to file does not imply endorsement by IRS/IRB of any computer software or of the quality of tax preparation services
provided by a service bureau or software vendor.
Sec. 7. State Abbreviations
.01The following state and U.S. possession abbreviations are to be used when developing the state code portion of address fields.
StateCodeStateCodeStateCode
AlabamaALKentuckyKYNo. Mariana IslandsMP
AlaskaAKLouisianaLAOhioOH
American SamoaASMaineMEOklahomaOK
ArizonaAZMarshall IslandsMHOregonOR
ArkansasARMarylandMDPennsylvaniaPA
CaliforniaCAMassachusettsMAPuerto RicoPR
ColoradoCOMichiganMIRhode IslandRI
Connectic
ut
CTMinnesotaMNSouth Caro
lina
SC
DelawareDEMississippiMSSouth DakotaSD
District of ColumbiaDCMissouriMOTennesseeTN
Federated States of Micronesia FMMontanaMTTexasTX
FloridaFLNebraskaNEUtahUT
GeorgiaGANevadaNVVermontVT
GuamGUNew Hamp
shire
NHVirgini
a
VA
HawaiiHINew JerseyNJU.S. Virgin IslandsVI
IdahoIDNew MexicoNMWashingtonWA
IllinoisILNew YorkNYWest VirginiaWV
IndianaINNorth CarolinaNCWisconsinWI
IowaIANorth DakotaNDWyomingWY
Kans
as
KS
2010–42 I.R.B.444October 18, 2010

.02Filers must adhere to the city, state, and ZIP Code format for U.S. addresses. This also includes American Samoa, Federated
States of Micronesia, Guam, Marshall Islands, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin
Islands.
Note: A Form 8027 is required only for establishments in the 50 states and the District of Columbia.
Sec. 8. Penalties
.01The Revenue Reconciliation Act of 1989 changed the penalty provisions for any documents, including corrections, which are
filed after the original filing date for the return. The penalty for failure to file correct information returns is “time sensitive,” in that
prompt correction of failures to file, or prompt correction of errors on returns that were filed, can lead to reduced penalties.
•The penalty generally is $50 for each information return that is not filed, or is not filed correctly, by the prescribed filing date,
with a maximum penalty of $250,000 per year ($100,000 for certain small businesses withaverage annual gross receipts, over the
most recent 3-year period, not in excess of $5,000,000). The penalty generally is reduced to:
•$30 for each failure to comply if the failureis corrected more than 30 days after the return was due, but on or before August 1 of
the calendar year in which the return was due, with a maximum penalty of $150,000 per year ($50,000 for certain small businesses
with average annual gross receipts, over the most recent 3-year period, not in excess of $5,000,000).
•$15 for each failure to comply if the failure is corrected within 30days after the date the return was due, with a maximum penalty
of $75,000 per year ($25,000 for certain small businesses with average annual gross receipts, over the most recent 3-year period,
not in excess of $5,000,000).
.02Penalties can be waived if failures were due to reasonable causeand not to willful neglect. In addition, section 6721(c) of the
Code provides ade minimisrule that if:
(a)information returns have been filed but were filed with incomplete or incorrect information, and
(b)the failures are corrected on or before August 1 of the calendar year in which the returns were due, then the penalty for
filing incorrect returns (but not the penalty for filing late) will not apply to the greater of 10 returns or one-half of 1 percent
of the total number of information returns you are required to file for the calendar year.
.03 Intentional Disregard of Filing Requirements— If any failure to file a correct information return is due to intentional disre-
gard of the filing and correct information requirements, the penalty is at least $100 per information return with no maximum penalty.
Sec. 9. Corrected Returns, Paper Forms, and Computer-Generated Forms
.01If returns must be corrected, approved electronic filers must provide such corrections electronically for 250 or more forms. If
the information is filed electronically, corrected returns are identified by using the“Corrected 8027 Indicator” in field position 370 of
the employer record.
.02A correction file must be identified by entering the correction indicator “G” in position 370.
.03When replacing a correction file that was bad, a replacement file must be submitted. When replacing a correction file, the
correction indicator “G” in position 370 must be entered.
.04If corrections are not submitted electronically, employers mustsubmit them on official Forms 8027. Substitute forms that have
been previously approved by IRS,or computer-generated forms that are exact facsimiles of the official form (except for minor page
size or print style deviations), may be submitted without obtaining IRS approval before using the form.
.05Employers/establishments may send corrected paper Forms 8027 to IRS at the address shown in Part A, Sec. 9.06. Corrected
paper returns are identified by marking the “AMENDED” check box on Form 8027.
.06If filing more than one paper Form 8027, attach a completed Form 8027-T, Transmittal of Employer’s Annual Information
Return of Tip Income and Allocated Tips, to the Forms 8027 and send to:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
IRS/IRB processes Forms 8027 submitted electronically only. Employers must not send paper Forms 8027 to IRS/IRB.
.07If part of a submission is filed electronically and the rest of the submission is filed on paper Forms 8027, send the paper forms
to the Cincinnati Service Center. For example, you filed your Forms 8027 electronically with IRS/IRB, and later you found that some
of the forms you filed need correcting. Because of the low volume ofcorrections, you submit the corrections on paper Forms 8027.
You must send these corrected Forms 8027 along with Form 8027-T to the Cincinnati Service Center.
October 18, 20104452010–42 I.R.B.

Sec. 10. Validation of Form 8027 at IRS/IRB
.01The accuracy of data reported on Form 8027 will be validated at the IRS Service Center. All fields indicated as “Required” in
the record layout must contain valid information. If the IRS identifies an error, filers will be notified and required to provide correct
information.
.02The address for the establishment must agree with the state and ZIP Code. If there are inconsistencies or if the ZIP Code does
not agree with the address, the record will error out.
.03All alpha characters must be in upper case.
.04The following is clarification of monetary amount requirements:
(a)Charged Receipts (positions 260–271) mustexceed Charged Tips (positions 248–259).
(b)Total Tips Reported (positions 308–319) must equal the combined amount of the Indirect Tips (positions 284–295) and
Direct Tips (positions 296–307).
(c)Gross Receipts (positions 320–331) must exceed all other monetary amounts with the exception of Charged Receipts. It is
possible to equal Charged Receipts if all transactions were conducted on charge cards.
(d)The Tip Percentage Rate Times Gross Receipts (positions332–343) must equal the Gross Receipts times the Tip Rate.
Normally, the Tip Rate is 8%. The Tip Rate must be entered as 0800 in (positions 343–347) unless you have been granted
a lower rate by the IRS.
(e)Generally, you would have allocated tips if the Total Tips Reported (positions 308–319) is less than the Tip Percentage Rate
Times Gross Receipts (positions 332–343). The difference must be entered as Allocated Tips (positions 348–359).
Sec. 11. Definition of Terms
ElementDescription
CorrectionA correction is an information return submitted by the employer/transmitter to correct
an information return that was previouslysubmitted to and successfully processed by
IRS, but contained erroneous information.
EINA nine-digit Employer Identification Number which has been assigned by IRS to the
reporting entity.
Employees hours workedThe average number of employee hours worked per business day during a month is figured
by dividing the total hours worked during the month by all your employees who are
employed in a food or beverage operation by the average number of days in the month that
each food or beverage operation at which these employees worked was open for business.
EmployerThe organization supplying their information. Use the same name and EIN you used on
your Forms W–2 and Forms 941.
EstablishmentA large food or beverage establishment that provides food or beverage for consumption on
the premises; where tipping is a customarypractice; and where there are normally more
than 10 employees who work more than 80 hours on a typical business day during the
preceding calendar year.
FileFor the purpose of this revenue procedure,a file is the Form 8027 information submitted
electronically by an Employer or Transmitter.
More than 10 employeesAn employer is considered to have more than 10 employees on a typical business day
during the calendar year if half the sum of: the average number of employee hours worked
per business day in the calendar month in which the aggregate gross receipts from food
and beverage operations were greatest,plusthe average number of employee hours
worked per business day in the calendar monthin which the total aggregate gross receipts
from food and beverage operations were the least,equalsmore than 80 hours.
ReplacementA replacement is an information return file sent by the employer/transmitterat the
requestof IRS/IRB because of errors encounteredwhile processing the filer’s original
file or correction file.
TransmitterPerson or organization preparing electronic file(s). May be employer or agent of employer.
Transmitter Control Code (TCC)A five-character alpha/numeric code assigned by IRS to the transmitter prior to
electronically filing. This number is inserted in the record and must be present. An
application (Form 4419)must be filed with IRS to receive this number.
2010–42 I.R.B.446October 18, 2010

Part B. Electronic Filing Specifications
Note: The FIRE System DOES NOT provide fill-in forms, except for Form 8809, Application for Extension of Time to File
Information Returns. Filers must program files according to the RecordLayout Specifications contained in this publication.
Sec. 1. General
.01Electronic filing of Forms 8027 information returns, originalsand replacements, is a reporting method for filers submitting 250
or more Forms 8027. Payers who are under the filing thresholdrequirement, are encouraged to file electronically.
.02All electronic filing of information returns are received at IRS/IRB via the FIRE (Filing Information Returns Electronically)
System. To connect to the FIRE System, point the browser to h
ttp://fire.irs.gov. The system is designed to support the electronic filing
of information returns only.
.03The electronic filing of information returns is not affiliated with any other IRS electronic filing programs. Filers must obtain
separate approval to participate in each program. Only inquiries concerning electronic filing of information returns should be directed
to IRS/IRB.
.04Files submitted to IRS/IRB electronically must be in standard ASCII code. Filers must not submit paper forms with the same
information as electronically submittedfiles. This would create duplicate reporting resulting in penalty notices.
.05Form 8809, Application for Extension of Time to File Information Returns, is available as a fill-in form via the FIRE System.
If filers do not already have a User ID and password they should refer to Section 7. At the Main Menu, filers must click “Extension
of Time Request” and then click “Fill-in Extension Form”. This option is only used to request an automatic 30-day extension and
must be completed by the due date of the return for each payer requesting an extension. Print the approval page for a record of the
approved extension. Filers should refer to Part D for additional details.
Sec. 2. Electronic Filing Approval Procedure
.01Filers must obtain a Transmitter Control Code (TCC) prior to submitting files electronically. Refer to Part A, Sec. 6, for
information on how to obtain a TCC.
.02Once a TCC is obtained, electronic filers create their own User ID, password and PIN (Personal Identification Number) and do
not need prior or special approval. See Part B, Sec. 5, for more information on the PIN.
.03If a filer is submitting files for more than one TCC, it is notnecessary to create a separate logon and password for each TCC.
.04For all passwords, it is the user’s responsibility to rememberthe password and not allow the password to be compromised.
Passwords are user assigned at first logon and must be 8 alpha/numeric characters containing at least 1 uppercase, 1 lowercase, and 1
numeric. However, filers who forget their password or PIN, can calltoll-free 1–866–455–7438for assistance. Users can change their
passwords at any time from the main menu. The FIRE System will require users to change their passwords periodically.
Sec. 3. Test Files
.01Filers are not required to submit a test file; however, the submission of a test file is encouraged for all new electronic filers to
test hardware and software. If filers wishto submit an electronic test file for Tax Year2010(returns to be filed in2011); itmustbe
submitted to IRS/IRBno earlier thanNovember 1, 2010, andno later thanFebruary 15, 2011.
.02Filers who encounter problems while transmitting the electronic test file can contact IRS/IRBtoll-free 1–866–455–7438for
assistance.
.03Within 5 days, the results of the electronic transmission will bee-mailed to the filer if he provided an accurate e-mail address on
the “Verify Your Filing Information” screen. If filers are using e-mail filtering software, they must configure their software to accept
e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov. If the file is bad, the filer must return to http://fire.irs.govto determine what
the errors are in the file by clicking on CHECK FILE STATUS. If you do not receive an e-mail in 5 business days, log back into the
FIRE System and click on CHECK FILE STATUS to view the results of your file.
Sec. 4. Electronic Submissions
.01Electronically filed information may be submitted to IRS/IRB 24 hours a day, 7 days a week. Technical assistance will be
available Monday through Friday between 8:30 a.m. and 4:30 p.m. Eastern Time by callingtoll-free 1–866–455–7438.
.02 The FIRE System will be down from 2 p.m. ET December 21, 2010 through January 3, 2011.This allows IRS/IRB to
update its system to reflect current year changes. In addition, the FIRE System may be down every Wednesday from 3:00 a.m. to
5:00 a.m. EST for maintenance.
.03If sending files larger than 10,000 records electronically, data compression isencouraged. The file size cannot exceed 2.5
million records. WinZip and PKZip are the only acceptable compression packages. IRS/IRB cannot accept self-extracting zip files or
compressed files containing multiple files. The time required to transmit information returns electronically will vary depending upon
October 18, 20104472010–42 I.R.B.

the type of connection to the Internetand if data compression is used.The time required to transmit a file can be reduced by as
much as 95 percent by using compression.
.04Transmitters may create files using self assigned filename(s). Files submitted electronicallywill be assigned a new unique
filename by the FIRE System. The filename assigned by the FIRE System will consist of submission type (ORIG [original], TEST
[test], CORR [correction], and REPL [replacement]), the filer’s TCC and a four-digit number sequence. The sequence number will be
incremented for every file sent. For example, for the first original file for the calendar year for TCC21000, the IRS assigned filename
would be ORIG.21000.0001.Record the filename.This information will be needed by IRS/IRB to identify the file, if assistance is
required.
.05If a timely submitted file is bad, the filer will have up to 60 days from the day the file was transmitted to submit an acceptable
replacement file. If an acceptable replacement file is not received within 60 days, then the employer could be subject to late filing
penalties.
.06The following definitions have been provided to help distinguish between a correction and a replacement:
•Acorrectionis an information return submitted by the transmitter to correct an information return that was previously submit-
ted to and successfully processed by IRS/IRB, but contained erroneous information.(See Note.)
Note:Corrections should only be made to forms that have been submitted incorrectly, not the entire file.
•Areplacementis an information return file sent by the filer because the CHECK FILE STATUS option on the FIRE System
indicated the original/correction file wasbad. After the necessary changes have been made, the file must be transmitted through
the FIRE System. (See Note.)
Note: Filers should never transmit anything to IRS/IRB as a “Replacement” file unless the CHECK FILE STATUS option on
the FIRE System indicates a previous file is bad.
.07Prior year data may be submitted; however, each tax yearmust be submitted in a separate file transmission.
Sec. 5. PIN Requirements
.01Filers will be prompted to create a PIN consisting of 10 numeric characters when establishing their initial User ID name and
password.
.02The PIN is required each time an ORIGINAL, CORRECTION, or REPLACEMENT file is sent electronically and is permission
to release the file. It is not needed for a TEST file. An authorized agent may enter their PIN, however, the payer is responsible for the
accuracy of the returns. The payer will be liable for penalties for failure to comply with filing requirements. If you forget your PIN,
please calltoll-free 1–866–455–7438for assistance.
Sec. 6. Electronic Filing Specifications
.01The FIRE System is designed exclusively for the filing of Forms 8027, 1097, 1098, 1099, 3921, 3922, 5498, 8935, 8955-SSA,
W–2G, and 1042-S.
.02A transmitter must have a TCC (see Part A,Sec. 6) before a file can be transmitted.
.03Within 5 days, the results of the electronic transmission will be e-mailed to the transmitter if an accurate e-mail address on the
“Verify Your Filing Information” screen was provided. If filers are using e-mailfiltering software, configure the software to accept
e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov. If the e-mail indicates the file is bad, filers must log into the FIRE System and
go to the CHECK FILE STATUS area of the FIRE System to determinewhat the errors are in the file. If filers do not receive an e-mail
in 5 business days, they must log back into the FIRE System andclick on CHECK FILE STATUS to view the results of their file.
Sec. 7. Connecting to the FIRE System
.01Before connecting, have the TCC and TIN available.
.02Filers should turn off pop-up blocking software before transmitting their files.
.03The browser must support the security standards listed below.
.04The browser must be set to receive “cookies.” Cookies are used to preserve the User ID status.
.05Point the browser to h
ttp://fire.irs.govto connect to the FIRE System.
.06FIRE Internet Security Technical Standards are:
2010–42 I.R.B.448October 18, 2010

HTTP 1.1 Specification (http://www.w3.org/Protocols/rfc2616/rfc2616.txt)
SSL 3.0 or TLS 1.0. SSL and TLS are implemented using SHA and RSA 1024 bits during the asymmetric handshake.
SSL 3.0 Specifications (h
ttp://wp/netscape.com/eng/ssl3)
TLS 1.0 Specifications (h
ttp://www.ief.org/rfc/rfc2246.txt)
The filer can use one of the following encryption algorithms, listed in order of priority, using SSL or TLS:
AES 256-bit (FIPS–197)
AES 128-bit (FIPS–197)
TDES 168-bit (FIPS–46–3)
F
irsttimeconnectiontotheFIRESystem(If the transmitter has logged on previously, they may skip to Subsequent
Connections to the FIRE System.)
Click“Create New Account”..
Fill out the
registration form and click“Submit”.
Create theUser ID
Create and verify thepassword(the password is user created and must be 8 alpha/numerics,
containing at least 1 uppercase, 1 lowercase and 1 numeric). FIRE will require the password
to be changed periodically.
Click“Create”.
If the message is received“Account Created”, click“OK”.
Enter and verify the 10-digit self-assigned PIN (Personal Identification Number).
Click“Submit”.
If the message is received“Your PIN has been successfully created!”, click“OK”.
Read the bulletin(s) and/or click“Click here to continue”.
S
ubsequentconnectionstotheFIRESystem
Click“Log On”.
Enter th
eUser ID.
Enter thepassword(the password is user assigned and is case sensitive).
Read the bulletin(s) and/or click“Click here to continue”.
U
pload
ingyourfiletotheFIRESystem
At Menu
Options:
Click“Send Information Returns”
Enter theTCC:
Enter theTIN:
Click“Submit”.
The system will then display the company name, address, city, state, ZIP code, phone number,
contact and e-mail address. This information will be used to e-mail the transmitter regarding this
transmission. Update as appropriate and/or Click“Accept”.
Note: Please ensure that the e-mail address is accurate so that the correct person receives
the e-mail and it does not return to us undeliverable. If SPAM filtering software is being
used, please configure it to allow an e-mail from f
ire@irs.govand irs.e-helpmail@irs.gov.
October 18, 20104492010–42 I.R.B.

Click one of the following:
Original File
Correction File
Test File(This option will only be available November 1 through February 15.)
Replacement File(Click on the file to be replaced.)
Enter your 10-digit PIN (not prompted for this if a test is being sent).
Click“Submit.”
Click“Browse”to locate the file and open it.
Click“Upload.”
•Electroni
c Replacement(file was originally transmitted on this system)
Click the f
ile to be replaced.
When the upload is complete, the screen will display the total bytes received and the name of the file that just uploaded.
Print this page and keep it for your records.
If you have more files to upload for that TCC:
Click“File Another?”;otherwise,
Click“Main Menu”.
If no e-mail is received in 5 business days or the e-mail indicates the file is bad, log back into the FIRE System and click on
CHECK FILE STATUS to view the results of the file.
CheckingtheFILESTATUS
At the Main Menu:
Click“Check File Status”.
Enter theTCC:
Enter theTIN:
Click“
Search”.
If “Results” indicate:
“Good, Not Released”— If the record count agrees with your records, the
file is complete. The file will automatically be released after 10 calendar
days unless IRB is contacted within this time frame.
“Good
, Released”— File has been released to our mainline processing.
“Bad”— Click on filename to view error message(s).Correct the errors and
timely resubmit the file as a “replacement”.
“Not yet processed”— File has been received, but we do not have results
available yet. Please check back in a few days.
Click on the desired file for a detailed report of the transmission.
When finished, click onMain Menu.
Click“Log Out”
Close the Web Browser.
Sec. 8. Common Problems and Questions Associated with Electronic Filing
.01The following are the major errors associated with electronic filing:
2010–42 I.R.B.450October 18, 2010

NON-FORMATERRORS
1. SPAM filters are not set to receive e-mail from fire@irs.govand irs.e-helpmail@irs.gov.
To receive e-mai
ls concerning files, processing results, reminders and notices, set the SPAM filter to receive e-mail from
f
ire@irs.govan
di
rs.e-helpmail@irs.gov.
2. Incorrect e-mail address provided.
When the “Verify Your Filing Information” screen is displayed,make sure the correct e-mail address is displayed. If not,
please update with the correct e-mail address.
3. Transmitter does not check the FIRE System to determine file acceptability.
The results of file transfers are posted to the FIRE System within 5 business days. If the correcte-mail address was provided on
the “Verify Your Filing Information” screen when the file was sent, an e-mail will be sent regarding the FILE STATUS. If the
results in the e-mail indicate “Good, Not Released” and the “Record Count” agrees with your records, then the file is complete. If
there are any other results, please follow the instructions in the Check File Status option. If the file contains errors, get an online
listing of the errors. Date received and number of records is also displayed. If the file is good, but not processed you should
contact IRS/IRB within 10 calendar days from the date of transmission of the file.
4. Replacemen
t file is not submitted timely.
If the file is bad, correct the file and timely resubmit as a replacement.
5. Transmitter compresses several files into one.
Only compress
one file at a time. For example, if there are 10 uncompressed files to send compress each file separately and
send 10 separ
ate compressed files.
6. Transmitter sends an original file that is good, and then sends a correction file for the entire file even though there are
only a few changes.
The correction file, containing the proper coding, should only contain the records requiring correction, not the entire file.
7. File is formatted as EBCDIC.
All files submitted electronically must be in standard ASCII code. All alpha characters must be uppercase.
8. Transmitter has one TCC number, but is filing for multiple companies, which TIN should be used when sending the file?
When sending the file electronically, enter the TIN of the company assigned to the TCC. When a file is uploaded, it will contain
the TINs for the other companies that are being filed. This is the information that will be passed forward.
9. Transmitter sent the wrong file, what should be done?
Call us as soo
naspossibletoll-free 1–866–455–7438.We may be able to stop the file before it has been processed.Please do not
send a replac
ement for a file that is marked as a good file.
Part C. Filing Specifications and Record Layout
.01If the file does not meet these specifications, IRS/IRB will request a replacement file. Filers are encouraged to submit a test
prior to submitting the actual file. Contact IRS/IRBtoll-free 1–866–455–7438for further information.
Note: The only allowable characters in name and address fields are alphas, numeric characters, and blanks. Punctuation such
as periods, hyphens, ampersands, slashes and commas are not allowed and will cause your file to be rejected. For example,
O’Hurley’s Bar & Grill, 210 N. QueenSt., Suite #300 must be entered as OHurleys Bar Grill 210 N Queen St Suite 300.
October 18, 20104512010–42 I.R.B.

Sec. 1. Record Format and Layout
FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
1Establishment Type1
Required.This number identifies the kind of establishment. Enter the number
which describes the type of establishment, as shown below:
1. for an establishment that serves evening meals only (with or without alcoholic
beverages).
2. for an establishment that servesevening meals and other meals (with or
without alcoholic beverages).
3. for an establishment that serves only meals other than evening meals (with or
without alcoholic beverages).
4. for an establishment that serves food, ifat all, only as an incidental part of the
business of serving alcoholic beverages.
2–6Establishment Serial
Numbers
5Required.These five-digit Serial Numbers are for identifying individual
establishments of an employer reporting under the same EIN. The employer
shall assign each establishment a unique number.Numeric characters only.
7–46Establishment Name40
Required.Enter the name of the establishment. Left-justify and fill unused
positions with blanks.Allowable characters are alphas, numeric, and blanks.
47–86Establishment Street
Address
40
Required.Enter the mailing address of the establishment. Street address
should include number, street, apartment or suite number (use P O Box only if
mail is not delivered to street address). Left-justify and blank fill.Allowable
characters are alphas,numeric, and blanks.
87–111Establishment City
25Required.Enter the city, town, or post office. Left-justify and blank fill.
Allowable characters are alphas, numeric, and blanks.
112–113Establishment State2
Required.Enter the state code from the state abbreviations table in Part A,
Sec. 7.
114–122Establishment ZIP
Code
9
Required.Enter the complete nine-digit ZIP Code of the establishment. If using
a five-digit ZIP Code, left-justify the five-digit ZIP Code and fill the remaining
four positions with blanks.
Note: Must be nine numeric characters or 5 numeric characters and four blanks. Do not enter the dash.
123–131Employer
Identification
Number
9
Required.Enter the nine-digit number assigned to the employer by IRS.Do not
enter hyphens, alphas, all 9s or all zeros.
132–171Employer Name40
Required.Enter the name of the employer as it appears on tax forms (e.g.,Form
941). Any extraneous information must be deleted. Left-justify and blank fill.
Allowable characters are alphas, numeric, and blanks.
172–211Employer Street
Address
40
Required.Enter the mailing address of employer. The street address should
include number, street, apartment or suite number (use P O Box only if mail
is not delivered to street address). Left-justify and blank fill.Allowable
characters are alphas,numeric, and blanks.
212–236Employer City
25Required.Enter the city, town, or post office. Left-justify and blank fill.
Allowable characters are alphas, numeric, and blanks.
237–238Employer State2
Required.Enter the state code from the state abbreviations table in Part A,
Sec. 7.
239–247Employer ZIP Code9
Required.Enter the complete nine-digit ZIP Code of the establishment. If using
a five-digit ZIP Code, left-justify the five-digit ZIP Code and fill the remaining
four positions with blanks.
Note: Must be nine numeric characters or 5 numeric characters and four blanks. Do not enter the dash.
2010–42 I.R.B.452October 18, 2010

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
248–259
Charged Tips12
Required.Enter the total amount of tips that are shown on charge receipts
for the calendar year. Amount must be entered in U.S. dollars and cents. The
right-most two positions represent cents. Right-justify and zero fill.If no entry,
zero fill. Numeric characters only. Do notenter decimal points, dollar signs,
or commas.
260–271Charged Receipts12
Required.Enter the total sales for the calendar year other than carry-out sales
or sales with an added service charge of 10 percent or more, that are on charge
receipts.
272–283Service Charge Less
Than 10 Percent
12
Required.Enter the total amount of servicecharges less than 10 percent added
to customers’ bills and were distributed to your employees for the calendar
year. In general, service charges addedto the bill are not tips since the customer
does not have a choice. These servicecharges are treated as wages and are
included on Form W 2. Amount must be entered in U.S. dollars and cents. The
right-most two positions represent cents. Right-justify and zero fill.If no entry,
zero fill. Numeric characters only. Do notenter decimal points, dollar signs,
or commas.
284–295
Indirect Tips
Reported
12
Required.Enter the total amount of tips reported by indirectly tipped employees
(e.g., bussers, service bartenders, cooks) for the calendar year. Do not include
tips received by employees in December of the prior tax year but not reported
until January. Include tips received by employees in December of the tax year
being reported, but not reported until January of the subsequent year. Amount
must be entered in U.S. dollars and cents. The right-most two positions represent
cents. Right-justify and zero fill.If no entry, zero fill. Numeric characters
only. Do not enter decimal points, dollar signs, or commas.
296–307Direct Tips Reported12
Required.Enter the total amount of tips reported by directly tipped employees
(e.g., servers, bartenders) for the calendar year. Do not include tips received by
employees in December of the prior tax year but not reported until January.
Include tips received by employees in December of the tax year being reported,
but not reported until January of the subsequent year. Amount must be entered
in U.S. dollars and cents. The right-most two positions represent cents.
Right-justify and zero fill.If no entry, zero fill. Numeric characters only. Do
not enter decimal points, dollar signs, or commas.
308–319Total Tips Reported12
Required.Enter the total amount of tips reported by all employees (both
indirectly tipped and directly tipped) for the calendar year. Do not include tips
received in December of the prior tax year but not reported until January. Include
tips received in December of the tax year being reported, but not reported until
January of the subsequent year. Amount must be entered in U.S. dollars and
cents. The right-most two positions represent cents. Right-justify and zero fill.
If no entry, zero fill. Numeric characters only. Do not enter decimal points,
dollar signs, or commas.
October 18, 20104532010–42 I.R.B.

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
320–331Gross Receipts12
Required.Enter the total gross receipts from the provision of food and/or
beverages for this establishment for the calendar year. Do not include receipts
for carry-out sales or sales with an added service charge of 10 percent or more.
Do not include in gross receipts chargedtips (field positions 248–259) shown
on charge receipts unless you have reduced the cash sales amount because you
have paid cash to tipped employees for tips they earned that were charged. Do
not include state or local taxes in gross receipts. If you do not charge separately
for food or beverages along with other services (such as a package deal for
food and lodging), make a good faith estimate of the gross receipts attributable
to the food or beverages. This estimate must reflect the cost of providing the
food or beverages plus a reasonable profit factor. Include the retail value of
complimentary food or beverages served to customers if tipping for them is
customary and they are provided in connection with an activity engaged in for
profit whose receipts would not be included as gross receipts from the provision
of food or beverages (e.g., complimentary drinks served to customers at a
gambling casino). Amount must be entered in U.S. dollars and cents. The
right-most two positions represent cents. Right-justify and zero fill.If no entry,
zero fill. Numeric characters only. Do notenter decimal points, dollar signs,
or commas.
332–343Tip Percentage Rate
Times Gross Receipts
12
Required.Enter the amount determined bymultiplying Gross Receipts for
the year (field positions 320–331) by the Tip Percentage Rate (field positions
344–347). For example, if the valueof Gross Receipts is “000045678900” and
Tip Percentage Rate is “0800”, multiply $456,789.00 by .0800 to get $36,543.12
and enter “000003654312”. If tips are allocated using other than the calendar
year, enter zeros; this may occur if you allocated tips based on the time period
for which wages were paid or allocated on a quarterly basis. Amount must be
entered in U.S. dollars and cents. The right-most two positions represent cents.
Right-justify and zero fill.If no entry, zero fill. Numeric characters only. Do
not enter decimal points, dollar signs, or commas.
344–347Tip Percentage Rate4
Required.Enter 8 percent (0800) unless a lower rate has been granted by the
IRS. The determination letter must follow the electronic submission. See Part
A, Sec. 4 .06 for details.Numeric characters only. Do not enter decimal
points, dollar signs, or commas.
348–359
Allocated Tips12
Required.If Tip Percentage Rate times Gross Receipts (field positions 332–343)
is greater than Total Tips Reported (field positions 308–319), then the difference
becomes Allocated Tips. Otherwise, enterall zeros. If tips are allocated using
other than the calendar year, enter the amount of allocated tips from your records.
Amount must be entered in U.S. dollarsand cents. The right-most two positions
represent cents. Right-justify and zero fill.If no entry, zero fill. Numeric
characters only. Do not enter decimal points, dollar signs, or commas.
360Allocation Method1
Required.Enter the allocation method used if Allocated Tips (field positions
348–359) are greater than zero as follows:
0) if allocated tips are equal to zero.
1) for allocation based on hours worked.
2) for allocation based on gross receipts.
3) for allocation based ona good faith agreement.
The good faith agreement must follow the electronic submission. See Part A,
Sec. 4, .05 for details.
2010–42 I.R.B.454October 18, 2010

FORM 8027 RECORD FORMAT
Field
PositionField TitleLength Description and Remarks
Note: The method of allocation of tips based on the number of hours worked as described in Section 31.6053–3(f)(1)(iv)
may be utilized only by an employer that employs less than the equivalent of 25 full-time employees at the establishment
during the payroll period. Section 31.6053–3(j)(19) provides that an employer is considered to employ less than the
equivalent of 25 full-time employees at anestablishment during a payroll period ifthe average number of employee hours
worked per business day during the payroll period is less than 200 hours.
361–364Number of Directly
Tipped Employees
4
Required.Enter the total number (must be greater than zero) of directly tipped
employees employed by the establishment for the calendar year. Right-justify
and zero fill.Numeric characters only.
365–369
Transmitter Control
Code (TCC)
5Required.Enter the 5-digit Transmitter Control Code assigned by the IRS.
370Corrected 8027
Indicator
1
Required.Enter blank for original return. Enter “G” for corrected return. A
corrected return must be a complete newreturn replacing the original return.
371Final Return Indicator1
Required.Enter the appropriate code:
F) if this is the last time you will file Form 8027
N) if this isnotthe last time you will file Form 8027
Do not enter a blank.
372Charge Card Indicator1
Required.Enter the appropriate code:
1) if your establishment accepts credit cards, debit cards or other charges.
2) if your establishment does not accept credit cards, debit cards or other charges.
373ATIP Indicator1
Required.Enter “T” if you are participating in the Attributed Tip Income
Program; otherwise, enter a blank.
374Liable/Not Liable
Indicator
1
Required.Enter the appropriate code:
N) if you are not liable to file Form 8027
Y) if you are liable to file Form 8027
Do not enter a blank.
375–378
Tax Year4
Required.Enter the 4-digit tax year.
379Prior Year Indicator1
Required.Enter a “P”onlyif reporting prior year data; otherwise, enter a blank.
380Test File Indicator1
Required for test files only.Enter “T” if this is a test file; otherwise, enter
a blank.
381–410Reserved30Enter blanks.
411–418Record Sequence
Number
8
Required.Enter the number of the record as it appears within your file. The first
record in your file will be “1” and each record, thereafter, must be incremented
by one in ascending numerical sequence,i.e.2, 3, 4, etc. Right-justify numbers
with leading zeros in the field. For example, the first record in the file would
appear as “00000001”, followed by “00000002”, “00000003” and so on until
you reach the final record of the file.
419–420Blank2Enter blanks or CR/LF characters.
October 18, 20104552010–42 I.R.B.

FORM 8027 RECORD LAYOUT
Establishment TypeEstablishment Serial NumbersEstablishment NameEstablishment Street Address
12–67–4647–86
Establishment CityEstablishment StateEstablishment ZIP CodeEmployer Identification
Number
87–111112–113114–122123–131
Employer NameEmployer Street AddressEmployer CityEmployer State
132–171172–211212–236237–238
Employer Zip CodeCharged TipsCharged ReceiptsService Charge Less Than
10 Percent
239–247
248–259
260–271272–283
Indirect Tips ReportedDirect Tips ReportedTotal Tips ReportedGross Receipts
284–295
296–307308–319320–331
Tip Percentage Rate Times
Gross Receipts
Tip Percentage RateAllocated TipsAllocation Method
332–343344–347
348–359
360
Number of Directly Tipped
Employees
Transmitter Control Code
(TCC)
Corrected 8027 IndicatorFinal Return Indicator
361–364
365–369
370371
Charge Card IndicatorATIP IndicatorLiable/Not Liable
Indicator
Tax YearPrior Year Indicator
372373374
375–378
379
Test File IndicatorReservedRecord Sequence NumberBlank or CR/LF
380381–410411–418419–420
Part D. Extensions of Time
Sec. 1. General
.01An extension of time to file may be requested for Form 8027.
Note: IRS encourages the employer/transmitter community to utilize the online fill-in form in lieu of the paper Form 8809. No
TCC is required to use the online fill-in form.
.02The fill-in Form 8809 may be completed online via the FIRE System. (See Part B, Sec. 7, for instructions on connecting to the
FIRE System.) At the Main Menu, click “Extension of Time Request” and then click “Fill-in Extension Form”. This option is only
used to request an automatic 30-day extension. Extension requests completed online via the FIRE System receive an instant response
if completed properly and timely. If you are requesting an additional extension, you must submit a paper Form 8809. Requests for an
additional extension of time to file information returns are not automatically granted. Requests for additional time are granted only in
cases of extreme hardship or catastrophic event. The IRS will only send a letter of explanation approving or denying your additional
extension request. (Refer to .12 of this Section.)
2010–42 I.R.B.456October 18, 2010

.03A paper Form 8809, Application for Extension of Time to File Information Returns, may be submitted to IRS/IRB at the address
listed in .09 of this section. This form may be used to request an extension of time to file information returns submitted on paper or
electronically to the IRS. Use a separate Form 8809 for each method of filing information returns you intend to use, i.e., electronically
or paper.
.04To be considered, an extension request must be postmarked, transmitted or completed online by the due date of the returns;
otherwise, the request will be denied. (See Part A, Sec. 4, for duedates.) If requesting an extension of time to file several types of
forms, use one Form 8809; however, Form 8809 or file must be submitted no later than the earliest due date. For example, if requesting
an extension of time to file both Forms 8027 and 5498, submit Form 8809 on or before the last day of February.
.05 As soon as it is apparentthat a 30-day extension of time to file is needed, an extension request should be submitted. It may take
up to 30 days for IRS/IRB to respond to an extension request. IRS/IRB does not begin processing extension requests until January.
Extensions completed online via the FIRE System receive instant results.
.06Under certain circumstances, a request for an extension of time may be denied. Whena denial letter is received, any additional
or necessary information may be resubmitted within 20 days.
.07Requesting an extension of time for multiple employers (10 or less) may be done by completing the online fill-in form via the
FIRE System. A separate Form 8809 must be completed online for each employer. Filers may also request an extension for 10 or less
by mailing Form 8809 and attaching a list of the employer names and associated TINs. Form 8809 may be computer-generated or
photocopied. Be sure to use the mostrecently updated version and includeall the pertinent information.
.08Employers/transmitters requesting an extension of time to file formore than 10employers arerequiredto submit the extension
requests online via the fill-in form or in a file electronically (see Sec. 3, for the record layout). For extension requests filed via an
electronic file, the transmitter must fax Form 8809 the same day asthe transmission. If you are requesting an additional extension,
you must fax a signed Form 8809 the same day as the transmission. Be sure to include the reason an additional extension is needed.
.09All requests for an extension of time filed on Form 8809 must be sent using the following address:
Internal Revenue Service
Information Returns Branch
Attn: Extension of Time Coordinator
240 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430
Note: Due to the large volume of mail received by IRS/IRB and the time factor involved in processing Extension of Time (EOT)
requests, it is imperative that the attention line be present on all envelopes or packages containing Form 8809.
.10Requests for extensions of time to file postmarked by the United States Postal Service on or before the due date of the returns,
and delivered by United States mail to IRS/IRB after the due date, are treated as timely under the “timely mailing as timely filing” rule.
A similar rule applies to designated private delivery services (PDSs). Notice 97–26, 1997–1 C.B. 6, provides rules for determining
the date that is treated as the postmark date. For items deliveredby a non-designated Private Delivery Service (PDS), the actual
date of receipt by IRS/IRB will be used as the filing date. For items delivered by a designated PDS, but through a type of service not
designated in Notice 2004–83, 2004–2 C.B. 1030 the actual date of receipt by IRS/IRB will be used as the filing date. The timely
mailing rule also applies to furnishing statements to recipients and participants.
.11Transmitters requesting an extension of time via an electronic file will receive an approval or denial letter, accompanied by a
list of employers covered under that approval/denial.
.12If an additional extension of time is needed, a second Form 8809 or file must be filed by the initial extended due date. Check
line 7 on the form to indicate that an additional extension is being requested. A second 30-day extension will be approved only in
cases of extreme hardship or catastrophic event.If requesting a second 30-day extension of time, submit the information return
files as soon as prepared. Do not wait for IRS/IRB’s response to your second extension request.
.13If an extension request is approved, the approval letter should be kept on file. The approval letter or copy of the approval
letter for extension of time shouldnotbe sent to IRS/IRB with the electronic file. When submitting Form 8027 onpaper onlyto the
Cincinnati Service Center, attach a copy of the approval letter. If an approvalletter has not been received, send a copy of the timely
filed Form 8809.
.14Request an extension for only the current tax year.
.15A signature is not required when requesting an automatic 30-day extension. If a second 30-day extension is requested, the Form
8809MUSTbe signed. Failure to properly complete and sign Form 8809 may cause delays in processing the request or result in a
denial. Carefully read and follow the instructions for Form 8809.
.16Form 8809 may be obtained by calling1–800–TAX–FORM (1–800–829–3676)
. The form is also available atwww.irs.gov.A
copy of Form 8809 is also provided in the back of Publication 1239.
Note: An extension of time to file is not an extension to furnish Form W–2 to the employee.
October 18, 20104572010–42 I.R.B.

Sec. 2. Specifications for Filing Extensions of Time Electronically
.01The specifications in Sec. 3 include the required 200-byte record layout for extensions of time to file requests submitted elec-
tronically. Also included are the instructions for the information that is to be entered in the record.Filers are advised to read this
section in its entirety to ensure proper filing.
.02If a filer does not have an IRS/IRB assigned Transmitter Control Code (TCC), Form 4419, Application for Filing Information
Returns Electronically (FIRE)mustbe submitted to obtain a TCC. This numbermustbe used to submit an extension request electron-
ically. (See Part A, Sec. 6.)
.03For extension requests filed via an electronic file, the transmitter must fax Form 8809 the same day as the transmission. If you
are requesting an additional extension, you must fax a signed Form 8809 the same day as the transmission. Be sure to include the
reason an additional extension is needed.
.04 Transmitters submitting an extension of time via an electronic file should not submit a list of payer names and TINs with
Form 8809 since this information is included in the electronic file. However, Line 6 of Form 8809 must be completed. The fill-in
Form 8809 c
annotbe used in lieu of the paper Form 8809 for electronic files.
.05Do not submit tax year 2010 extension requests filed electronically before January 4, 2011.
Sec. 3. Record Layout — Extension of Time
.01Positions 6 through 188 of the following record should contain information about the employer for whom the extension of time
to file is being requested. Do not enter transmitter information in these fields.OnlyoneTCCmaybepresentinafile.
Record Layout for Extension of Time
Field
Position Field TitleLength Description and Remarks
1–5Transmitter Control Code5
Required.Enter the five-character alpha/numeric Transmitter
Control Code (TCC) issued by IRS.Only one TCC per file is
acceptable.
6–14
Employer TIN9
Required.Must be the valid nine-digit EIN assigned to the employer.
Do not enter blanks, hyphens or alpha characters.All zeros, ones,
twos, etc., will have the effect of an incorrect TIN. For foreign entities
that are not required to have a TIN, this field may be blank; however,
the Foreign Entity Indicator, position 187,mustbe set to “X.”
15–54Employer Name40
Required.Enter the name of the employer whose TIN appears in
positions 6–14. Left-justify information and fill unused positions
with blanks.
55–94Second Employer Name40If additional space is needed, this field may be used to continue
name line information (e.g., c/o First National Bank); otherwise,
enter blanks.
95–134Employer Address40
Required.Enter the employer’s address. Street address should
include number, street, apartment or suite number (or PO Box if
mail is not delivered to a street address).
135–174
Employer City40
Required.Enter the employer’s city, town, or post office.
175–176
Employer State2
Required.Enter the employer’s valid U.S. Postal Service state
abbreviation. (Refer to Part A, Sec. 7.)
177–185 Employer ZIP Code9
Required.Enter the employer’s ZIP Code. If using a five-digit ZIP
Code, left-justify information and fill unused positions with blanks.
186
Document Indicator1
Required.Enter the appropriate document code that indicates the
form for which you are requesting an extension of time.
187Foreign Entity Indicator1Enter “X” if the employer is a foreign entity.
188–198 Blank11Enter blanks.
199–200 Blank2Enter blanks or carriage return/line feed (CR/LF) characters.
2010–42 I.R.B.458October 18, 2010

Extension of Time Record Layout
Transmitter
Control Code
Employer TIN Employer NameSecond
Employer Name
Employer
Address
Employer City Employer State
1–5
6–14
15–5455–9495–134135–174
175–176
Employer ZIP
Code
Document Ind
icator
Foreign Ent
ity
Indicator
BlanksBlank or CR/L
F
177–185
186
187188–198199–200
Sec. 4. Extension of Time for Recipient Copies of Information Returns
.01 Request an extension of time to furnish the statements to recipients of Forms W–2 by submitting a letter to IRS/IRB at the address
listed in Part D, Sec. 1.09. The letter should contain the following information:
(a)Payer name
(b)TIN
(c)Address
(d)Type of return
(e)Specify that the extension request is to provide statements to recipients
(f)Reason for delay
(g)Signature of payer or duly authorized person
.02 Requests for an extension of time to furnish statements to recipients of Forms W–2 are not automatically approved; however, if
approved, generally an extension will allow a MAXIMUM of 30 additional days from the due date. The request must be postmarked
by the date on which the statements are due to the recipients.
.03 Generally, only the payer may sign the letter requesting the extension for recipient copies. A transmitter must have a contractual
agreement with the filers to submit extension requests on their behalf. This should be stated in your letter of request for recipient copy
extensions.
.04 Requests for a recipient extension of time to file for more than 10payers are required to be submitted electronically. (See Sec.
3, for the record layout.)
.05 The fill-in Form 8809 extension option cannot be used to request an extension to furnish statements to recipients.
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part I, §§ 62, 162, 267, 274; 1.62–2, 1.162–17,
1.267(a)–1, 1.274–5.)
Rev. Proc. 2010–39
S
ECTION 1. PURPOSE
This revenue procedure updates Rev.
Proc. 2009–47, 2009–42 I.R.B. 524, and
provides rules for using aper diemrate to
substantiate, under § 274(d) of the Inter-
nal Revenue Code and § 1.274–5 of the
Income Tax Regulations, the amount of
ordinary and necessary business expenses
paid or incurred while traveling away from
home. Taxpayers are not required to use
a method described in this revenue proce-
dure. A taxpayer may substantiate actual
allowable expenses if the taxpayer main-
tains adequate records or other sufficient
evidence.
This revenue procedure provides rules
for using aper diemrate to substantiate
the amount of an employee’s expenses for
lodging, meal, and incidental expenses,
or for meal and incidental expenses only,
that a payor (an employer, its agent, or a
third party) reimburses. Employees and
self-employed individuals that deduct un-
reimbursed expenses for travel away from
home may use aper diemrate for meals
and incidental expenses, or incidental ex-
penses only, under this revenue procedure.
This revenue procedure does not provide
rules for using aper diemrate to substan-
tiate the amount of lodging expenses only.
SECTION 2. BACKGROUND AND
CHANGES
.01 Section 162(a) allows a deduction
for ordinary and necessary expenses paid
or incurred during the taxable year in car-
rying on any trade or business, includ-
ing expenses for travel away from home.
However, under § 262, a taxpayer may not
deduct personal travel or living expenses.
.02 Section 274(n) generally limits the
amount allowable as a deduction under
§ 162 for any expense for food, bever-
ages, or entertainment to 50 percent of the
otherwise allowable amount. For an indi-
vidual during, or incident to, a period of
duty subject to the hours of service lim-
itations of the Department of Transporta-
tion, § 274(n)(3) provides that, for taxable
years beginning in 2008 or thereafter, the
deductible percentage for these expenses is
80 percent.
October 18, 20104592010–42 I.R.B.

.03 To deduct expenses for travel away
from home, a taxpayer must substantiate
the expenses under § 274(d), which also
authorizes the Secretary to prescribe that
some or all of the substantiation require-
ments do not apply to an expense that does
not exceed a particular amount.
.04 Section 1.274–5(g) authorizes the
Commissioner to prescribe rules under
which reimbursement arrangements or
per diemallowances are regarded (1) as
equivalent to substantiation, by adequate
records or other sufficient evidence, of the
amount of travel expenses for purposes
of § 1.274–5(c), and (2) as satisfying the
requirements of an adequate accounting
to the employer of the amount of travel
expenses for purposes of § 1.274–5(f).
.05 For purposes of determining ad-
justed gross income, § 62(a)(2)(A) allows
an employee to deduct business expenses
the employee pays or incurs in performing
services under a reimbursement or other
expense allowance arrangement with a
payor.
.06 Section 62(c) provides that an ar-
rangement is not treated as a reimburse-
ment or other expense allowance arrange-
ment for purposes of § 62(a)(2)(A) if it—
(1) Does not require the employee to
substantiate the expenses covered by the
arrangement to the payor, or
(2) Allows the employee to retain any
amount in excess of the substantiated ex-
penses covered under the arrangement.
Section 62(c) further provides, how-
ever, that substantiation is not required for
the expense to the extent provided in regu-
lations under § 274(d).
.07 Under § 1.62–2(c), a reimburse-
ment or other expense allowance arrange-
ment satisfies the requirements of § 62(c)
if it meets the requirements of business
connection, substantiation, and return-
ing amounts in excess of expenses. In
that case, all amounts paid under the ar-
rangement are treated as paid under an
accountable plan and are excluded from
income and wages. If an arrangement does
not meet these requirements, all amounts
paid under the arrangement are treated as
paid under a nonaccountable plan and are
included in an employee’s gross income,
must be reported as wages or compensa-
tion on the employee’s Form W–2, and are
subject to the withholding and payment of
employment taxes.
.08 Section 1.62–2(e)(2) provides that
substantiation of the amount of a busi-
ness expense in accordance with rules pre-
scribed under the authority of § 1.274–5(g)
is treated as substantiating the amount for
purposes of § 1.62–2.
.09 Under § 1.62–2(f)(2), the Com-
missioner may prescribe rules for treating
an arrangement providingper diemal-
lowances as satisfying the requirement of
returning amounts in excess of expenses
if the arrangement requires the employee
to return amounts that relate to unsub-
stantiated travel days, even though the ar-
rangement does not require the employee
to return the portion of the allowance that
relates to substantiated travel days but that
exceeds the deemed substantiated amount
for those days. The allowance must be
reasonably calculated not to exceed the
amount of the employee’s expenses or
anticipated expenses and the employee
must be required to return within a rea-
sonable period of time any portion of the
allowance that relates to unsubstantiated
travel days. Under § 1.62–2(h)(2)(i)(B),
the portion of the allowance that relates to
substantiated travel days but exceeds the
substantiated amount for those days, and
that the employee is not required to return,
is subject to withholding and payment of
employment taxes. See §§ 31.3121(a)–3,
31.3231(e)–1(a)(5), 31.3306(b)–2, and
31.3401(a)–4 of the Employment Tax
Regulations.
.10 Under § 1.62–2(h)(2)(i)(B)(4), the
Commissioner may prescribe special rules
for the timing of withholding and paying
employment taxes onper diemallowances.
.11 Section 1.274–5(j)(1) authorizes
the Commissioner to establish a method
allowing a taxpayer to treat a specific
amount as paid or incurred for meals while
traveling away from home instead of sub-
stantiating the actual cost.
.12 Section 1.274–5(j)(3) authorizes
the Commissioner to establish a method
allowing a taxpayer to treat a specific
amount as paid or incurred for incidental
expenses while traveling away from home
in lieu of substantiating the actual cost.
.13 This revenue procedure includes
modifications to Rev. Proc. 2009–47 as
follows:
(1) Sections 3.02(1)(a), 4.04(6), and
5.06 provide transition rules for the last 3
months of calendar year 2010.
(2) Section 5.03 contains the list of
high-cost localities and section 5.04 de-
scribes changes to the list of high-cost
localities for purposes of section 5.
.14 The Internal Revenue Service
is evaluating the continuing need for
the high-low method provided in sec-
tion 5 of this revenue procedure, and
requests public comments on this is-
sue. Comments should be submitted
by December 31, 2010, to: Internal
Revenue Service,CC:PA:LPD:PR
(Rev. Proc. 2010-39), Room 5203,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Comments may
be hand delivered between the hours of
8:00 a.m. and 4:00 p.m. Monday to
Friday to CC:PA:LPD:PR (Rev. Proc.
2010-39), Courier’s Desk, Internal
Revenue Service, 1111 Constitution
Avenue NW, Washington, D.C. Comments
also may be transmitted electronically to
Notice.Comments@irscounsel.treas.gov,
indicating Rev. Proc. 2010-39 in
the subject line. All comments will
be available for public inspection and
copying.
SECTION 3. DEFINITIONS
.01Per diem allowance.Theterm“per
diemallowance” means a payment under a
reimbursement or other expense allowance
arrangement that is—
(1) Paid for ordinary and necessary
business expenses incurred, or that the
payor reasonably anticipates will be in-
curred, by an employee for lodging, meal,
and incidental expenses, or for meal and
incidental expenses, for travel away from
home performing services as an employee
of the employer,
(2) Reasonably calculated not to exceed
the amount of the expenses or the antici-
pated expenses, and
(3) Paid at or below the applicable fed-
eralper diemrate, a flat rate or stated
schedule, or in accordance with any other
Service-specified rate or schedule.
.02Federal per diem rate and federal
M&IE rate.
(1)In general. The federalper diem
rate is equal to the sum of the applicable
federal lodging expense rate and the appli-
cable federal meal and incidental expense
(M&IE) rate for the day and locality of
travel.
2010–42 I.R.B.460October 18, 2010

(a)CONUS rates. The rates for lo-
calities in the continental United States
(CONUS) are provided in Appendix A to
41 C.F.R. ch. 301. However, in apply-
ing section 4.01, 4.02, or 4.03 of this rev-
enue procedure, taxpayers may continue
to use the CONUS rates in effect for the
first 9 months of 2010 for expenses of all
CONUS travel away from home that are
paid or incurred during calendar year 2010
instead of the updated GSA rates. A tax-
payer must consistently use either these
rates or the updated rates for the period Oc-
tober 1, 2010, through December 31, 2010.
(b)OCONUS rates. The rates for local-
ities outside the continental United States
(OCONUS) are established by the Secre-
tary of Defense (rates for non-foreign lo-
calities, including Alaska, Hawaii, Puerto
Rico, the Northern Mariana Islands, and
the possessions of the United States) and
by the Secretary of State (rates for for-
eign localities), and are published in the
Per DiemSupplement to the Standardized
Regulations (Government Civilians, For-
eign Areas) (updated on a monthly basis).
(c)Internet access to the rates.The
CONUS and OCONUS rates may be found
on the internet atwww.gsa.gov.
(2)Locality of travel. The term “local-
ity of travel” means the locality where an
employee traveling away from home stops
for sleep or rest.
(3)Incidental expenses. The term “in-
cidental expenses” has the same mean-
ing as in the Federal Travel Regulations,
41 C.F.R. 300–3.1 (2010). The Federal
Travel Regulations currently include as in-
cidental expenses fees and tips given to
porters, baggage carriers, bellhops, hotel
maids, stewards or stewardesses and oth-
ers on ships, and hotel servants in foreign
countries; transportation between places
of lodging or business and places where
meals are taken, if suitable meals can be
obtained at the temporary duty site; and the
mailing cost associated with filing travel
vouchers and payment of employer-spon-
sored charge card billings.
.03Flat rate or stated schedule.
(1)In general. Except as provided in
section 3.03(2) of this revenue procedure,
an allowance is paid at a flat rate or stated
schedule if it is provided on a uniform and
objective basis for the expenses described
in section 3.01 of this revenue procedure.
The allowance may be paid for the number
of days away from home performing ser-
vices as an employee or on any other basis
that is consistently applied and in accor-
dance with reasonable business practice.
Thus, for example, an hourly payment to
cover meal and incidental expenses paid
to a pilot or flight attendant who is travel-
ing away from home performing services
as an employee is an allowance paid at
a flat rate or stated schedule. Likewise,
a payment based on the number of miles
traveled (such as cents per mile) to cover
meal and incidental expenses paid to an
over-the-road truck driver who is traveling
away from home performing services as an
employee is an allowance paid at a flat rate
or stated schedule.
(2)Limitation. An allowance that is
computed on a basis similar to that used
in computing an employee’s wages or
other compensation (such as the number
of hours worked, miles traveled, or pieces
produced) does not meet the business con-
nection requirement of § 1.62–2(d), is not
aper diemallowance, and is not paid at a
flat rate or stated schedule, unless, as of
December 12, 1989, (a) the allowance was
identified by the payor either by making a
separate payment or by specifically iden-
tifying the amount of the allowance, or (b)
an allowance computed on that basis was
commonly used in the industry in which
the employee performed services. See
§ 1.62–2(d)(3)(ii).
SECTION 4. PER DIEM
SUBSTANTIATION METHOD
.01Per diem allowance. If a payor pays
aper diemallowance in lieu of reimburs-
ing actual lodging, meal, and incidental ex-
penses incurred or to be incurred by an
employee for travel away from home, the
amount of the expenses that is deemed sub-
stantiated for each calendar day is equal to
thelesseroftheper diemallowance for
that day or the amount computed at the
federalper diemrate (see section 3.02 of
this revenue procedure) for the locality of
travel for that day (or partial day, see sec-
tion 6.04 of this revenue procedure).
.02Meal and incidental expenses only
per diem allowance. If a payor pays a
per diemallowance only for meal and in-
cidental expenses in lieu of reimbursing
actual meal and incidental expenses in-
curred or to be incurred by an employee for
travel away from home, the amount of the
expenses that is deemed substantiated for
each calendar day is equal to the lesser of
theper diemallowance for that day or the
amount computed at the federal M&IE rate
for the locality of travel for that day or par-
tial day. Aper diemallowance is treated
as paid for meal and incidental expenses
only if (1) the payor pays the employee for
actual expenses for lodging based on re-
ceipts submitted to the payor, (2) the payor
provides the lodging in kind, (3) the payor
pays the actual expenses for lodging di-
rectly to the provider of the lodging, (4)
the payor does not have a reasonable belief
that the employee will or did incur lodging
expenses, or (5) the allowance is computed
on a basis similar to that used in computing
an employee’s wages or other compensa-
tion (such as the number of hours worked,
miles traveled, or pieces produced).
.03Optional method for meal and in-
cidental expenses only deduction. Instead
of the actual expense amount, employees
and self-employed individuals may sub-
stantiate the amount of deductible meal
expenses by using an amount computed
at the federal M&IE rate for the locality
of travel for each calendar day or partial
day the employee or self-employed indi-
vidual is traveling away from home. This
amount is deemed substantiated for pur-
poses of § 1.274–5T(b)(2)(i) and (c), pro-
vided the employee or self-employed indi-
vidual substantiates the elements of time,
place, and business purpose of the travel
for that day or partial day in accordance
with those regulations. See section 6.05(1)
of this revenue procedure for rules related
to the application of the § 274(n) limitation
to amounts determined under this section
4.03. See section 4.05 of this revenue pro-
cedure for a method for substantiating inci-
dental expenses that employees or self-em-
ployed individuals who do not pay or incur
meal expenses may use.
.04Special rules for transportation in-
dustry.
(1)In general. Thissection4.04ap-
plies to (a) a payor that pays aper diem
allowance only for meal and incidental
expenses for travel away from home to
an employee in the transportation indus-
try and computes the amount under section
4.02 of this revenue procedure, or (b) an
employee or self-employed individual in
the transportation industry who computes
the deductible amount for meal and inci-
dental expenses for travel away from home
October 18, 20104612010–42 I.R.B.

under section 4.03 of this revenue proce-
dure.
(2)Transportation industry defined.
For purposes of this section 4.04, an em-
ployee or self-employed individual is in
the transportation industry only if the
employee’s or self-employed individ-
ual’s work (a) is of the type that directly
involves moving people or goods by air-
plane, barge, bus, ship, train, or truck, and
(b) regularly requires travel away from
home which, during any single trip away
from home, usually involves travel to lo-
calities with differing federal M&IE rates.
For purposes of the preceding sentence,
a payor must determine that an employee
or a group of employees is in the trans-
portation industry by using a method that
is consistently applied and in accordance
with reasonable business practice.
(3)Rates. A taxpayer described in sec-
tion 4.04(1) of this revenue procedure may
treat $59 as the federal M&IE rate for any
CONUS locality of travel and $65 as the
federal M&IE rate for any OCONUS lo-
cality of travel. A payor that uses either or
both of these special rates for an employee
must use the special rate(s) for all amounts
deemed substantiated under section 4.02
of this revenue procedure paid to that em-
ployee for travel away from home within
CONUSand/orOCONUSduringthecal-
endar year. Similarly, an employee or
self-employed individual who uses either
or both of these special rates must use the
special rate(s) for all amounts deemed sub-
stantiated under section 4.03 of this rev-
enue procedure for travel away from home
within CONUS and/or OCONUS during
the calendar year. See section 4.04(6) of
this revenue procedure for transition rules.
(4)Periodic rule. A payor described
in section 4.04(1) of this revenue proce-
dure may compute the amount of the em-
ployee’s expenses that is deemed substan-
tiated under section 4.02 of this revenue
procedure periodically (not less frequently
than monthly) rather than daily by compar-
ing the totalper diemallowance paid for
the period to the sum of the amounts com-
puted either at the federal M&IE rate(s) for
the localities of travel, or at the special rate
described in section 4.04(3), for the days
or partial days the employee is away from
home during the period.
(5)Examples.
(a)Example 1. Taxpayer, an employee in the
transportation industry, travels away from home on
business within CONUS for 16 days (including par-
tial days) during a calendar month. A payor pays Tax-
payer aper diemallowance for meal and incidental
expenses only that the payor computes using section
4.04(3) of this revenue procedure and the method of
proration described in section 6.04(2) of this revenue
procedure. The amount deemed substantiated under
section 4.02 of this revenue procedure is equal to the
lesser of the totalper diemallowance paid for the
month or $944 (16 days at $59 per day).
(b)Example 2. Taxpayer, a truck driver employee
in the transportation industry, is paid a “cents-per-
mile” allowance that qualifies as an allowance paid
under a flat rate or stated schedule as defined in sec-
tion 3.03 of this revenue procedure. Taxpayer travels
away from home on business for 10 days. Based on
the number of miles Taxpayer drives, Taxpayer’s em-
ployer pays an allowance of $500 for the 10 days of
business travel. Taxpayer actually drives for 8 days,
and does not drive for the other 2 days Taxpayer is
away from home. Taxpayer is paid under the peri-
odic rule used for transportation industry employers
and employees in accordance with section 4.04(4) of
this revenue procedure. The amount deemed substan-
tiated is the full $500 because that amount does not
exceed $590 (ten days away from home at $59 per
day).
(6)Transition rules. Under the calen-
dar-year convention provided in section
4.04(3), a taxpayer who used the federal
M&IE rates during the first 9 months of
calendar year 2010 to substantiate the
amount of an individual’s travel expenses
under sections 4.02 or 4.03 of Rev. Proc.
2009–47 may not use, for that individ-
ual, the special transportation industry
ratesprovidedinthissection4.04until
January 1, 2011. Similarly, a taxpayer who
used the special transportation industry
rates during the first 9 months of calendar
year 2010 to substantiate the amount of an
individual’s travel expenses may not use,
for that individual, the federal M&IE rates
until January 1, 2011.
.05Optional method for incidental ex-
penses only deduction. Instead of using
actual expenses in computing the amount
allowable as a deduction for ordinary
and necessary incidental expenses paid
or incurred for travel away from home,
employees and self-employed individuals
who pay or incur incidental expenses but
do not pay or incur meal expenses for a
calendar day or partial day of travel away
from home may use, for each calendar day
or partial day the employee or self-em-
ployed individual is away from home, an
amount computed at the rate of $5 per day
for any CONUS or OCONUS locality of
travel. This amount is deemed substanti-
ated for purposes of § 1.274–5T(b)(2)(i)
and (c), provided the employee or self-em-
ployed individual substantiates the ele-
ments of time, place, and business purpose
of the travel for that day or partial day in
accordance with those regulations. See
section 4.03 of this revenue procedure for
a method that may be used by employees
or self-employed individuals who pay or
incur meal expenses. The method autho-
rized by this section 4.05 may not be used
by payors that use section 4.01, 4.02, or
5.01 of this revenue procedure, or by em-
ployees or self-employed individuals who
use the method described in section 4.03
of this revenue procedure. See section
6.05(5) of this revenue procedure for rules
related to the application of the § 274(n)
limitation to amounts determined under
this section 4.05.
SECTION 5. HIGH-LOW
SUBSTANTIATION METHOD
.01In general. If a payor pays aper
diemallowance in lieu of reimbursing
actual lodging, meal, and incidental ex-
penses an employee incurs or will incur
for travel away from home and the payor
uses the high-low substantiation method
described in this section 5 for travel within
CONUS, the amount of the expenses that
is deemed substantiated for each calendar
day is equal to the lesser of theper diem
allowance for that day or the amount com-
puted at the rate provided in section 5.02
of this revenue procedure for the locality
of travel for that day or partial day (see
section 6.04 of this revenue procedure).
Except as provided in section 5.06 of this
revenue procedure, this high-low substan-
tiation method may be used in lieu of the
per diemsubstantiation method provided
in section 4.01 of this revenue procedure,
but may not be used instead of the meal
and incidental expenses onlyper diem
substantiation method provided in section
4.02 of this revenue procedure.
.02Specific high-low rates. Except as
provided in section 5.06 of this revenue
procedure, theper diemrate set forth in this
section 5.02 is $233 for travel to any “high-
cost locality” specified in section 5.03 of
this revenue procedure, and $160 for travel
to any other locality within CONUS. The
high or low rate, as appropriate, applies
as if it were the federalper diemrate for
the locality of travel. For purposes of ap-
plying the high-low substantiation method
and the § 274(n) limitation on meal ex-
2010–42 I.R.B.462October 18, 2010

penses (see section 6.05(3) of this revenue
procedure), the amount of the high and low
rates that is treated as paid for meals is
$65 for a high-cost locality and $52 for any
other locality within CONUS.
.03High-cost localities. The following
localities have a federalper diemrate of
$196 or more, and are high-cost localities
for all of the calendar year or the portion of
the calendar year specified in parentheses
under the key city name:
Key CityCounty or other defined location
Arizona
Phoenix/ScottsdaleMaricopa
(January 1-May 31)
SedonaCity limits of
Sedona
(March 1-April 30)
California
MontereyMonterey
NapaNapa
(October 1
-November 30 and April 1-September 30)
San DiegoSan Diego
San FranciscoSan Francisco
Santa BarbaraSanta Barbara
Santa MonicaCity limits of Santa Monica
South Lake TahoeEl Dorado
Yosemit
e National Park
Maripos
a
Colorado
AspenPitkin
(December 1-March 31 and June 1-August 31)
Denver/AuroraDenver, Adams, Arapahoe, and Jefferson
Silve
rthorne/Breckenridge
Summi
t
(December 1-March 31)
Steamboat SpringsRoutt
(December 1-March 31)
TellurideSan Miguel
(December 1-March 31)
Va
il
Ea
gle
(December 1-August 31))
District of Columbia
Washington D.C. (also the cities of Alexandria, Falls Church,and Fairfax, and the counties of Arlington and Fairfax, in
Virginia; and the counties of Montgomery and Prince George’s in Maryland) (See also Maryland and Virginia)
Florida
Fort LauderdaleBroward
(January 1-May 31)
Fort Walton Beach/De Funiak SpringsOkaloosa and Walton
(June 1-July 31)
Key WestMonroe
MiamiMiami-Dade
(December 1-March 31)
NaplesCollier
(January 1-April 30)
Illinois
ChicagoCook and Lake
October 18, 20104632010–42 I.R.B.

Key CityCounty or other defined location
Louisiana
New OrleansOrleans, St. Bernard, Jefferson and
Plaquemine Parishes
(October 1-June 30)
Maine
Bar HarborHancock
(July 1-August 31)
Maryland
Baltimore CityBaltimore City
(October 1-November 30 and March 1-September 30)
Cambridge
/St. Michaels
Dorcheste
r and Talbot
(June 1-August 31)
Ocean CityWorcester
(June 1-August 31)
Washington, DC Metro AreaMontgomery and Prince George’s
Massach
usetts
Boston/CambridgeSuffolk, City of Cambridge
FalmouthCity limits of Falmouth
(July 1-August 31)
Martha’s VineyardDukes
(July 1-August 31)
Nant
ucket
Nant
ucket
(June 1-September 30)
New Hampshire
ConwayCarroll
(July 1-August 31)
New York
Floral Park/Garden City/Great NeckNassau
Glens FallsWarren
(July 1-August 31)
Lake PlacidEssex
(July 1-August 31)
Manhattan (includes the boroughs of Manhattan, Brooklyn,
the Bronx, Queens and Staten Island)
Bronx, Kings, New York, Queens,
Richmond
Riverhead/Ronkonkoma/MelvilleSuffolk
(June 1-August 31)
Saratoga Springs/SchenectadySaratoga and Schenectady
(July 1-August 31)
Tarrytown/White Plains/New RochelleWestchester
North Carolina
Kill DevilDare
(June 1-August 31)
Pennsylvania
PhiladelphiaPhiladelphia
Rhode Island
Jamestown/Middletown/NewportNewport
(October 1-October 31 and May 1-September 30)
2010–42 I.R.B.464October 18, 2010

Key CityCounty or other defined location
Utah
Park CitySummit
(January 1-March 31)
Vermont
StoweLamoille
(October 1-March 31 and June 1-September 30)
Virginia
Washington, DC Metro AreaCities of Alexandria, Fairfax, and Falls
Church; counties of Arlington and Fairfax
Virginia BeachCity of Virginia Beach
(June 1-August 31)
Washington
SeattleKing
WyomingTeton and Sublette
Jackson/Pinedale
(July 1-August 31)
.04Changes in high-cost localities.
The list of high-cost localities in section
5.03 of this revenue procedure differs from
the list of high-cost localities in section
5.03 of Rev. Proc. 2009–47 (changes
listed by key cities).
(1) The following localities have been
added to the list of high-cost localities:
Yosemite National Park, California; Sil-
verthorne/Breckenridge, Colorado; New
Orleans, Louisiana; Falmouth, Massachu-
setts; Riverhead/Ronkonkoma/Melville,
New York; Kill Devil, North Carolina;
Stowe, Vermont; and Virginia Beach, Vir-
ginia.
(2) The portion of the year for which the
following are high-cost localities has been
changed: South Lake Tahoe, California;
Aspen, Colorado; Telluride, Colorado;
Vail, Colorado; Fort Lauderdale, Florida;
Miami, Florida; and Martha’s Vineyard,
Massachusetts.
(3) The following locality has been re-
moved from the list of high-cost localities:
Hershey, Pennsylvania.
.05Specific limitation.
(1) Except as provided in section
5.05(2) of this revenue procedure, a payor
that uses the high-low substantiation
method for an employee must use that
method for all amounts paid to that em-
ployee for travel away from home within
CONUS during the calendar year. See
section 5.06 of this revenue procedure for
transition rules.
(2) For an employee described in sec-
tion 5.05(1) of this revenue procedure, the
payor may reimburse actual expenses, use
the meal and incidental expenses onlyper
diemsubstantiation method described in
section 4.02 of this revenue procedure, or
use theper diemsubstantiation method de-
scribedinsection4.01ofthisrevenuepro-
cedure for any OCONUS travel away from
home.
.06Transition rules. A payor who
used the substantiation method of sec-
tion 4.01 of Rev. Proc. 2009–47 for an
employee during the first 9 months of cal-
endar year 2010 may not use the high-low
substantiation method in section 5 of this
revenue procedure for that employee until
January 1, 2011. A payor who used the
high-low substantiation method of section
5 of Rev. Proc. 2009–47 for an employee
during the first 9 months of calendar year
2010 must continue to use the high-low
substantiation method for the remainder of
calendar year 2010 for that employee. A
payor described in the previous sentence
may use the rates and high-cost localities
published in section 5 of Rev. Proc.
2009–47, instead of the updated rates
and high-cost localities provided in
section 5 of this revenue procedure, for
travel on or after October 1, 2010, and
before January 1, 2011, if those rates and
localities are used consistently during this
period for all employees reimbursed under
this method.
SECTIO
N 6. LIMITATIONS AND
SPECI
AL RULES
.01In general. The federalper diem
rate and the federal M&IE rate described
in section 3.02 of this revenue procedure
for the locality of travel apply in the same
manner as they apply under the Federal
Travel Regulations, 41 C.F.R. Part 301–11
(2010), except as provided in sections 6.02
through 6.04 of this revenue procedure.
.02Federal per diem rate. A receipt
for lodging expenses is not required in de-
termining the amount of expenses deemed
substantiated under section 4.01 or 5.01 of
this revenue procedure. See section 7.01
of this revenue procedure for the require-
ment that the employee substantiate the
time, place, and business purpose of the
expense.
.03Federal per diem or M&IE rate.A
payor is not required to reduce the federal
per diemrate or the federal M&IE rate for
the locality of travel for meals provided in
kind, provided the payor has a reasonable
belief that the employee incurred or will
incur meal and incidental expenses during
each day of travel.
October 18, 20104652010–42 I.R.B.

.04Proration of the federal per diem
or M&IE rate. Under the Federal Travel
Regulations, in determining the federalper
diemrate or the federal M&IE rate for the
locality of travel, the full applicable fed-
eral M&IE rate is available for a full day
of travel from 12:01 a.m. to 12:00 mid-
night. A taxpayer must use the method de-
scribed in section 6.04(1) of this revenue
procedure for purposes of determining the
amount deemed substantiated under sec-
tion 4.03 or 4.05 of this revenue proce-
dure for partial daysof travel away from
home. For purposes of determining the
amount deemed substantiated under sec-
tion 4.01, 4.02, or 5 of this revenue pro-
cedure for partial days of travel away from
home, a payor may use either of the follow-
ing methods to prorate the federal M&IE
rate to determine the federalper diemrate
or the federal M&IE rate for the partial
days of travel:
(1) The rate may be prorated using the
method prescribed by the Federal Travel
Regulations. Currently the Federal Travel
Regulations allow three-fourths of the ap-
plicable federal M&IE rate for each partial
day during which an employee or self-em-
ployed individual is traveling away from
home performing services as an employee
or self-employed individual. A payor may
apply the same ratio to prorate the al-
lowance for incidental expenses described
in section 4.05 of this revenue procedure;
or
(2) The rate may be prorated using any
method that is consistently applied and is
consistent with reasonable business prac-
tice. For example, if an employee trav-
els away from home from 9 a.m. one day
to 5 p.m. the next day, a method of pro-
ration that results in an amount equal to
two times the federal M&IE rate is con-
sistent with reasonable business practice
(even though the Federal Travel Regula-
tions allow only one and a half times the
federal M&IE rate).
.05Application of the appropriate
§ 274(n) limitation on meal expenses.Ex-
cept as provided in section 6.05(5), all or
part of the amount of an expense deemed
substantiated under this revenue procedure
is subject to the appropriate limitation
under § 274(n) (see section 2.02 of this
revenue procedure) on the deductibility of
food and beverage expenses.
(1) A taxpayer must treat the entire
amount computed for meal and incidental
expenses under section 4.03 of this rev-
enue procedure as an expense for food and
beverages.
(2) If aper diemallowance is paid for
meal and incidental expenses only, a payor
must treat an amount equal to the lesser of
the allowance or the federal M&IE rate for
the locality of travel for each day or partial
day (see section 6.04 of this revenue pro-
cedure) as an expense for food and bever-
ages.
(3) If aper diemallowance is paid for
lodging, meal, and incidental expenses for
each calendar day or partial day an em-
ployee is away from home at a rate equal
to or in excess of the federalper diemrate
for the locality of travel, a payor must treat
an amount equal to the federal M&IE rate
for the locality of travel for each calendar
day or partial day as an expense for food
or beverages.
(4) If aper diemallowance is paid for
lodging, meal, and incidental expenses for
each calendar day or partial day an em-
ployee is away from home at a rate less
than the federalper diemrate for the lo-
cality of travel, a payor must:
(a) Treat an amount equal to the federal
M&IE rate for the locality of travel for
each calendar day or partial day or, if less,
the amount of the allowance, as an expense
for food or beverages; or
(b) Treat an amount equal to 40 percent
of the allowance as an expense for food or
beverages.
(5) None of an amount for incidental ex-
penses computed under section 4.05 of this
revenue procedure is subject to limitation
under § 274(n).
.06No double reimbursement or deduc-
tion. If a payor pays aper diemallowance
in lieu of reimbursing actual lodging,
meal, and incidental expenses, or meal
and incidental expenses, under section 4
or 5 of this revenue procedure, and the
amount is treated as paid under an ac-
countable plan, any additional payment
for those expenses is treated as paid un-
der a nonaccountable plan, is included in
an employee’s gross income, is reported
as wages or other compensation on the
employee’s Form W–2, and is subject
to withholding and payment of employ-
ment taxes. Similarly, if an employee or
self-employed individual computes the
amount allowable as a deduction for meal
and incidental expenses for travel away
from home under section 4.03 or 4.04 of
this revenue procedure, no other deduction
is allowed to the employee or self-em-
ployed individual for those expenses. For
example, an employee receives aper diem
allowance from a payor for lodging, meal,
and incidental expenses, or for meal and
incidental expenses, incurred while trav-
eling away from home and the amount
is treated as paid under an accountable
plan. During that trip, the employee pays
for dinner for the employee and two busi-
ness associates. The payor reimburses as
a business entertainment meal expense
the meal expense for the employee and
the two business associates. Because the
payor also pays aper diemallowance to
cover the cost of the employee’s meals, the
amount paid for the employee’s portion of
the business entertainment meal expense
is treated as paid under a nonaccountable
plan, is reported as wages or other com-
pensation on the employee’s Form W–2,
and is subject to withholding and payment
of employment taxes.
.07Related parties. Sections 4.01 and
5 of this revenue procedure do not apply if
a payor and an employee are related within
the meaning of § 267(b), but for this pur-
pose the percentage of ownership interest
referred to in § 267(b)(2) is 10 percent.
SECTION 7. APPLICATION
.01 An employee satisfies the adequate
accounting and substantiation require-
ments of § 1.274–5(c) and (f)(4) and
§ 1.274–5T(c) if—
(1) The employee uses this revenue
procedure to substantiate to a payor the
amount of the employee’s travel expenses,
and
(2) Within a reasonable period of
time, the employee also substantiates to
the payor the elements of time, place,
and business purpose of the travel
in accordance with § 1.274–5T(b)(2)
and (c) and § 1.274–5(c) (other than
§ 1.274–5(c)(2)(iii)(A)).
.02 An arrangement providingper diem
allowances is treated as satisfying the
requirement of § 1.62–2(f)(2) of return-
ing amounts in excess of expenses if an
employee is required to return within a
reasonable period of time (as defined in
§ 1.62–2(g)) any portion of the allowance
that relates to unsubstantiated travel days,
even though the arrangement does not re-
quire the employee to return the portion of
2010–42 I.R.B.466October 18, 2010

the allowance that relates to substantiated
travel days and that exceeds the amount of
the employee’s expenses deemed substan-
tiated. For example, a payor provides an
employee an advanceper diemallowance
for meal and incidental expenses of $250,
basedonananticipated5daysofbusi-
ness travel at $50 per day to a locality for
which the federal M&IE rate is $46, and
the employee substantiates 3 full days of
business travel. The requirement to return
excess amounts is treated as satisfied if
the employee is required to return within
a reasonable period of time (as defined in
§ 1.62–2(g)) the portion of the allowance
that is attributable to the 2 unsubstantiated
days of travel ($100), even though the
employee is not required to return the por-
tion of the allowance ($12) that exceeds
the amount of the employee’s expenses
deemed substantiated under section 4.02
of this revenue procedure ($138) for the
3 substantiated days of travel. However,
the $12 excess portion of the allowance
is treated as paid under a nonaccountable
planasdiscussedinsection7.04ofthis
revenue procedure.
.03 An employee is not required to in-
clude in gross income the portion of a
per diemallowance received from a payor
that is less than or equal to the amount
deemed substantiated under the rules pro-
vided in section 4 or 5 of this revenue pro-
cedure if the employee substantiates the
business travel expenses covered by the
per diemallowance in accordance with
section 7.01 of this revenue procedure. See
§ 1.274–5T(f)(2)(i). If the remaining re-
quirements for an accountable plan pro-
vided in § 1.62–2 are satisfied, that por-
tion of the allowance is treated as paid un-
der an accountable plan, is not reported as
wages or other compensation on the em-
ployee’s Form W–2, and is exempt from
the withholding and payment of employ-
ment taxes. See § 1.62–2(c)(2) and (c)(4).
.04 An employee is required to include
in gross income only the portion of theper
diemallowance received from a payor that
exceeds the amount deemed substantiated
under the rules provided in section 4 or 5
of this revenue procedure if the employee
substantiates the business travel expenses
coveredbytheper diemallowance in
accordance with section 7.01 of this rev-
enue procedure. See § 1.274–5T(f)(2)(ii).
In addition, the excess portion of the
allowance is treated as paid under a nonac-
countable plan, is reported as wages or
other compensation on the employee’s
Form W–2, and is subject to withholding
and payment of employment taxes. See
§ 1.62–2(c)(3)(ii), (c)(5), and (h)(2)(i)(B).
.05 If the amount of the expenses that is
deemed substantiated under the rules pro-
vided in section 4.01, 4.02, or 5 of this rev-
enue procedure is less than the amount of
an employee’s business expenses for travel
away from home, an employee may claim
an itemized deduction for the amount by
which the business travel expenses exceed
the amount that is deemed substantiated,
provided the employee substantiates all the
business travel expenses (not just the ex-
cess over the federalper diemrate), in-
cludes on Form 2106, “Employee Business
Expenses,” the deemed substantiated por-
tion of theper diemallowance received
from the payor, and includes in gross in-
cometheportion(ifany)oftheper diem
allowance received from the payor that ex-
ceeds the amount deemed substantiated.
See § 1.274–5T(f)(2)(iii). However, for
purposes of claiming this itemized deduc-
tion for meal and incidental expenses, sub-
stantiation of the amount of the expenses
is not required if the employee is claim-
ing a deduction that is equal to or less than
the amount computed under section 4.03 of
this revenue procedure minus the amount
deemed substantiated under sections 4.02
and 7.01 of this revenue procedure. The
itemized deduction is subject to the appro-
priate limitation (see section 2.02 of this
revenue procedure) on meal and entertain-
ment expenses in § 274(n) and the 2-per-
cent floor on miscellaneous itemized de-
ductions in § 67.
.06 An employee who pays or incurs
meal expenses and does not receive aper
diemallowance for meal and incidental ex-
penses may deduct an amount computed
under section 4.03 of this revenue proce-
dure only as an itemized deduction. This
itemized deduction is subject to the ap-
propriate limitation on meal and entertain-
ment expenses in § 274(n) and the 2-per-
cent floor on miscellaneous itemized de-
ductions in § 67.
.07 An employee who does not pay or
incur amounts for meal expenses and does
not receive aper diemallowance for in-
cidental expenses may deduct an amount
computed under section4.05ofthisrev-
enue procedure only as an itemized deduc-
tion. This itemized deduction is subject to
the 2-percent floor onmiscellaneous item-
ized deductions in § 67.
.08 A self-employed individual who
pays or incurs meal expenses for a calen-
dar day or partial day of travel away from
home may deduct an amount computed
under section 4.03 of this revenue proce-
dure in determining adjusted gross income
under § 62(a)(1), subject to the appropri-
ate limitation on meal and entertainment
expenses in § 274(n).
.09 A self-employed individual who
does not pay or incur meal expenses for a
calendar day or partial day of travel away
from home may deduct an amount com-
puted under section 4.05 of this revenue
procedure in determining adjusted gross
income under § 62(a)(1).
SECTION 8. WITHHOLDING AND
PAYMENT OF EMPLOYMENT TAXES
.01Theportionofaper diemal-
lowance, if any, that relates to the days
of business travel substantiated and that
exceeds the amount deemed substantiated
for those days under section 4.01, 4.02, or
5 of this revenue procedure is treated as
paid under a nonaccountable plan and is
subject to withholding and payment of em-
ployment taxes. See § 1.62–2(h)(2)(i)(B).
.02 In the case of aper diemallowance
paid as a reimbursement, the excess de-
scribed in section 8.01 of this revenue pro-
cedure is subject to withholding and pay-
ment of employment taxes in the payroll
period in which a payor reimburses the ex-
penses for the days of travel substantiated.
See § 1.62–2(h)(2)(i)(B)(2).
.03 In the case of aper diemallowance
paid as an advance, the excess described
in section 8.01 of this revenue procedure
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll period
in which the days of travel for which the
advance was paid are substantiated. See
§ 1.62–2(h)(2)(i)(B)(3). If an employee
does not substantiate some or all of the
days of travel for which the advance was
paid within a reasonable period of time
or does not return the portion of the al-
lowance that relates to those days within
a reasonable period of time, the portion of
the allowance that relates to those days is
subject to withholding and payment of em-
ployment taxes no later than the first pay-
October 18, 20104672010–42 I.R.B.

roll period following the end of the reason-
able period. See § 1.62–2(h)(2)(i)(A).
.04 In the case of aper diemallowance
only for meal and incidental expenses for
travel away from home paid to an em-
ployee in the transportation industry by a
payor that uses the rule in section 4.04(4)
of this revenue procedure, the excess of
theper diemallowance paid for the pe-
riod over the amount deemed substanti-
ated for the period under section 4.02 of
this revenue procedure (after applying sec-
tion 4.04(4) of this revenue procedure),
is subject to withholding and payment of
employment taxes no later than the first
payroll period following the payroll pe-
riod in which the excess is computed. See
§ 1.62–2(h)(2)(i)(B)(4).
.05 For example, an employer pays an
employee aper diemallowance under an
arrangement that otherwise meets the re-
quirements of an accountable plan to cover
business expenses for meals and lodging
for travel away from home at a rate of 120
percent of the federalper diemrate for
the localities to which the employee trav-
els. The employer does not require the em-
ployee to return the 20 percent by which
the reimbursement for those expenses ex-
ceeds the federalper diemrate. The em-
ployee substantiates 6 days of travel away
from home: 2 days in a locality where the
federalper diemrate is $150 and 4 days
in a locality where the federalper diem
rate is $130. The employer reimburses
the employee $984 for the 6 days of travel
away from home (2 x (120% x $150) + 4 x
(120% x $130)), and does not require the
employee to return the excess payment of
$164 (2 days x $30 ($180-$150) + 4 days
x $26 ($156-$130)). For the payroll pe-
riod in which the employer reimburses the
expenses, the employer must withhold and
pay employment taxes on $164. See sec-
tion 8.02 of this revenue procedure.
.06 All payments to an employee under
aper diemallowance arrangement are
treated as paid under a nonaccountable
plan if the reimbursement arrangement
evidences a pattern of abuse. An arrange-
ment evidences a pattern of abuse if, for
example, it has no process to determine
when an allowance exceeds the amount
that may be deemed substantiated and the
arrangement routinely pays allowances in
excess of the amount that may be deemed
substantiated without requiring actual sub-
stantiation or repayment of the excess
amount or treating the excess allowances
as wages for employment tax purposes.
See § 62(c), § 1.62–2(k), and Rev. Rul.
2006–56, 2006–2 C.B. 874. Thus, these
payments are included in the employee’s
gross income, are reported as wages or
other compensation on the employee’s
Form W–2, and are subject to withholding
and payment of employment taxes. See
§§ 1.62–2(c)(3), (c)(5), and (h)(2).
SECTION 9. EFFECTIVE DATE
This revenue procedure is effective for
per diemallowances for lodging, meal
and incidental expenses, or for meal and
incidental expenses only that are paid
to an employee on or after October 1,
2010, for travel away from home on or
after October 1, 2010. For purposes of
computing the amount allowable as a
deduction for travel away from home, this
revenue procedure is effective for meal
and incidental expenses or for incidental
expenses only paid or incurred on or after
October 1, 2010.
SECTION 10. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 2009–47 is superseded.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Karla M. Meola of the Office
of Associate Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, con-
tact Ms. Meola at (202) 622–4930 (not a
toll-free call).
2010–42 I.R.B.468October 18, 2010

Part IV. Items o
fGeneralInterest
Notice of Prop
osed
Rulemaking an
dNoticeof
Public Hearin
g
Electronic Fu
nds Transfer of
Depository T
axes
REG–153340–
09
AGENCY: Inte
rnal Revenue Service
(IRS), Treas
ury.
ACTION: Noti
ce of proposed rulemaking
and notice o
f public hearing.
SUMMARY: Th
is document contains
proposed re
gulations relating to Federal
tax deposit
s (FTDs) by Electronic Funds
Transfer (E
FT). The proposed regulations
affect all t
axpayers that currently use FTD
coupons. I
n response to the decision of
the Financ
ial Management Service to dis-
continue t
he system that processes FTD
coupons, t
he proposed regulations provide
rules und
er which depositors must use
EFT for al
l FTDs and eliminate the rules
regardin
g FTD coupons. This document
also prov
ides notice of a public hearing on
these pro
posed regulations.
DATES: Wr
itten or electronic comments
must be r
eceived by September 22,
2010. Ou
tlines of topics to be discussed
at the pu
blic hearing scheduled for
Septemb
er 27, 2010, must be received by
Septemb
er 20, 2010.
ADDRESS
ES: Send submissions to:
CC:PA:
LPD:PR(REG–153340–09),
Room 52
03, Internal Revenue Service,
P.O. Bo
x 7604, Ben Franklin Station,
Washin
gton, DC 20044. Submissions may
be hand
delivered Monday through Friday
betwe
en the hours of 8 a.m. and 4 p.m.
to: CC
:PA:LPD:PR (REG–153340–09),
Couri
er’s Desk, Internal Revenue Ser-
vice,
1111 Constitution Avenue, N.W.,
Washi
ngton, DC, or sent electroni-
call
y via the Federal eRulemaking Por-
tal a
thttp://www.regulations.gov(IRS
REG–
153340–09). The public hearing
will
be held in the IRS Auditorium, Inter-
nal R
evenue Building, 1111 Constitution
Aven
ue, N.W., Washington, DC.
FOR FURTHER IN
FORMATION
CONTACT: Conc
erning the proposed
regulations,
Michael E. Hara, (202)
622–4910; con
cerning submissions of
comments, the
hearing, and/or to be placed
on the buildi
ng access list to attend the
hearing, Reg
ina Johnson, (202) 622–7180
(not toll-fr
ee numbers).
SUPPLEMENTA
RY INFORMATION:
Background
This documen
t contains proposed
amendments
to the Income Tax Regula-
tions (26 CF
R part 1), the Employment
Tax and Coll
ection of Income Tax at the
Source Regu
lations (26 CFR part 31),
theExciseT
ax Procedural Regulations
(26 CFR par
t 40), and the Procedure and
Administr
ation Regulations (26 CFR part
301), to re
quire that all FTDs be made by
EFT.
These prop
osed regulations are ex-
pected to b
e finalized by the end of 2010.
The final r
egulations are expected to apply
to remitt
ances made after the date that
final reg
ulations are published in theFed-
eral Regi
ster, but in no event earlier than
January 1
,2011.
Explanat
ion of Provisions
1.Requir
ement to make deposits by
electro
nic funds transfer
Section
6302(h) of the Internal Rev-
enue Cod
e (Code) authorizes the Secretary
to presc
ribe regulations as may be neces-
sary for
the development and implemen-
tation o
f an EFT system that is required
to be us
ed for the collection of depository
taxes.
On July 14, 1997, final regulations
under s
ection 6302(h) relating to the col-
lectio
n of Federal tax deposits (FTDs) by
EFT (T.
D. 8723, 1997–2 C.B. 258 [62 FR
37490]
) were issued. These final regula-
tions
phased in depositors to the EFT sys-
tem th
rough 1999. In the final stages of
the ph
ase-in under those regulations, de-
posit
ors with more than $50,000 in em-
ploym
ent tax deposits during calendar year
1995
, 1996, or 1997, and depositors that,
in an
y of those years, had no employment
tax d
eposits but made deposits of other
FTDs
exceeding $50,000, were required to
begi
n to deposit by EFT.
On July 13, 199
9, final regulations
amending T.D.
8723 (T.D. 8828, 1999–2
C.B. 120 [64 FR
37675]) were issued. Un-
der those regu
lations, which are currently
in effect, dep
ositors whose aggregate an-
nual FTDs exc
eed $200,000 generally
must use EFT.
Depositors that exceed
the $200,000
threshold have an initial
one-year gra
ce period after which they
must use EFT
in all later years even if their
FTDs fall be
low the threshold.
The Electro
nic Federal Tax Payment
System (EFT
PS) is the EFT system cur-
rently used
by the Treasury Department
to collect F
TDs. More than 97.5 percent
of all FTDs
are currently deposited elec-
tronicall
y through EFTPS. Depositors not
currently
required to use EFTPS for de-
posits may
instead use the paper-based
FTD coupon
systemtomakeadepositby
presenti
ng a check and an FTD coupon
to a bank t
eller at one of approximately
8,000 fin
ancial institutions authorized as
a governm
ent depositary or to a financial
agent, a
process that dates back to World
War I.
These pr
oposed regulations are be-
ing issu
ed to effectuate system changes
made by t
he Financial Management Ser-
vice (FM
S), a Bureau of the Treasury
Departm
ent. Beginning in 2011, FMS is
elimin
ating the system that enables the
proces
sing of FTD coupons. Accordingly,
these p
roposed regulations require the use
of EFT f
or all FTDs, effective January 1,
2011. T
he proposed regulations remove
refer
ences to “banking” days and provide
that,
if the day an FTD would otherwise
be due
is a Saturday, Sunday, or legal
holid
ay under section 7503, the taxes will
be tre
ated as timely deposited if deposited
on th
e next succeeding day which is not
aSat
urday, Sunday, or legal holiday. The
prop
osed regulations do not change ex-
isti
ng rules for determining a depositor’s
stat
us as either a monthly or semi-weekly
dep
ositor for employment taxes. The
pro
posed regulations also do not change
exi
sting rules on whether a taxpayer can
rem
it taxes with a return in lieu of making
an F
TD.
For
example, under the proposed reg-
ula
tions, employers must deposit income
tax
es withheld from wages and taxes un-
de
r the Federal Insurance Contributions
October 18, 20104692010–42 I.R.B.

Act (FICA) (collectively, “employment
taxes”) by EFT unless the existingde
minimisrule under §31.6302–1T(f)(4) ap-
plies. Generally, thede minimisrule for
employment taxes allows employers with
a deposit liability of less than $2,500 for
a return period to remit employment taxes
with their quarterly or annual return. Em-
ployers below the $2,500 threshold may
remit the employment taxes with their tax
return, may voluntarily make deposits by
EFT, or may use other methods of payment
as provided by the instructions relating to
the return.
2.Taxes required to be deposited by EFT
Because the FTD coupon system will
be eliminated by FMS, the proposed reg-
ulations require all FTDs of the following
taxestobemadebyEFT:
1. Corporate income and corporate esti-
mated taxes pursuant to §1.6302–1;
2. Unrelated business income taxes of
tax-exempt organizations under sec-
tion 511 pursuant to §1.6302–1;
3. Private foundation excise taxes under
section 4940 pursuant to §1.6302–1;
4. Taxes withheld on nonresident aliens
and foreign corporations pursuant to
§1.6302–2;
5. Estimated taxes on certain trusts pur-
suant to §1.6302–3;
6. FICA taxes and withheld income
taxes pursuant to §31.6302–1;
7. Railroad retirement taxes pursuant to
§31.6302–2;
8. Nonpayroll taxes, including backup
withholding pursuant to §31.6302–4;
9. FederalUnemploymentTax
Act (FUTA) taxes pursuant to
§31.6302(c)–3; and
10. Excise taxes reported on Form 720,
Quarterly Federal Excise Tax Return,
pursuant to §40.6302(c)–1.
3.Benefits of EFTPS
The benefits to taxpayers using EFTPS
are substantial. According to IRS data,
depositors using EFTPS are 31 times
less likely to make an error resulting in
a penalty than depositors using an FTD
coupon. Depositors can schedule an
EFTPS transaction 120 days in advance
of the desired payment date at their con-
venience, 24 hours a day, 365 days a
year. EFTPS also provides a confirmation
number, called an “EFT Number,” which
guarantees depositors that the tax deposit
has been scheduled and allows the trans-
action to be traced if necessary. EFTPS
processes over 100 million transactions
per year, totaling nearly $2 trillion dollars,
with an error rate of 0.18 percent. In ad-
dition, many financial institutions are no
longer accepting FTD coupons through
their branch infrastructure. Eliminating
FTD coupons will also result in projected
cost savings for the Federal Government
of at least $65 million over the first five
years, with an estimated savings of $13
million each year thereafter.
These proposed regulations also align
with the Treasury Department’s broad ini-
tiative to significantly increase the number
of electronic transactions between taxpay-
ers and the Federal Government. In addi-
tion to greatly reducing costs, enhancing
customer service, and minimizing Trea-
sury’s environmental impact, the move
from paper to electronic transactions will
increase reliability, safety, and security for
taxpayers.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required.
It also has been determined that sec-
tion 553(b) of the Administrative Proce-
dure Act (5 U.S.C. chapter 5) does not ap-
ply to these regulations and because this
regulation does not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section 7805(f)
of the Code, these regulations have been
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
for comment on their impact on small busi-
ness.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, considera-
tion will be given to any written (a signed
original and eight (8) copies) or electronic
comments that are submitted timely to the
IRS. Comments are requested on the clar-
ity of the proposed regulations and how
they can be made more understandable.
Comments are also requested on the accu-
racy of the certification that the regulations
in this document will not have a signif-
icant economic impact on a substantial
number of small entities. All comments
will be available for public inspection and
copying.
A public hearing has been scheduled for
September 27, 2010, at 10:00 a.m. in the
IRS Auditorium, Internal Revenue Build-
ing, 1111 Constitution Avenue, N.W.,
Washington, DC. Due to building security
procedures, visitors must enter at the Con-
stitution Avenue entrance. In addition, all
visitors must present photo identification
to enter the building. Because of access
restrictions, visitors will not be admitted
beyond the immediateentrance area more
than 30 minutes before the hearing starts.
For information about having your name
placed on the building access list to attend
the hearing, see the “FOR FURTHER IN-
FORMATION CONTACT” section of this
preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit written or electronic comments by
September 22, 2010 and an outline of the
topics to be discussed and the time to be
devoted to each topic (a signed original
and eight (8) copies) by September 20,
2010. A period of 10 minutes will be
allotted to each person for making com-
ments. An agenda showing the scheduling
of the speakers will be prepared after the
deadline for receivingoutlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal author of these proposed
regulations is Michael E. Hara, Office of
the Associate ChiefCounsel (Procedure
and Administration).
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 31, 40,
and301areproposedtobeamendedas
follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by revising the entry for
2010–42 I.R.B.470October 18, 2010

Section 1.1461–1 and 1.6302–1 through
1.6302–4 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.1461–1, 1.6302–1, 1.6302–2,
1.6302–3 and 1.6302–4 also issued under
26 U.S.C. 6302(h). * * *
Par. 2. Section 1.1461–1 is amended by
revising paragraph (a)(1), first sentence, to
read as follows:
§1.1461–1 Payment and returns of tax
withheld.
(a)Payment of withheld tax—(1)De-
posits of tax. Every withholding agent
who withholds tax pursuant to chapter 3 of
the Internal Revenue Code (Code) and the
regulations under such chapter shall de-
posit such amount of tax as provided in
§1.6302–2(a). * * *
*****
Par. 3. Section 1.6302–1 is amended
by:
1. Revising the heading.
2. Revising paragraph (a).
3. Removing paragraph (b)(1) and re-
designating paragraph (b)(2) as paragraph
(b).
4. Removing paragraph (c).
5. Redesignating paragraph (d) as para-
graph (c).
6. Adding paragraph (d).
The revisions and additions read as fol-
lows:
§1.6302–1 Deposit rules for corporation
income and estimated income taxes and
certain taxes of tax-exempt organizations.
(a)Requirement. A corporation, any
organization subject to the tax imposed
by section 511, and any private founda-
tion subject to the tax imposed by section
4940 shall deposit all payments of tax im-
posed by chapter 1 of the Internal Revenue
Code (or treated as so imposed by section
6154(h)), including any payments of esti-
mated tax, on or before the date otherwise
prescribed for paying such tax. This para-
graph (a) does not apply to a foreign corpo-
ration or entity that has no office or place
of business in the United States.
(b)Deposits by electronic funds trans-
fer. ***
*****
(d)Effective/applicability date.This
section applies to deposits and payments
made after the date that final regulations
are published in theFederal Register,but
no earlier than January 1, 2011.
Par. 4. Section 1.6302–2 is amended
by:
1. Revising the heading.
2. Revising paragraphs (a)(1)(i), (ii),
and (iv).
3. Revising the heading for paragraph
(b).
4. Revising paragraph (b)(1).
5. Removing paragraph (b)(6).
6. Adding a sentence to the end of para-
graph (g).
The revisions and additions read as fol-
lows:
§1.6302–2 Deposit rules for tax withheld
on nonresident aliens and foreign
corporations.
(a)Time for making deposits—(1)De-
posits—(i)Monthly deposits. Except as
provided in paragraphs (a)(1)(ii) and (iv)
of this section, every withholding agent
that, pursuant to chapter 3 of the Inter-
nal Revenue Code, has accumulated at the
close of any calendar month an aggregate
amount of undeposited taxes of $200 or
more shall deposit such aggregate amount
within 15 days after the close of such cal-
endar month. However, the preceding sen-
tence shall not apply if the withholding
agent has made a deposit of taxes pursuant
to paragraph (a)(1)(ii) of this section to a
quarter monthly period that occurred dur-
ing such month. With respect to section
1446, this section applies only to a publicly
traded partnership described in §1.1446–4.
(ii)Quarter-monthly deposits.Ifatthe
close of any quarter-monthly period within
a calendar month, the aggregate amount
of undeposited taxes required to be with-
held pursuant to chapter 3 of the Inter-
nal Revenue Code is $2,000 or more, the
withholding agent shall deposit such ag-
gregate amount within 3 business days af-
ter the close of such quarter-monthly pe-
riod. Business days include every calen-
dar day other than Saturdays, Sundays, or
legal holidays under section 7503. If any
of the three weekdays following the close
of a quarter-monthly period is a legal hol-
iday under section 7503, the withholding
agent has an additional day for each day
that is a legal holiday by which to make
the required deposit. For example, if the
Monday following the close of a quar-
ter-monthly period is New Year’s Day, a
legal holiday, the required deposit for the
quarter-monthly period is not due until the
following Thursday rather than the follow-
ing Wednesday.
*****
(iv)Annual deposits.Ifatthecloseof
December of each calendar year, the ag-
gregate amount of undeposited taxes re-
quired to be withheld pursuant to chapter
3 of the Internal Revenue Code is less than
$200, the withholding agent may deposit
such aggregate amount by March 15 of the
following calendar year. If such aggregate
amount is not so deposited, it shall be re-
mitted in accordance with paragraph (a)(1)
of §1.1461–1.
*****
(b)Manner of payment—(1)Payments
not required by electronic funds transfer.
A payment that is not required to be de-
posited by this section shall be made sep-
arately from a payment required by any
other section. The payment may be sub-
mitted with the filed return. The timeliness
of the payment will be determined by the
date payment is received by the Internal
Revenue Service at the place prescribed
for filing by regulations or forms and in-
structions, or if section 7502(a) applies, by
the date the payment is treated as received
under section 7502(a). Each withholding
agent making payments under this section
shall report on the return, for the period to
which such payments are made, informa-
tion regarding such payments according to
the instructions that apply to such return.
*****
(g)***Paragraph(b)(1)ofthissection
applies to payments made after the date
that final regulations are published in the
Federal Register, but no earlier than Jan-
uary 1, 2011.
Par. 5. Section 1.6302–3 is amended
by:
1. Revising the heading.
2. Revising paragraph (a).
3. Revising paragraph (c).
4. Adding paragraph (d).
The revisions and additions read as fol-
lows:
§1.6302–
3Deposit rules for estimated
taxes of c
ertain trusts.
(a)Requirement. A bank or other finan-
cial institution described in paragraph (b)
of this section shall deposit all payments
October 18, 20104712010–42 I.R.B.

of estimated tax under section 6654(l) with
respect to trusts for which such institution
acts as a fiduciary by the date otherwise
prescribed for paying such tax in the man-
ner set forth in published guidance, forms
and instructions.
*****
(c)Cross-references. For the require-
ment to deposit estimated tax payments of
taxable trusts by electronic funds transfer,
see §31.6302–1(h) of this chapter.
(d)Effective/applicability date.This
section applies to payments made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
Par. 6. Section 1.6302–4 is revised to
read as follows:
§1.6302–4 Voluntary payments by
electronic funds transfer.
(a)Electronic funds transfer.Anyper-
son may voluntarily remit by electronic
funds transfer any payment of tax imposed
by subtitle A of the Internal Revenue Code,
including any payment of estimated tax.
Such payment must be made in accordance
with procedures prescribed by the Com-
missioner.
(b)Effective/applicability date.This
section applies to payments made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Par. 7. The authority citation for part
31 is amended by removing the entries for
sections 31.6302–1 through 31.6302–3,
31.6302–4, and 31.6302(c)–2A and adding
entries in numerical order to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
Section 31.6302–1 also issued under
26 U.S.C. 6302(a) and (h).
Section 31.6302–1T also issued under
26 U.S.C. 6302(a).
Section 31.6302–2, 31.6302–3, and
31.6302–4 also issued under 26 U.S.C.
6302(a) and (h).
Section 31.6302(c)–2A also issued un-
der 26 U.S.C. 6157(d) and 6302(a) and (h).
Section31.6302(c)–3alsoissuedunder
26 U.S.C. 6302(a) and (h). * * *
§31.6302–0 [Amended]
Par. 8. Section 31.6302–0 is amended
by removing the entries for §31.6302–1T.
Par. 9. Section 31.6302–1 is amended
by:
1. Revising the heading.
2. Revising paragraphs (c)(1), (c)(2),
(c)(3), and (c)(4).
3. Revising paragraph (d)Example 1,
Example 2,Example 3,Example 4,and
Example 5.
4. Revising paragraph (h)(2)(ii).
5. Redesignating paragraph (h)(2)(iii)
as paragraph (h)(2)(iv) and revising
newly-designated paragraph (h)(2)(iv).
6. Adding new paragraph (h)(2)(iii).
7. Revising paragraph (i)(1) and (i)(3).
8. Removing paragraphs (i)(4), (i)(5)
and (i)(6).
9. Adding paragraph (o).
The revisions and additions read as fol-
lows:
§31.6302–1 Deposit rules for taxes under
the Federal Insurance Contributions Act
(FICA) and withheld income taxes.
*****
(c)Deposit rules—(1)Monthly rule.
An employer that is a monthly depositor
must deposit employment taxes accu-
mulated with respect to payments made
during a calendar month by electronic
funds transfer by the 15th day of the fol-
lowing month. If the 15th day of the
following month is a Saturday, Sunday,
or legal holiday, taxes will be treated as
timely deposited if deposited on the next
succeeding day which is not a Saturday,
Sunday, or legal holiday under section
7503.
(2)Semi–Weekly rule—(i)In general.
An employer that is a semi-weekly depos-
itor for a calendar year must deposit em-
ployment taxes by electronic funds trans-
fer by the dates set forth below:
Payment dates/semi-weekly periodsDeposit date
(A) Wednesday, Thursday and/or FridayOn or before the following Wednesday.
(B) Saturday, Sunday, Monday and/or TuesdayOn or before the following Friday.
(ii)Semi-weekly period spanning two
return periods. If the return period ends
during a semi-weekly period in which an
employer has two or more payment dates,
two deposit obligations may exist. For ex-
ample, if one quarterly return period ends
on Thursday and a new quarterly return pe-
riod begins on Friday, employment taxes
from payments on Wednesday and Thurs-
day are subject to one deposit obligation,
and taxes from payments on Friday are
subject to a separate deposit obligation.
Two separate federal tax deposits are re-
quired.
(iii)Special rule for computing days.
Semi-weekly depositors have at least three
business days following the close of the
semi-weekly period by which to deposit
employment taxes accumulated during the
semi-weekly period. Business days in-
clude every calendar day other than Satur-
days, Sundays, or legal holidays under sec-
tion 7503. If any of the three weekdays fol-
lowing the close of a semi-weekly period is
a legal holiday under section 7503, the em-
ployer has an additional day for each day
that is a legal holiday by which to make the
required deposit. For example, if the Mon-
day following the close of a Wednesday
to Friday semi-weekly period is Memorial
Day, a legal holiday, the required deposit
for the semi-weekly period is not due un-
til the following Thursday rather than the
following Wednesday.
(3)Exception—One-Dayrule.
Notwithstanding paragraphs (c)(1) and
(c)(2) of this section, if on any day within
a deposit period (monthly or semi-weekly)
an employer has accumulated $100,000
or more of employment taxes, those taxes
must be deposited by electronic funds
transfer in time to satisfy the tax obli-
gation by the close of the next day. If
the next day is a Saturday, Sunday, or le-
gal holiday under section 7503, the taxes
will be treated as timely deposited if de-
posited on the next succeeding day which
is not a Saturday, Sunday, or legal holiday.
2010–42 I.R.B.472October 18, 2010

For purposes of determining whether the
$100,000 threshold is met—
(i) A monthly depositor takes into ac-
count only those employment taxes accu-
mulated in the calendar month in which the
day occurs; and
(ii) A semi-weekly depositor takes into
account only those employment taxes ac-
cumulated in the Wednesday–Friday or
Saturday–Tuesday semi-weekly period in
which the day occurs.
(4)Deposits required only on business
days. No taxes are required to be deposited
under this section on any day that is a Sat-
urday, Sunday, or legal holiday. Deposits
are required only on business days. Busi-
ness days include every calendar day other
than Saturday, Sundays, or legal holidays.
For purposes of this paragraph (c), legal
holidays shall have the same meaning pro-
videdinsection7503.
*****
(d) * * *
Example 1.Monthly depositor.(i)Determination
of status. For calendar year 2011, Employer A deter-
mines its depositor status using the lookback period
July 1, 2009 to June 30, 2010. For the four calen-
dar quarters within this period, A reported aggregate
employment tax liabilities of $42,000 on its quarterly
Forms 941. Because the aggregate amount did not
exceed $50,000, A is a monthly depositor for the en-
tire calendar year 2011.
(ii)Monthly rule. During December 2011, A (a
monthly depositor) accumulates $3,500 in employ-
ment taxes. A has a $3,500 deposit obligation that
must be satisfied by the 15th day of the following
month. Since January 15, 2012, is a Sunday, and Jan-
uary 16, 2012, Dr. Martin Luther King, Jr.’s Birthday,
is a legal holiday, A’s deposit obligation will be satis-
fied if the deposit is made by electronic funds transfer
by the next business day, January 17, 2012.
Example 2.Semi-weekly depositor.(i)Deter-
mination of status. For the calendar year 2011,
Employer B determines its depositor status using
the lookback period July 1, 2009 to June 30, 2010.
For the four calendar quarters within this period,
B reported aggregate employment tax liabilities of
$88,000 on its quarterly Forms 941. Because that
amount exceeds $50,000, B is a semi-weekly depos-
itor for the entire calendar year 2011.
(ii)Semi-weekly rule. On Friday, January 7, 2011,
B (a semi-weekly depositor) has a pay day on which
it accumulates $4,000 in employment taxes. B has a
$4,000 deposit obligation that must be satisfied on or
before the following Wednesday, January 12, 2011.
(iii)Deposit made within three business days.On
Friday, January 14, 2011, B (a semi-weekly depos-
itor) has a pay day on which it accumulates $4,200
in employment taxes. Generally, B would have a re-
quired deposit obligation of employment taxes that
must be satisfied by the following Wednesday, Jan-
uary 19, 2011. Because Monday, January 17, 2011,
is Dr. Martin Luther King, Jr.’s Birthday, a legal hol-
iday, B has an additional day to make the required
deposit. B has a $4,200 deposit obligation that must
be satisfied on or before the following Thursday, Jan-
uary 20, 2011.
Example 3.One–Day rule. On Monday,
January 10, 2011, Employer C accumulates $110,000
in employment taxes with respect to wages paid on
that date. C has a deposit obligation of $110,000 that
must be satisfied by the next business day. If C was
not subject to the semi-weekly rule on January 10,
2011, C becomes subject to that rule as of January
11, 2011. See paragraph (b)(2)(ii) of this section.
Example 4.One–Day rule in combination with
subsequent deposit obligation. Employer D is subject
to the semi-weekly rule for calendar year 2011. On
Monday, January 10, 2011, D accumulates $115,000
in employment taxes. D has a deposit obligation that
must be satisfied by the next business day. On Tues-
day, January 11, D accumulates an additional $30,000
in employment taxes. Although D has a $115,000 de-
posit obligation incurred earlier in the semi-weekly
period, D has an additional and separate deposit obli-
gation of $30,000 on Tuesday that must be satisfied
by the following Friday.
Example 5.[Reserved].
*****
(h) * * *
(2) * * *
(ii)Deposits for return periods begin-
ning after December 31, 1999, and made
before January 1, 2011.Unlessexempted
under paragraph (h)(5) of this section, for
deposits for return periods beginning after
December 31, 1999, and made before Jan-
uary 1, 2011, a taxpayer that deposits more
than $200,000 of taxes described in para-
graph (h)(3) of this section during a cal-
endar year beginning after December 31,
1997, must use electronic funds transfer
(as defined in paragraph (h)(4) of this sec-
tion) to make all deposits of those taxes
that are required to be made for return pe-
riods beginning after December 31 of the
following year and must continue to de-
posit by electronic funds transfer in all suc-
ceeding years. As an example, a taxpayer
that exceeds the $200,000 deposit thresh-
old during calendar year 1998 is required
to make deposits for return periods begin-
ning in or after calendar year 2000 by elec-
tronic funds transfer.
(iii)Deposits made after December 31,
2010. Unless exempted under paragraph
(h)(5) of this section, a taxpayer that has
a required tax depositobligation described
in paragraph (h)(3) of this section must
use electronic funds transfer (as defined in
paragraph (h)(4) of this section) to make
all deposits of those taxes made after De-
cember 31, 2010.
(iv)Voluntary deposits. A taxpayer that
is authorized to make payment of taxes
with a return under regulations may vol-
untarily make a deposit by electronic funds
transfer.
*****
(i)Time and manner of remittance with
areturn—(1)General rules. A remittance
required to be made by this section that is
authorized to be made with a return under
regulations and is made with a return must
be made separately from a remittance re-
quired by any other section. Further, a re-
mittance for a deposit period in one return
period must be made separately from a re-
mittance for a deposit period in another re-
turn period.
*****
(3)Time deemed paid. In general,
amounts remitted with a return under this
section will be considered as paid on the
date payment is received by the Internal
Revenue Service at the place prescribed
for filing by regulations or forms and in-
structions (or if section 7502(a) applies, by
the date the payment is treated as received
under section 7502(a)), or on the last day
prescribed for filing the return (determined
without regard to any extension of time
for filing the return), whichever is later. In
the case of the taxes imposed by chapter
21 and 24 of the Internal Revenue Code,
solely for purposes of section 6511 and the
regulations thereunder (relating to the pe-
riod of limitation on credit or refund), if an
amount is remitted with a return under this
section prior to April 15th of the calendar
year immediately succeeding the calendar
year that contains theperiodforwhich
the amount was remitted, the amount will
be considered paid on April 15th of the
succeeding calendar year.
*****
(o)Effective/applicability date. Para-
graphs (c), (d) Examples 1 through 5,
(h)(2)(ii), (h)(2)(iii), (h)(2)(iv),(i)(1) and
(i)(3) of this section apply to payments
made after the date that final regulations
are published in theFederal Register,but
no earlier than January 1, 2011.
Par. 10. Section 31.6302–1T is
amended by:
1. Revising paragraph (g)(1).
2. Revising paragraph (n)(1).
The revisions read as follows:
October 18, 20104732010–42 I.R.B.

§31.6302–1T Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992 (temporary).
*****
(g)Agricultural employers—Special
rules—(1)In general. An agricultural em-
ployer reports wages paid to farm workers
annually on Form 943 (Employer’s Annual
Tax Return for Agricultural Employees)
and reports wages paid to nonfarm work-
ers quarterly on Form 941 or annually on
Form 944. Accordingly, an agricultural
employer must treat employment taxes re-
portable on Form 943 (“Form 943 taxes”)
separately from employment taxes re-
portable on Form 941 or Form 944 (“Form
941 or Form 944 taxes”). Form 943 taxes
and Form 941 or Form 944 taxes are not
combined for purposes of determining
whether a deposit of either is due, whether
the One–Day rule of §31.6302–1(c)(3)
applies, or whether any safe harbor is
applicable. In addition, Form 943 taxes
and Form 941 or Form 944 taxes must be
deposited separately. (See §31.6302–1(b)
for rules for determining an agricultural
employer’s deposit status for Form 941
taxes.) Whether an agricultural employer
is a monthly or semi-weekly depositor of
Form 943 taxes is determined according
to the rules of this paragraph (g).
*****
(n)Effective/applicability dates—(1)
In general. Sections 31.6302–1 through
31.6302–3 apply with respect to the de-
posit of employment taxes attributable
to payments made after December 31,
1992. To the extent that the provisions
of §§31.6302–1 through 31.6302–3
are inconsistent with the provisions of
§§31.6302(c)–1 and 31.6302(c)–2, a
taxpayer will be considered to be in
compliance with §§31.6301–1 through
31.6302–3 if the taxpayer makes timely
deposits during 1993 in accordance
with §§31.6302(c)–1 and 31.6302(c)–2.
Paragraphs (b)(4), (c)(5), (c)(6), (d)
Example 6, (e)(2), (f)(4)(i), (f)(4)(iii),
(f)(5)Example 3, and (g)(1) of this section
apply to taxable years beginning on or
after December 30, 2008. Paragraph
(f)(4)(ii) of this section applies to taxable
years beginning on or after January 1,
2010. The rules of paragraphs (e)(2)
and (g)(1) of this section that apply to
taxable years beginning before December
30, 2008, are contained in §31.6302–1 in
effect prior to December 30, 2008. The
rules of paragraphs (b)(4), (c)(5), (c)(6),
(d)Example 6, (f)(4)(i), (f)(4)(iii), and
(f)(5)Example 3of this section that apply
to taxable years beginning on or after
January 1, 2006, and before December 30,
2008, are contained in §31.6302–1T in
effect prior to December 30, 2008. The
rules of paragraphs (b)(4) and (f)(4) of
this section that apply to taxable years
beginning before January 1, 2006, are
contained in §31.6302–1 in effect prior to
January 1, 2006. The rules of paragraph
(g) eliminating use of Federal tax deposit
coupons apply to deposits and payments
made after the date that final regulations
are published in theFederal Register,but
no earlier than January 1, 2011.
*****
Par. 11. Section 31.6302–2 is amended
by:
1. Revising the heading.
2. Revising paragraph (d).
The revisions read as follows.
§31.6302–2 Deposit rules for taxes under
the Railroad Retirement Tax Act (RRTA).
*****
(d)Effective/applicability date.This
section applies to payments made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
Par. 12. Section 31.6302–4 is amended
by:
1. Revising the heading.
2. Revising paragraph (d).
3. Adding paragraph (e).
The revisions and additions read as fol-
lows:
§31.6302–4 Deposit rules for withheld
income taxes attributable to nonpayroll
payments.
*****
(d)Special rules. A taxpayer must
treat nonpayroll withheld taxes, which are
reported on Form 945, “Annual Return
of Withheld Federal Income Tax,” sepa-
rately from taxes reportable on Form 941,
“Employer’s QUARTERLY Federal Tax
Return” (or any other return, for example,
Form 943, “Employer’s Annual Federal
Tax Return for Agricultural Employees”).
Taxes reported on Form 945 and taxes re-
ported on Form 941 are not combined for
purposes of determining whether a deposit
of either is due, whether the One-Day rule
of §31.6302–1(c)(3) applies, or whether
any safe harbor is applicable. In addi-
tion, taxes reported on Form 945 and
taxes reported on Form 941 must be de-
posited separately. (See paragraph (b)
of §31.6302–1 for rules for determining
an employer’s deposit status for taxes re-
ported on Form 941.) Taxes reported on
Form 945 for one calendar year must be
deposited separately from taxes reported
on Form 945 for another calendar year.
(e)Effective/applicability date. Section
31.6302–4(d) applies to payments made
after the date that final regulations are pub-
lished in theFederal Register, but no ear-
lier than January 1, 2011.
§31.6302
(c)–2A [REMOVED]
Par. 13. Section 31.6302(c)–2A is re-
moved.
Par. 14. Section 31.6302(c)–3 is
amended by:
1. Revising the heading.
2. Revising paragraph (a)(1), introduc-
tory text.
3. Revising paragraph (a)(1)(i).
4. Revising paragraph (a)(1)(ii), intro-
ductory text.
5. Removing paragraph (a)(3).
6. Revising paragraph (b).
7. Revising paragraph (c).
8. Removing paragraph (d).
The revisions read as follows:
§31.6302(c)–3 Deposit rules for taxes
under the Federal Unemployment Tax Act.
(a)Requirement—(1)In general.Ex-
cept as provided in paragraph (a)(2) of this
section, every person that, by reason of the
provisions of section 6157, computes the
tax imposed by section 3301 on a quarterly
or other time period basis shall—
(i) If the person is described in section
(a)(1) of section 6157, deposit the amount
of such tax by the last day of the first cal-
endar month following the close of each of
the first three calendar quarters in the cal-
endar year; or
(ii) If the person is other than a person
described in section (a)(1) of section 6157,
deposit the amount of such tax by the last
day of the first calendar month following
the close of—
2010–42 I.R.B.474October 18, 2010

*****
(b)Manner of deposit—(1)In general.
A deposit required to be made by an em-
ployer under this section shall be made
separately from a deposit required by any
other section. An employer may make one,
or more than one, remittance of the amount
required to be deposited. An employer that
is not required to deposit an amount of
tax by this section may nevertheless vol-
untarily make that deposit. For the require-
ment to deposit tax under the Federal Un-
employment Tax Act by electronic funds
transfer, see §31.6302–1(h).
(2)Time deemed paid.Forthe
time an amount deposited by elec-
tronic funds transfer is deemed paid, see
§31.6302–1(h)(9). For the time an amount
remitted with a return is deemed paid, see
§31.6302–1(i)(3).
(c)Effective/applicability date.This
section applies to payments made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
PART 40—EXCISE TAX
PROCEDURAL REGULATIONS
Par. 15. Th
e authority citation for part
40 contin
ues to read in part as follows:
Authority
:26U.S.C.7805***
Par. 16. Se
ction 40.6302(c)–1 is
amended by
:
1. Revisin
g the heading.
2. In parag
raph (b)(2)(v), removing the
language “
that failure may be reported to
the appro
priate IRS office and”.
3. Revisin
g paragraphs (d) and (f).
The revisi
ons read as follows:
§40.6302(c)–1 Deposits.
*****
(d)Deposits required by electronic
funds transfer. All deposits required
by this part must be made byelectronic
funds transfer, as that term is defined in
§31.6302–1(h)(4) of this chapter.
*****
(f)Effec
tive/applicability date.This
section a
pplies to deposits made after the
date that
final regulations are published in
theFeder
al Register, but no earlier than
January
1, 2011.
*****
§40.6302(c)–2 [Amended]
Par. 17. Section 40.6302(c)–2, para-
graph (c), is amended by removing the lan-
guage “2001” and adding “2001, except
that paragraph (b) of this section does not
apply on and after the date described in
§40.6302(c)–1(f)” in its place.
Par. 18. Section 40.6302(c)–3 is
amended as follows:
1. The heading is revised to read as set
forth below.
2. In paragraph (c), the language “bank-
ing” is removed in both places it appears
and “business” is added in its place.
3. In paragraph (g), the language
“2004” is removed and “2004, except that
paragraph (f)(5) of this section does not
apply on and after the date described in
§40.6302(c)–1(f)”is added in its place.
§40.6302(c)–3 Special rules for deposits
under chapter 33.
*****
PART 301—PROCEDURE AND
ADMINISTRATION
Par. 19. The authority citation for part
301 is amended to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 20. Section 301.6302–1 is revised
to read as follows:
§301.6302–1 Manner or time of collection
of taxes.
(a)Employment and excise taxes.For
provisions relating to the manner or time of
collection of certain employment and ex-
cise taxes and deposits in connection with
the payment thereof, see the regulations re-
lating to the particular tax.
(b)Income taxes. (1) For provisions re-
lating to the deposits of income and es-
timated income taxes of certain corpora-
tions, see §1.6302–1 of this chapter (In-
come Tax Regulations).
(2) For provisions relating to the de-
posits of tax required to be withheld un-
der chapter 3 of the Code on nonresident
aliens and foreign corporations and tax-
free covenant bonds, see §1.6302–2 of this
chapter.
(c)Effective/applicability date.This
section applies to payments made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
Par. 21. Section 301.6656–1 is
amended by:
1. Revising paragraph (b).
2. Revising paragraph (c).
The revisions read as follows:
§301.6656–1 Abatement of penalty.
*****
(b)Deposit sent to Secretary. The Sec-
retary may abate the penalty imposed by
section 6656(a) if the first time a depositor
is required to make a deposit, the amount
required to be deposited is inadvertently
sent to the Secretary rather than deposited
by electronic funds transfer.
(c)Effective/applicability date.This
section applies to deposits made after the
date that final regulations are published in
theFederal Register, but no earlier than
January 1, 2011.
§301.7502–2 [REMOVED]
Par. 22. Section 301.7502–2 is re-
moved.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
Filed by the Office of the Federal Register on August 19,
2010, 4:15p.m., and published in the issue of the Federal Reg-
ister for August 23, 2010, 75 F.R. 51707)
Deletions From Cumulative
List of Organizations
Contributions to Which
are Deductible Under Section
170 of the Code
Announcement 2010–79
The Internal Revenue Service has re-
voked its determination that the organi-
zations listed below qualify as organiza-
tions described in sections 501(c)(3) and
170(c)(2) of the Internal Revenue Code of
1986.
Generally, the Service will not disallow
deductions for contributions made to a
listed organization on or before the date
of announcement in the Internal Revenue
Bulletinthatanorganizationnolonger
qualifies. However, the Service is not
October 18, 20104752010–42 I.R.B.

precluded from disallowing a deduction
for any contributions made after an or-
ganization ceases to qualify under section
170(c)(2) if the organization has not timely
filed a suit for declaratory judgment under
section 7428 and if the contributor (1) had
knowledge of the revocation of the ruling
or determination letter, (2) was aware that
such revocation was imminent, or (3) was
in part responsible for or was aware of the
activities or omissions of the organization
that brought about this revocation.
If on the other hand a suit for declara-
tory judgment has been timely filed, con-
tributions from individuals and organiza-
tions described in section 170(c)(2) that
are otherwise allowable will continue to
be deductible. Protection under section
7428(c) would begin on October 18, 2010,
and would end on the date the court first
determines that the organization is not de-
scribed in section 170(c)(2) as more partic-
ularly set forth in section 7428(c)(1). For
individual contributors, the maximum de-
duction protected is $1,000, with a hus-
band and wife treated as one contributor.
This benefit is not extended to any indi-
vidual, in whole or in part, for the acts or
omissions of the organization that were the
basis for revocation.
Coach Ken Carter Foundation
Richmond, CA
First Step, Inc.
Manahawkin, NJ
Updates to Publication 1220,
Specifications for Filing Forms
1097-BTC, 1098, 1099,
3921, 3922, 5498, 8935 and
W-2G, Electronically, revised
August 2010.
Announcement 2010–82
This announcement updates and clar-
ifies changes to Publication 1220 (Rev.
Proc. 2010–26),Specifications for Fil-
ing Forms 1097-BTC, 1098, 1099, 3921,
3922, 5498, 8935, and W-2G Electroni-
cally. The following are changes or clar-
ifications to Publication 1220 effective for
tax year 2010:
•Publication 1220 went to print before
Public Law 111-240, Small Business
Jobs Act of 2010 (H.R. 5297), was
signed by the President. P.L. 111-240
increases penalties for failure to timely
file information returns to the IRS.
The first-tier penalty is increased from
$15 to $30, and the calendar year max-
imum is increased from $75,000 to
$250,000. The second-tier penalty is
increased from $30 to $60, and the cal-
endar year maximum is increased from
$150,000 to $500,000. The third-tier
penalty is increased from $50 to $100,
and the calendar year maximum is
increased from $250,000 to $1.5 mil-
lion. For small filers, the calendar year
maximum is increased from $25,000
to $75,000 for the first-tier penalty,
from $50,000 to $200,000 for the sec-
ond-tier penalty, and from $100,000 to
$500,000 for the third-tier penalty. The
minimum penalty for each failure due
to intentional disregard is increased
from $100 to $250. The penalty
amounts are to be adjusted every five
years for inflation. Penalties for failure
to file information returns to payees
are similarly increased. The changes
apply to information returns required
to be filed on or after January 1, 2011.
(2010 information returns).
•For Form 1099-INT, additional in-
structions for Payee B record field
positions 587–599 (CUSIP number).
For single bondsor accounts contain-
ing a single bond, enter the CUSIP
number in field positions 587–599. If
the tax-exempt interest is reported in
the aggregate for multiple bonds or
accounts, enter: VARIOUS in field
positions 587–599.
•For Form 1099-R, change to the in-
structions for Payee B record field
positions 545–546 Distribution Code.
Distribution Codes 3, 5, 9, E, F, N, Q,
R, S and T cannot be used with any
other codes. Code 6 can be used with
Code W as stated in the FORM 1099-R
DISTRIBUTION CODE CHART
2010 which appears on page 81 of the
2010 Publication 1220.
If you have any questions, contact the
Internal Revenue Service, Information Re-
porting Program, toll-free 866–455–7438.
2010–42 I.R.B.476October 18, 2010

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
October 18, 2010i2010–42 I.R.B.

Numerical Finding List
1
Bulletins 2010–27 through 2010–42
Announcements:
2010-43, 2010-27 I.R.B.42
2010-44, 2010-28 I.R.B.54
2010-45, 2010-29 I.R.B.87
2010-46, 2010-29 I.R.B.87
2010-47, 2010-30 I.R.B.173
2010-48, 2010-32 I.R.B.234
2010-49, 2010-34 I.R.B.272
2010-50, 2010-33 I.R.B.260
2010-51, 2010-33 I.R.B.261
2010-52, 2010-36 I.R.B.315
2010-53, 2010-36 I.R.B.323
2010-54, 2010-38 I.R.B.386
2010-55, 2010-37 I.R.B.346
2010-56, 2010-39 I.R.B.398
2010-57, 2010-38 I.R.B.386
2010-58, 2010-38 I.R.B.387
2010-59, 2010-39 I.R.B.399
2010-60, 2010-40 I.R.B.417
2010-61, 2010-40 I.R.B.417
2010-62, 2010-40 I.R.B.417
2010-63, 2010-40 I.R.B.417
2010-64, 2010-40 I.R.B.418
2010-65, 2010-40 I.R.B.418
2010-66, 2010-40 I.R.B.418
2010-67, 2010-40 I.R.B.418
2010-68, 2010-40 I.R.B.418
2010-69, 2010-40 I.R.B.418
2010-70, 2010-40 I.R.B.418
2010-71, 2010-40 I.R.B.418
2010-72, 2010-40 I.R.B.419
2010-73, 2010-40 I.R.B.419
2010-74, 2010-40 I.R.B.419
2010-75, 2010-41 I.R.B.428
2010-76, 2010-41 I.R.B.432
2010-77, 2010-41 I.R.B.433
2010-78, 2010-41 I.R.B.433
2010-79, 2010-42 I.R.B.475
2010-82, 2010-42 I.R.B.476
Notices:
2010-48, 2010-27 I.R.B.9
2010-49, 2010-27 I.R.B.10
2010-50, 2010-27 I.R.B.12
2010-51, 2010-29 I.R.B.83
2010-52, 2010-30 I.R.B.88
2010-53, 2010-31 I.R.B.182
2010-54, 2010-40 I.R.B.403
2010-55, 2010-33 I.R.B.253
2010-56, 2010-33 I.R.B.254
2010-57, 2010-34 I.R.B.267
2010-58, 2010-37 I.R.B.326
Notices— Continued:
2010-59, 2010-39 I.R.B.396
2010-60, 2010-37 I.R.B.329
2010-61, 2010-40 I.R.B.408
2010-62, 2010-40 I.R.B.411
2010-63, 2010-41 I.R.B.420
2010-64, 2010-41 I.R.B.421
2010-65, 2010-41 I.R.B.424
2010-66, 2010-42 I.R.B.437
Proposed Regulations:
REG-139343-08, 2010-33 I.R.B.256
REG-151605-09, 2010-31 I.R.B.184
REG-153340-09, 2010-42 I.R.B.469
REG-112841-10, 2010-27 I.R.B.41
REG-118412-10, 2010-29 I.R.B.85
REG-119046-10, 2010-40 I.R.B.415
REG-120391-10, 2010-35 I.R.B.310
REG-120399-10, 2010-32 I.R.B.239
Revenue Procedures:
2010-25, 2010-27 I.R.B.16
2010-26, 2010-30 I.R.B.91
2010-27, 2010-31 I.R.B.183
2010-28, 2010-34 I.R.B.270
2010-29, 2010-35 I.R.B.309
2010-30, 2010-36 I.R.B.316
2010-31, 2010-40 I.R.B.413
2010-32, 2010-36 I.R.B.320
2010-33, 2010-38 I.R.B.347
2010-34, 2010-41 I.R.B.426
2010-35, 2010-42 I.R.B.438
2010-36, 2010-42 I.R.B.439
2010-37, 2010-42 I.R.B.440
2010-39, 2010-42 I.R.B.459
Revenue Rulings:
2010-18, 2010-27 I.R.B.1
2010-19, 2010-31 I.R.B.174
2010-20, 2010-36 I.R.B.312
2010-21, 2010-39 I.R.B.388
2010-22, 2010-39 I.R.B.388
2010-23, 2010-39 I.R.B.388
2010-24, 2010-40 I.R.B.400
Tax Conventions:
2010-48, 2010-32 I.R.B.234
2010-52, 2010-36 I.R.B.315
Treasury Decisions:
9486, 2010-27 I.R.B.3
9487, 2010-28 I.R.B.48
9488, 2010-28 I.R.B.51
9489, 2010-29 I.R.B.55
9490, 2010-31 I.R.B.176
9491, 2010-32 I.R.B.186
Treasury Decisions— Continued:
9492, 2010-33 I.R.B.242
9493, 2010-35 I.R.B.273
1
A cumulative list of all revenue rulings, revenueprocedures, Treasury decisions, etc., publishedin Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin
2010–26, dated June 28, 2010.
2010–42 I.R.B.iiOctober 18, 2010

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2010–27 through 2010–42
Notices:
96-53
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2003-19
Revoked by
Notice 2010-53, 2010-31 I.R.B.182
2004-2
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2004-50
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2005-90
Supplemented by
Notice 2010-65, 2010-41 I.R.B.424
2006-69
Amplified by
Notice 2010-59, 2010-39 I.R.B.396
2008-51
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2008-52
Modified by
Notice 2010-59, 2010-39 I.R.B.396
2009-47
Obsoleted by
Rev. Proc. 2010-28, 2010-34 I.R.B.270
2009-80
Corrected by
Ann. 2010-59, 2010-39 I.R.B.399
2009-90
Superseded by
Notice 2010-54, 2010-40 I.R.B.403
Proposed Regulations:
REG-115037-00
Withdrawn by
Ann. 2010-60, 2010-40 I.R.B.417
REG-146893-02
Withdrawn by
Ann. 2010-60, 2010-40 I.R.B.417
Revenue Procedures:
81-18
Obsoleted by
Rev. Proc. 2010-27, 2010-31 I.R.B.183
Revenue Procedures— Continued:
2007-44
Modified by
Notice 2010-48, 2010-27 I.R.B.9
2009-18
Obsoleted in part by
Rev. Proc. 2010-25, 2010-27 I.R.B.16
2009-30
Superseded by
Rev. Proc. 2010-26, 2010-30 I.R.B.91
2009-35
Superseded by
Rev. Proc. 2010-33, 2010-38 I.R.B.347
2009-46
Superseded by
Rev. Proc. 2010-37, 2010-42 I.R.B.440
2009-47
Superseded by
Rev. Proc. 2010-39, 2010-42 I.R.B.459
2009-50
Modified by
Rev. Proc. 2010-35, 2010-42 I.R.B.438
2010-3
Modified by
Notice 2010-62, 2010-40 I.R.B.411
Revenue Rulings:
2003-102
Obsoleted by
Rev. Rul. 2010-23, 2010-39 I.R.B.388
Treasury Decisions:
9487
Corrected by
Ann. 2010-50, 2010-33 I.R.B.260
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2010–1 through 2010–26 is in Internal Revenue Bulletin 2010–26, dated June 28, 2010.
October 18, 2010iii2010–42 I.R.B.

2010–42 I.R.B.October 18, 2010

October 18, 20102010–42 I.R.B.

INTERNAL REVENUE BULLETIN
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