Electronic Payee Statements

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Parts 1, 31, 301, and 602 [TD 8942]
RIN 1545-AY00

TITLE: Electronic Payee Statements

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains temporary regulations under sections
6041 and 6051 relating to the voluntary electronic furnishing of
payee statements on Forms W-2, and under section 6050S relating to
the voluntary electronic furnishing of statements to individuals for
whom Forms 1098-T, and Forms 1098-E,are filed. The regulations will
affect persons required by the foregoing Internal Revenue Code
sections to furnish these statements (furnishers) who wish to
furnish these statements electronically. The regulations will also
affect individuals, principally employees, students, and borrowers
(recipients), who consent to receive these statements
electronically. The text of the temporary regulations also serves as
the text of the proposed regulations set forth in the notice of
proposed rulemaking on this subject in the Proposed Rules section of
this issue of the Federal Register. The temporary regulations do not
affect the requirement to file copy.

A of Forms W-2 with the Social Security Administration or the
requirement to file Forms 1098-T or Forms 1098-E with the IRS.

DATES: Effective Date: These regulations are effective February 14,
2001.

Applicability Date: These regulations apply to statements to
recipients required to be furnished under sections 6041(d),
6050S(d), and 6051 after December 31, 2000.

FOR FURTHER INFORMATION CONTACT: Laura C. Nash at (202) 622-4910
(not a toll free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

These temporary regulations are being issued without prior notice
and public procedure pursuant to the Administrative Procedure Act (5
U.S.C. 553). For this reason, the collection of information
contained in these regulations has been reviewed, and pending
receipt and evaluation of public comments, approved by the Office of
Management and Budget (OMB) under control number 1545-1729.

Responses to this collection of information are required if a person
required by section 6050S(d) to furnish statements to recipients for
whom Forms 1098-T or Forms 1098-E are filed, or a person required by
sections 6041(d) and 6051 to furnish payee statements on Forms W-2,
wishes to furnish the statements electronically using website
technology.

An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the. collection of
information displays a valid control number assigned by the Office
of Management and Budget.

For further information concerning this collection of information,
and where to submit comments on the collection of information and
the accuracy of the estimated burden, and suggestions for reducing
this burden, please refer to the preamble to the cross-referencing
notice of proposed rulemaking published in the Proposed Rules
section of this issue of the Federal Register.

Books and records relating to a collection of information must be
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns
and tax return information are confidential, as required by 26
U.S.C. 6103.

Background

This document contains amendments to the Income Tax Regulations (26
CFR part 1) relating to sections 6041(d) and 6050S(d), to the
Regulations on Employment Taxes and Collection of Income Tax at
Source (26 CFR part 31) relating to section 6051, and to the
Regulations on Procedure and Administration (26 CFR Part 301)
relating to section 6724. Sections 6041(d) and 6050S(d) generally
require certain persons to furnish a statement to a person with
respect to whom an information return is required to be filed with
the Federal government under sections 6041(a) and 6050S(a). Section
6051 requires certain persons to furnish a written statement to an
employee regarding remuneration. paid by such person to the
employee. The foregoing statements (specified statements) are
generally required to be furnished to recipients on or before
January 31 of the year following the calendar year for which the
related information returns are required to be filed or in which the
wages or other compensation was paid.

These temporary regulations state that furnishers may provide the
written statements required by sections 6041(d), 6050S(d), and 6051
in an electronic format in lieu of a paper format. In addition, the
temporary regulations provide furnishers with a method of furnishing
these statements electronically using website technology. Furnishers
who use this website technology and satisfy the requirements of the
temporary regulations are treated as timely furnishing the
statements under sections 6041(d), 6050S(d), and 6051.

The objective of the temporary regulations is to facilitate the
voluntary electronic furnishing of these statements. This objective
is consistent with the general goals of (i) section 2001 of the
Internal Revenue Service Restructuring and Reform Act of 1998 to
eliminate barriers, provide incentives, and use competitive forces
to increase electronic filing over the next ten years and (ii) the
Electronic Signatures in Global and National Commerce Act (E-SIGN
Act) to facilitate voluntary use of certain electronic records.
However, furnishers are not required to use the website technology
described in the temporary regulations if they wish to continue to
provide paper statements.. Thus, the temporary regulations do not
require a furnisher to invest in new delivery systems or to meet any
new legal requirements to furnish a statement.

A major impetus for publishing these temporary regulations was the
large number of requests for published guidance from lenders,
educational institutions, employers and other furnishers who want
the option of delivering statements to recipients in an electronic
format. In addition, the Information Reporting Program Advisory
Committee of the Internal Revenue Service (IRPAC) and the Electronic
Tax Administration Advisory Committee (ETAAC) also strongly support
providing furnishers with the option of furnishing statements
electronically.

At its May 11, 2000, public meeting, IRPAC advocated issuance of
guidance permitting furnishers to use website technology to furnish
statements electronically. The IRS consulted with IRPAC
representatives to ensure that the temporary regulations provide
furnishers with clear, practical, and administrable procedures for
the voluntary electronic furnishing of the specified statements. The
temporary regulations incorporate many of IRPAC's suggestions and
those of other furnishers.

These temporary regulations also strike a balance between
furnishers' desires to reduce costs and modernize business processes
by furnishing statements electronically and the tax administration
concern that employees, students, and borrowers must be able to
access electronic statements so that they can. timely file accurate
income tax returns. The consumer consent provisions of section
101(c)(1) of the E-SIGN Act strike a similar balance between
businesses' desire to transmit records electronically and concerns
about consumers' abilities to access and use those records.
Therefore, these temporary regulations include disclosure provisions
that are consistent with the Congressionally-approved consent
provisions of the E-SIGN Act. These disclosure provisions will
ensure that recipients will obtain the information they need to make
an informed choice to receive the statements electronically and to
access them timely. The IRS and the Treasury Department invite
comments about whether the provisions of these temporary regulations
should apply to statements required to be furnished to recipients
under other sections of the Internal Revenue Code. In addition,
comments are invited about whether furnishers will use other
technologies (such as e-mail) to furnish statements electronically
and whether they need guidance on the conditions under which those
statements will be considered timely furnished. Finally, comments
are invited on whether the final regulations should prescribe
standards to ensure confidentiality of taxpayer information posted
on a website. Until final regulations are issued, the Treasury
Department and the IRS expect that furnishers will take reasonable
precautions to ensure confidentiality of taxpayer information.

Explanation of Provisions

This temporary regulation provides guidance under
§§1.6041- 2T(a)(5) (by cross-reference to the regulations
under section 6051), 1.6050S-1T(a), 1.6050S-2T(a), and 31.6051-1T(j)
regarding the electronic furnishing of specified statements. The
temporary regulations provide that the written statements required
by sections 6041(d), 6050S(d), and 6051 may be furnished in an
electronic format. In addition, the temporary regulations provide
that a furnisher that complies with the consent, required
disclosures, format, posting, notice, and retention provisions of
the temporary regulations is treated as timely furnishing the
specified statements under sections 6041(d), 6050S(d), and 6051.
Consent

The temporary regulations provide that a recipient must have
affirmatively consented to receive the statement electronically and
must not have withdrawn that consent before the statement is
furnished. The consent or, alternatively, its confirmation must be
made electronically in a manner that reasonably demonstrates that
the recipient can access the statement in the electronic format in
which it will be furnished to the recipient. A furnisher must take
certain actions, including obtaining from the recipient a new
electronic consent or confirmation of consent to receive the
statement electronically, if a change in the hardware or software
needed to access a statement creates a material risk that the
recipient will not be able to access the statement. Required
Disclosures.

Prior to or at the time a recipient consents to receive a statement
electronically, the furnisher must provide a clear and conspicuous
statement to the recipient containing certain disclosures. These
required disclosures are similar to the consumer consent provisions
in the E-SIGN Act and, like those provisions, require a furnisher to
inform a recipient about, for example, the scope and duration of a
consent to receive an electronic statement, the ability to revoke
that consent, the hardware and software required to access, print,
and retain an electronic statement, and the ability to obtain a
paper statement.

Format

The temporary regulations require that the electronic version of a
statement furnished to a recipient contain all required information
and comply with applicable revenue procedures relating to substitute
statements.

Posting

The temporary regulations generally require that the furnisher post
the statements on a website accessible to recipients on or before
January 31 of the year following the calendar year to which the
statements relate.

Notice

The temporary regulations generally require the furnisher to notify
a recipient that the statement is posted on a website on or before
January 31 of the year following the calendar year to which the
statement relates. The notice may be delivered by. mail, electronic
mail, or in person and must provide instructions to the recipient on
how to access and print the statement. If a furnisher later posts
corrected statements on the website, the furnisher must notify the
recipients of that posting within 30 days after the posting.

Retention

The temporary regulations generally require the furnisher to
maintain access to the statements on the website through October 15
of the year following the calendar year to which the statements
relate. In addition, the furnisher generally must maintain access to
corrected statements that are posted on the website through October
15 of the year following the calendar year to which the statements
relate or for 90 days after that posting, whichever is later.

Special Analyses

It has been determined that this temporary regulation is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act
(5 U.S.C. Chapter 5) does not apply to these regulations.

Because no preceding notice of proposed rulemaking is required for
this temporary regulation, the provisions of the Regulatory
Flexibility Act do not apply. However, an initial Regulatory
Flexibility Analysis was prepared for the proposed regulations
published elsewhere in this issue of the Federal.10 Register.
Pursuant to section 7805(f) of the Internal Revenue Code, that
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.

Drafting Information

The principal author of these temporary regulations is Eric Lucas,
formerly of the Office of Associate Chief Counsel (Procedure and
Administration). However, other personnel from the IRS and Treasury
Department participated in their development.

List of Subjects

26 CFR Part 1 Income taxes, Reporting and recordkeeping
requirements.

26 CFR Part 31 Employment taxes, Income taxes, Penalties, Pensions,
Railroad retirement, Reporting and recordkeeping requirements,
Social security, Unemployment compensation.

26 CFR Part 301 Employment taxes, Estate taxes, Excise taxes, Gift
taxes, Income taxes, Penalties, Reporting and recordkeeping
requirements.

26 CFR Part 602 Reporting and recordkeeping requirements. Amendments
to the Regulations Accordingly, 26 CFR parts 1, 31, 301, and 602 are
amended as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows: Authority: 26
U.S.C. 7805 * * *

Section 1.6041-2T also issued under 26 U.S.C. 6041(d). ***

Section 1.6050S-1T also issued under 26 U.S.C. 6050S(g).

Section 1.6050S-2T also issued under 26 U.S.C. 6050S(g).***

Par. 2. Section 1.6041-2T is added to read as follows:
§1.6041-2T Return of information as to payments to employees
(temporary).

(a)(1) through (4) [Reserved]

(5) Statement for employees. An employer that is required under
§1.6041-2(a) to file Form W-2 with respect to an employee is
also required under section 6041(d) and 6051 to furnish a written
statement to the employee. This written statement must be furnished
on Form W-2 in accordance with section 6051 and the regulations.

(b) and (c). For further guidance, see §1.6041-2(b) and

(c). Par. 3. Sections 1.6050S-1T and 1.6050-2T are added to read as
follows: §1.6050S-1T Information reporting for payments and
reimbursements or refunds of qualified tuition and related expenses
(temporary).

(a) Electronic furnishing of statements--

(1) In general. A person required by section 6050S(d) to furnish a
written statement (furnisher) to the individual to whom it is
required to be furnished (recipient) may furnish the statement in
an.12 electronic format in lieu of a paper format. A furnisher who
meets the requirements of paragraphs (a)(2) through (7) of this
section is treated as furnishing the statement in a timely manner.

(2) Consent--

(i) In general. The recipient must have affirmatively consented to
receive the statement in an electronic format and must not have
withdrawn that consent before the statement is furnished. The
consent must be made electronically in a manner that reasonably
demonstrates that the recipient can access the statement in the
electronic format in which it will be furnished to the recipient.
Alternatively, the consent may be made in a different manner (for
example, in an e-mail or in a paper document) if it is confirmed
electronically in the manner described in the preceding sentence.

(ii) Change in hardware or software requirements. If a change in the
hardware or software required to access the statement creates a
material risk that the recipient will not be able to access the
statement, the furnisher must, prior to changing the hardware or
software, provide the recipient with a notice. The notice must
describe the revised hardware and software required to access the
statement and inform the recipient that a new consent to receive the
statement in the revised electronic format must be provided to the
furnisher. After implementing the revised hardware and software, the
furnisher must obtain from the recipient, in the manner described.13
in paragraph (a)(2)(i) of this section, a new consent or
confirmation of consent to receive the statement electronically.

(iii) Example. The following example illustrates the rules of this
paragraph (a)(2): Example. Furnisher F sends Recipient R an e-mail
stating that R may consent to receive statements required by section
6050S(d) electronically on a website instead of in a paper format.
The e-mail contains an attachment instructing R how to consent to
receive the statements electronically. The e-mail attachment uses
the same electronic format that F will use for the electronically
furnished statements. R opens the attachment, reads the
instructions, and submits the consent in the manner provided in the
instructions. R has consented to receive the statements
electronically in the manner described in paragraph (a)(2)(i) of
this section.

(3) Required disclosures--

(i) In general. Prior to, or at the time of, a recipient's consent,
the furnisher must provide to the recipient a clear and conspicuous
disclosure statement containing each of the disclosures described in
paragraphs (a)(3)(ii) through (viii) of this section.

(ii) Paper statement. The recipient must be informed that the
statement will be furnished on paper if the recipient does not
consent to receive it electronically.

(iii) Scope and duration of consent. The recipient must be informed
of the scope and duration of the consent. For example, the recipient
must be informed whether the consent applies to statements furnished
every year after the consent is given until it is withdrawn in the
manner described in paragraph (a)(3)(v)(A) of this section or only
to the statement required to be furnished on or before the January
31 immediately following the date on which the consent is given..14
(iv) Post-consent request for a paper statement. The recipient must
be informed of any procedure for obtaining a paper copy of the
recipient's statement after giving the consent described in
paragraph (a)(2)(i) of this section.

(v) Withdrawal of consent. The recipient must be informed that--

(A) The recipient may withdraw a consent at any time by furnishing
the withdrawal in writing (electronically or on paper) to the person
whose name, mailing address, telephone number, and e-mail address is
provided in the disclosure statement;

(B) The furnisher will confirm the withdrawal in writing (either
electronically or on paper); and

(C) A withdrawal of consent does not apply to a statement that was
furnished electronically in the manner described in this paragraph
(a) before the withdrawal of consent is furnished.

(vi) Notice of termination. The recipient must be informed of the
conditions under which a furnisher will cease furnishing statements
electronically to the recipient.

(vii) Updating information. The recipient must be informed of the
procedures for updating the information needed by the furnisher to
contact the recipient.

(viii) Hardware and software requirements. The recipient must be
provided with a description of the hardware and software required to
access, print, and retain the statement, and the date when the
statement will no longer be available on the website..15

(4) Format. The electronic version of the statement must contain all
required information and comply with applicable revenue procedures
relating to substitute statements to recipients.

(5) Posting. The furnisher must on or before January 31 of the year
following the calendar year to which the statement relates (or such
other date permitted or required for furnishing the statement) post
it on a website accessible to the recipient.

(6) Notice--

(i) In general. The furnisher must on or before January 31 of the
year following the calendar year to which the statement relates (or
such other date permitted or required for furnishing the statement)
notify the recipient that the statement is posted on a website. The
notice may be delivered by mail, electronic mail, or in person. The
notice must provide instructions on how to access and print the
statement. The notice must include the following statement in
capital letters,

IMPORTANT TAX RETURN DOCUMENT AVAILABLE.

If the notice is provided by electronic mail, the foregoing
statement should be on the subject line of the electronic mail and
sent with high importance.

(ii) Undeliverable electronic address. If an electronic notice
described in paragraph (a)(6)(i) of this section is returned as
undeliverable, and the correct electronic address cannot be obtained
from the furnisher's records or from the recipient, then the
furnisher must furnish the notice by mail or in person within 30
days after the electronic notice is returned..16

(iii) Corrected statements. A furnisher must notify a recipient that
it has posted corrected statements on a website within 30 days of
such posting in the manner described in paragraph (a)(6)(i) of this
section. This notice must be furnished by mail or in person if--

(A) An electronic notice of the website posting of an original
statement was returned as undeliverable; and

(B) The recipient has not provided a new e-mail address.

(7) Retention. The furnisher must maintain access to the statements
on the website through October 15 of the year following the calendar
year to which the statements relate (or the first business day after
such October 15, if October 15 falls on a Saturday, Sunday, or legal
holiday). The furnisher must maintain access to corrected statements
that are posted on the website through October 15 of the year
following the calendar year to which the statements relate (or the
first business day after such October 15, if October 15 falls on a
Saturday, Sunday, or legal holiday) or the date 90 days after the
corrected statements are posted, whichever is later.

(b) Effective date. This section applies to statements required to
be furnished under section 6050S(d) after December 31, 2000.

§1.6050S-2T Information reporting for payments of interest on
qualified education loans (temporary)..17

(a) Electronic furnishing of statements--

(1) In general. A person required by section 6050S(d) to furnish a
written statement (furnisher) to the individual to whom it is
required to be furnished (recipient) may furnish the statement in an
electronic format in lieu of a paper format. A furnisher who meets
the requirements of paragraphs (a)(2) through (7) of this section is
treated as furnishing the statement in a timely manner.

(2) Consent--

(i) In general. The recipient must have affirmatively consented to
receive the statement in an electronic format and must not have
withdrawn that consent before the statement is furnished. The
consent must be made electronically in a manner that reasonably
demonstrates that the recipient can access the statement in the
electronic format in which it will be furnished to the recipient.
Alternatively, the consent may be made in a different manner (for
example, in an e-mail or in a paper document) if it is confirmed
electronically in the manner described in the preceding sentence.

(ii) Change in hardware or software requirements. If a change in the
hardware or software required to access the statement creates a
material risk that the recipient will not be able to access the
statement, the furnisher must, prior to changing the hardware or
software, provide the recipient with a notice. The notice must
describe the revised hardware and software required to access the
statement and inform the recipient that a new consent to receive the
statement in the.18 revised electronic format must be provided to
the furnisher. After implementing the revised hardware and software,
the furnisher must obtain from the recipient, in the manner
described in paragraph (a)(2)(i) of this section, a new consent or
confirmation of consent to receive the statement electronically.

(iii) Example. The following example illustrates the rules of this
paragraph (a)(2): Example. Furnisher F sends Recipient R an e-mail
stating that R may consent to receive statements required by section
6050S(d) electronically on a website instead of in a paper format.
The e-mail contains an attachment instructing R how to consent to
receive the statements electronically. The e-mail attachment uses
the same electronic format that F will use for the electronically
furnished statements. R opens the attachment, reads the
instructions, and submits the consent in the manner provided in the
instructions. R has consented to receive the statements
electronically in the manner described in paragraph (a)(2)(i) of
this section.

(3) Required disclosures--

(i) In general. Prior to, or at the time of, a recipient's consent,
the furnisher must provide to the recipient a clear and conspicuous
disclosure statement containing each of the disclosures described in
paragraphs (a)(3)(ii) through (viii) of this section.

(ii) Paper statement. The recipient must be informed that the
statement will be furnished on paper if the recipient does not
consent to receive it electronically.

(iii) Scope and duration of consent. The recipient must be informed
of the scope and duration of the consent. For example, the recipient
must be informed whether the consent applies to statements furnished
every year after the consent is given until it is withdrawn in the
manner described in paragraph (a)(3)(v)(A).19 of this section or
only to the statement required to be furnished on or before the
January 31 immediately following the date on which the consent is
given.

(iv) Post-consent request for a paper statement. The recipient must
be informed of any procedure for obtaining a paper copy of the
recipient's statement after giving the consent described in
paragraph (a)(2)(i) of this section.

(v) Withdrawal of consent. The recipient must be informed that--

(A) The recipient may withdraw a consent at any time by furnishing
the withdrawal in writing (electronically or on paper) to the person
whose name, mailing address, telephone number, and e-mail address is
provided in the disclosure statement;

(B) The furnisher will confirm the withdrawal in writing (either
electronically or on paper); and

(C) A withdrawal of consent does not apply to a statement that was
furnished electronically in the manner described in this paragraph
(a) before the withdrawal of consent is furnished.

(vi) Notice of termination. The recipient must be informed of the
conditions under which a furnisher will cease furnishing statements
electronically to the recipient.

(vii) Updating information. The recipient must be informed of the
procedures for updating the information needed by the furnisher to
contact the recipient.

(viii) Hardware and software requirements. The recipient must be
provided with a description of the hardware and software.20 required
to access, print, and retain the statement, and the date when the
statement will no longer be available on the website.

(4) Format. The electronic version of the statement must contain all
required information and comply with applicable revenue procedures
relating to substitute statements to recipients.

(5) Posting. The furnisher must on or before January 31 of the year
following the calendar year to which the statement relates (or such
other date permitted or required for furnishing the statement) post
it on a website accessible to the recipient.

(6) Notice--

(i) In general. The furnisher must on or before January 31 of the
year following the calendar year to which the statement relates (or
such other date permitted or required for furnishing the statement)
notify the recipient that the statement is posted on a website. The
notice may be delivered by mail, electronic mail, or in person. The
notice must provide instructions on how to access and print the
statement. The notice must include the following statement in
capital letters,

IMPORTANT TAX DOCUMENT RETURN AVAILABLE.

If the notice is provided by electronic mail, the foregoing
statement should be on the subject line of the electronic mail and
sent with high importance.

(ii) Undeliverable electronic address. If an electronic notice
described in paragraph (a)(6)(i) of this section is returned as
undeliverable, and the correct electronic address cannot be obtained
from the furnisher's records or from the.21 recipient, then the
furnisher must furnish the notice by mail or in person within 30
days after the electronic notice is returned.

(iii) Corrected statements. A furnisher must notify a recipient that
it has posted corrected statements on a website within 30 days of
such posting in the manner described in paragraph (a)(6)(i) of this
section. This notice must be furnished by mail or in person if--

(A) An electronic notice of the website posting of an original
statement was returned as undeliverable; and

(B) The recipient has not provided a new e-mail address.

(7) Retention. The furnisher must maintain access to the statements
on the website through October 15 of the year following the calendar
year to which the statements relate (or the first business day after
such October 15, if October 15 falls on a Saturday, Sunday, or legal
holiday). The furnisher must maintain access to corrected statements
that are posted on the website through October 15 of the year
following the calendar year to which the statements relate (or the
first business day after such October 15, if October 15 falls on a
Saturday, Sunday, or legal holiday) or the date 90 days after the
corrected statements are posted, whichever is later.

(b) Effective date. This section applies to statements required to
be furnished under section 6050S(d) after December 31, 2000.

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE

Par. 4. The authority citation for part 31 is amended to read in
part as follows: Authority: 26 U.S.C. 7805 * * *

Section 31.6051-1T also issued under 26 U.S.C. 6051. * * *

Par. 5. Section 31.6051-1T is added to read as follows:
§31.6051-1T Statements for employees (temporary).

(a) through (i) [Reserved]. For further guidance, see
§31.6051-1(a) through (i).

(j) Electronic furnishing of statements--

(1) In general. A person required by section 6051 to furnish a
written statement on Form W-2 (furnisher) to the individual to whom
it is required to be furnished (recipient) may furnish the Form W-2
in an electronic format in lieu of a paper format. A furnisher who
meets the requirements of paragraphs (j)(2) through (7) of this
section is treated as furnishing the Form W-2 in a timely manner.

(2) Consent--

(i) In general. The recipient must have affirmatively consented to
receive the Form W-2 in an electronic format and must not have
withdrawn that consent before the Form W-2 is furnished. The consent
must be made electronically in a manner that reasonably demonstrates
that the recipient can access the Form W-2 in the electronic format
in which it will be furnished to the recipient. Alternatively, the
consent may be made in a different manner (for example, in an e-mail
or in a paper document) if it is confirmed electronically in the
manner described in the preceding sentence..23

(ii) Change in hardware or software requirements. If a change in
hardware or software required to access the Form W-2 creates a
material risk that the recipient will not be able to access the Form
W-2, the furnisher must, prior to changing the hardware or software,
provide the recipient with a notice. The notice must describe the
revised hardware and software required to access the Form W-2 and
inform the recipient that a new consent to receive the Form W-2 in
the revised electronic format must be provided to the furnisher.
After implementing the revised hardware and software, the furnisher
must obtain from the recipient, in the manner described in paragraph
(j)(2)(i) of this section, a new consent or confirmation of consent
to receive the Form W-2 electronically.

(iii) Example. The following example illustrates the rules of this
paragraph (j)(2):

Example. Furnisher F sends Recipient R an e-mail stating that R may
consent to receive Forms W-2 electronically on a website instead of
in a paper format. The e-mail contains an attachment instructing R
how to consent to receive Forms W-2 electronically. The e-mail
attachment uses the same electronic format that F will use for its
electronically furnished Forms W-2. R opens the attachment, reads
the instructions, and submits the consent in the manner provided in
the instructions. R has consented to receive Forms W-2
electronically in the manner described in paragraph (j)(2)(i) of
this section.

(3) Required disclosures--

(i) In general. Prior to, or at the time of, a recipient's consent,
the furnisher must provide to the recipient a clear and conspicuous
disclosure statement containing each of the disclosures described in
paragraphs (j)(3)(ii) through (viii) of this section..24

(ii) Paper statement. The recipient must be informed that the Form
W-2 will be furnished on paper if the recipient does not consent to
receive it electronically.

(iii) Scope and duration of consent. The recipient must be informed
of the scope and duration of the consent. For example, the recipient
must be informed whether the consent applies to Forms W-2 furnished
every year after the consent is given until it is withdrawn in the
manner described in paragraph (j)(3)(v)(A) of this section or only
to the Form W-2 required to be furnished on or before the January 31
immediately following the date on which the consent is given.

(iv) Post-consent request for a paper statement. The recipient must
be informed of any procedure for obtaining a paper copy of the
recipient's Form W-2 after giving the consent described in paragraph
(j)(2)(i) of this section.

(v) Withdrawal of consent. The recipient must be informed that--

(A) The recipient may withdraw a consent at any time by furnishing
the withdrawal in writing (electronically or on paper) to the person
whose name, mailing address, telephone number, and e-mail address is
provided in the disclosure statement;

(B) The furnisher will confirm the withdrawal in writing (either
electronically or on paper); and

(C) A withdrawal of consent does not apply to a Form W-2 that was
furnished electronically in the manner described in this paragraph
(j) before the withdrawal of consent is furnished..25

(vi) Notice of termination. The recipient must be informed of the
conditions under which a furnisher will cease furnishing statements
electronically to the recipient (for example, termination of the
recipient's employment with furnisher-employer).

(vii) Updating information. The recipient must be informed of the
procedures for updating the information needed by the furnisher to
contact the recipient.

(viii) Hardware and software requirements. The recipient must be
provided with a description of the hardware and software required to
access, print, and retain the Form W-2, and the date when the Form
W-2 will no longer be available on the website. The recipient must
be informed that the Form W-2 may be required to be printed and
attached to a Federal, State, or local income tax return.

(4) Format. The electronic version of the Form W-2 must contain all
required information and comply with applicable revenue procedures
relating to substitute statements to recipients.

(5) Posting. The furnisher must on or before January 31 of the year
following the calendar year to which the Form W-2 relates (or such
other date permitted or required for furnishing the Forms W-2) post
it on a website accessible to the recipient.

(6) Notice--

(i) In general. The furnisher must on or before January 31 of the
year following the calendar year to which the Form W-2 relates (or
such other date permitted or required for.26 furnishing the Form
W-2) notify the recipient that the Form W-2 is posted on a website.
The notice may be delivered by mail, electronic mail, or in person.
The notice must provide instructions on how to access and print the
statement. The notice must include the following statement in
capital letters,

IMPORTANT TAX RETURN DOCUMENT AVAILABLE.

If the notice is provided by electronic mail, the foregoing
statement should be on the subject line of the electronic mail and
sent with high importance.

(ii) Undeliverable electronic address. If an electronic notice
described in paragraph (j)(6)(i) of this section is returned as
undeliverable, and the correct electronic address cannot be obtained
from the furnisher's records or from the recipient, then the
furnisher must furnish the notice by mail or in person within 30
days after the electronic notice is returned.

(iii) Corrected Forms W-2. A furnisher must notify a recipient that
it has posted corrected Forms W-2 on a website within 30 days of
such posting in the manner described in paragraph (j)(6)(i) of this
section. This notice must be furnished by mail or in person if-- (A)
An electronic notice of the website posting of an original Form W-2
was returned as undeliverable; and (B) The recipient has not
provided a new e-mail address.

(7) Retention. The furnisher must maintain access to the Forms W-2
on the website through October 15 of the year following the calendar
year to which the Forms W-2 relate (or the first.27 business day
after October 15, if October 15 falls on a Saturday, Sunday, or
legal holiday). The furnisher must maintain access to corrected
Forms W-2 that are posted on the website through October 15 of the
year following the calendar year to which the Forms W-2 relate (or
the first business day after such October 15, if October 15 falls on
a Saturday, Sunday, or legal holiday) or the date 90 days after the
corrected forms are posted, whichever is later.

(b) Effective date. Paragraph (j) of this section applies to Forms
W-2 required to be furnished under section 6051 after December 31,
2000.

PART 301--PROCEDURE AND ADMINISTRATION

Par. 6. The authority citation for part 301 continues to read in
part as follows:

Authority 26 U.S.C. 7805 * * *

Par. 7. Section 301.6724-1T is added to read as follows:
§301.6724-1T Reasonable cause (temporary).

(a) through (d)(2) [Reserved]. For further information, see
§301.6724-1 (a) through (d)(2).

(d)(3) Special rule for furnishers of electronic statements. A filer
may seek a waiver for reasonable cause pursuant to
§301.6724-1(c)(6), for failing to timely furnish a statement in
the following situation. If the recipient of the statement withdraws
a consent to receive the statement in an electronic format, the
filer will be deemed to have acted in a responsible manner under
§301.6724-1(d) if the filer furnishes a paper.28 statement on
or before the date 30 days after the date the withdrawal of consent
is received.

(e) through (n) [Reserved]. For further guidance, see
§301.6724-1(e) through (n).

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 8. The authority citation for part 602 continues to read as
follows: Authority: 26 U.S.C. 7805 * * *

Par. 9. In §602.101, paragraph (b) is amended by adding entries
to the table in numerical order to read as follows:.§602.101
OMB Control numbers.

* * * * *

(b) * * *

CFR part or section where Current OMB identified and described
control No.

* * * * *

1.6041-2T ..................... 1545-1729

* * * * *

1.6050S-1T .................... 1545-1729

1.6050S-2T .................... 1545-1729

* * * * *

31.6051-1T .................... 1545-1729

* * * * *

Robert E. Wenzel
Deputy Commissioner of Internal Revenue

Approved: January 10, 2001

Jonathan Talisman
Assistant Secretary of the Treasury

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