11.4.2 Data Exchange Program

Manual Transmittal

October 16, 2017

Purpose

(1) This transmits revised IRM 11.4.2, Office of Governmental Liaison, Data Exchange Program.

Material Changes

(1) Editorial changes have been made throughout to update IRM/organizational references and processing dates, clarify existing procedures and make text easier to follow. Web references were added/updated throughout to make text easier to research in electronic media.

(2) IRM 11.4.2.1 - Revised the title to Program Scope and Objectives to reflect internal control attributes. Added content to identify policy owner, program owner and to properly reflect the information communicated in this subsection. Included important information to conform to the new internal and management control standards under the following titles:

(3) IRM 11.4.2.1(5) - Removed reference to frequently used terminology; terminology was incorporated into IRM 11.4.2.1.5

(4) IRM 11.4.2.1.1 - IRM 11.4.2.1.6 - Added content to provide background and identify authority, responsibilities, acronyms, terminology and related resources.

(5) IRM 11.4.2.2(3) - Removed paragraph; was incorporated into IRM 11.4.2.1.1.

(6) IRM 11.4.2.3 - Revised the title to Data Extracts to appropriately identify the information contained in this subsection.

(7) IRM 11.4.2.3(1) - Updated acronyms to address data extracts appropriately.

(8) IRM 11.4.2.5.1(2) - Updated to clarify the enrollment package contents.

(9) IRM 11.4.2.5.2(4) - Added paragraph to clarify ODES package contains Sensitive But Unclassified (SBU) information; agencies must adhere to IRS encryption and media transport guidelines.

(10) IRM 11.4.2.6(5) - Updated to clarify spec books are revised annually and sent electronically from Data Services to GLs in the field via a GLADIS Task on AFOIA.

(11) IRM 11.4.2.7.8(1) - Updated additional 4th & 5th digits for ITIN validity.

(12) IRM 11.4.2.8(3) - Added reference to IRM 11.3.36, Safeguard Review Program and removed reference to IRM 11.3.35, Requests and Demands for Testimony and Production of Documents.

(13) Exhibit 11.4.2-1 - Updated title to Terminology to reflect information appropriately.

(14) Exhibit 11.4.2-2 - Added Exhibit to reference comprehensive list of acronyms.

Effect on Other Documents

This material supersedes IRM 11.4.2 dated May 19, 2014.

Audience

This IRM is intended for all employees of Governmental Liaison, Disclosure and Safeguards.

Effective Date

(10-16-2017)

Related Resources

The Governmental Liaison Data Exchange Program home page can be found at the following:
https://organization.ds.irsnet.gov/sites/vldp/DEP/GL/GLDEP/Pages/default.aspx.

Phyllis T Grimes
Director, Governmental Liaison, Disclosure and Safeguards

Program Scope and Objectives

  1. Purpose: This IRM section provides instruction on the Governmental Liaison Data Exchange Program (GLDEP) which involves the disclosure of Federal tax information (FTI) under the authority of IRC §6103(d) to state tax agencies for state tax administration purposes.

    Note:

    For purposes of the GLDEP, a state is defined as any of the 50 states, the District of Columbia, certain U.S. possessions or territories, regional income tax agencies and any municipality with a population in excess of 250,000 that imposes a tax on income or wages according to IRC §6103(b)(5).

  2. Audience: This IRM section provides procedures applicable to Governmental Liaison, Disclosure and Safeguards personnel.

  3. Policy Owner: Office of Data Services, under Governmental Liaison, Disclosure and Safeguards (GLDS), is responsible for administering the GLDEP. Information Technology (IT) management and staff play a key role in the program's design and operation. Significant IT resources are devoted to programming and distribution.

  4. Program Owner: GLDS function, under Privacy, Governmental Liaison and Disclosure (PGLD), is responsible for oversight of the GLDEP.

Background

  1. IRS provides data extracts containing Federal tax information (FTI) to state tax agencies on a recurring basis, which state tax agencies use to administer state tax laws. A data extract is a computer-generated file that contains specific data elements. Extracts are currently provided electronically via the IRS Secure Data Transfer (SDT) program. SDT is a file sharing information system used to securely exchange electronic files with external entities over the internet. State tax agencies may choose from multiple data extracts that make up the program. For some extracts, state tax agencies are required to submit input files, also known as tickler files, to IRS. These GLDEP tickler files must be submitted to IRS via SDT.

  2. Extracts may only be used as authorized by IRC §6103(d). Data contains FTI which is shared with state tax agencies based on their need and use of the information for state tax administration purposes. The safeguarding requirements of IRC 6103(p)(4) apply to state tax agencies receiving FTI under IRC 6103(d). State tax agency personnel and authorized contractors must maintain the confidentiality of FTI received via the GLDEP and are subject to the civil and criminal sanctions of IRC sections IRC §7213 and IRC §7431 for unauthorized access or disclosure of FTI. Applicable safeguard procedures may be found in IRS Pub 1075, Tax Information Security Guidelines for Federal, State, and Local Agencies.

Authority

  1. The following items govern the authority pertaining to the GLDEP in which certain data-sharing activities take place between IRS and state tax agencies:

    • IRC §6103

    • 26 CFR §301.6103

    • Delegation Order 11-2, found in IRM 1.2.49.3

    • IRM 10.5, Privacy and Information Protection

Responsibilities

  1. This Internal Revenue Manual (IRM) is used by all Governmental Liaison, Disclosure and Safeguards (GLDS) personnel and ensure policies comply with the disclosure and safeguarding requirements of IRC§ 6103.

Acronyms

  1. A comprehensive list of acronyms used in this IRM section can be found in Exhibit 11.4.2-2.

Terminology

  1. A comprehensive list of terms used in this IRM section can be found in Exhibit 11.4.2-1.

Related Resources

  1. The following is a list of other related resources regarding the GLDEP:

    • IRM 11.3.32, Disclosure to States for Tax Administration Purposes

    • IRM 11.3.36, Safeguard Review Program

    • IRM 11.4.1, Communications and Liaison, Office of Governmental Liaison, Governmental Liaison Operations

    • Federation of Tax Administrators web site: https://www.taxadmin.org/

History

  1. IRS has been sharing FTI with state tax agencies since the 1920s. These exchanges were initially paper-oriented and provided on magnetic media in the form of tape cartridges. Today, FTI is provided electronically using the IRS Secure Data Transfer (SDT) program. Initially, state tax agencies were charged a small fee for obtaining extract information. In 1994, IRS waived charges because of the shared mission of tax administration; so the FTI is now provided free of charge.

  2. Originally, state tax agencies received all information available pertaining to taxpayers residing in their state. In 1978, the Government Accountability Office (GAO) (formerly the General Accounting Office) issued a report stating IRS needed to limit information provided to state tax agencies to only the information necessary to administer a state's tax laws which conforms to the statutory language of IRC§ 6103(d) that restricts disclosure "only to the extent necessary in, the administration of such laws". In addition, the report said IRS had additional sources of information that would be valuable to state tax agencies which had not yet been tapped. In response to that report, the program was redesigned and further expanded to its current status.

Data Extracts

  1. The following data extracts are currently part of the GLDEP:

    • 1099-MISC

    • Business Master File (BMF)

    • Business Return Transaction File (BRTF)

    • Corporate Affiliations

    • CP 2000

    • Examination Operational Automation Database (EOAD)

    • Exam/Appeals

    • Federal Employer Identification Number (FEIN)

    • Individual Master File (IMF)

    • Individual Return Transaction File (IRTF)

    • Identity Theft Protection Indicator (ITPI)

    • Individual Taxpayer Identification Number (ITIN)

    • Information Returns Master File (IRMF) by Payee State Code

    • Information Returns Master File (IRMF) Non-Resident K-1

    • Levy

    • Military Combat Zone (MCZ)

    • Non-Itemizer

    • Preparer Tax Identification Number (PTIN)

    • Taxpayer Address Request (TAR)

  2. There are many other data exchange activities between IRS and "FedState trading partners" that are not part of the GLDEP. More information on non-GLDEP exchanges can be found on the GLDS Data Services Home Page Intranet site at: https://program.ds.irsnet.gov/sites/PGLDds/gldep/SitePages/Home.aspx. Some examples are as follows:

    • Reimbursable Federal Program: A data exchange program between IRS and other federal agencies. This program is owned by GLDS Data Services but is not part of the GLDEP.

    • Compliance Programs: Some data exchanges are part of specific compliance programs such as Abusive Tax Avoidance Transactions (ATAT). More information may be obtained by contacting the specific Operating Division (OD) that has ownership of the program.

    • User Applications: Some data exchanges are user applications that fall under the E-services umbrella. More information on these programs may be obtained by contacting E-Services or the specific OD that has ownership of the application.

Communications and Marketing

  1. Internal Communications: Information about the GLDEP is available internally on the GLDS Data Services Home Page Intranet site at: https://program.ds.irsnet.gov/sites/PGLDds/gldep/SitePages/Home.aspx

  2. External Communications: Information about the GLDEP is available to external partners through IRS Governmental Liaisons (GLs). Some information is also available on the Federation of Tax Administrators' (FTA) web site at: https://www.taxadmin.org/ , and via the FTA Data Exchange E-List. FTA is a non-profit group representing the interests of state tax administrators. The E-List is for personnel, both state tax agencies and IRS, who work with the GLDEP. GLDEP analysts at IRS use E-List to alert state tax agency personnel about expected release dates of extracts, to provide updated technical guidance, and to remind them of approaching deadlines. State tax agency personnel use the E-List to explore such questions as how to better use the extracts in compliance programs and whether other state tax agencies have encountered particular difficulties. To subscribe or unsubscribe to the FTA Data Exchange E-List, personnel should go to https://www.taxadmin.org/e-lists and enter name and e-mail address. Choose subscribe or unsubscribe, select "IRS Extract E-List" and submit.

Program Participation

  1. Each state tax agency wishing to participate must meet the following criteria:

    1. The agency must have an Agreement on the Coordination of Tax Administration (Basic Agreement) in place to exchange data with IRS.

    2. The agency must have a Safeguards Security Report approved by the Office of Safeguards on file with IRS.

    3. The agency must complete an Annual Enrollment Form.

    4. The agency must satisfy the requirements of IRC §6103(d); that is, the agency must be a state tax agency as defined in IRC §6103 (b), be responsible for state tax administration, demonstrate a need for the FTI being disclosed and demonstrate the FTI will be used for the purposes of state tax administration.

  2. There are two annual processes that state tax agencies must complete to participate in the GLDEP.

    • Annual Enrollment Process

    • Annual Optional Data Element Selection (ODES) Process (for agencies that enroll for the IMF/IRTF and/or BMF/BRTF Extracts)

Annual Enrollment Process

  1. The enrollment process takes place from June until the beginning of September, which provides the Governmental Liaisons (GLs) and the state tax agencies adequate time for the enrollment and approval process. State tax agencies wishing to participate in the GLDEP must complete an Annual Enrollment Form. The form is used by the enrolling state tax agency to designate which extracts are needed for the enrollment year. Need and Use Statements must accompany all enrollment forms. Need and Use Statements are required for state tax agencies to notify IRS why they need the FTI they are requesting and how they will use that information. All Need and Use Statements submitted with Annual Enrollment Forms must be approved by an IRS Disclosure Manager (DM) before FTI may be disclosed to the state agency. By law, IRS may only disclose FTI to state tax agencies which establish a need and use for the FTI requested.

  2. The mechanics of the Annual Enrollment Process are as follows:

    • Each year in June an "enrollment package" is sent electronically (via the IRS e-mail system) from GLDS Data Services to GLs in the field.

    • The enrollment package contains the Annual Enrollment Form, Signature Form, Need & Use Justification Form, instructions for completing the forms, Description & Use Document, Safeguard Security Report Notice, an e-mail with basic instructions, and a "sample" e-mail for the GLs to forward to their state tax agencies. The completed enrollment forms should be returned to the designated Data Services GLDEP analyst.

  3. The GL and DM will act as consultants to the enrolling state tax agency during the enrollment process. The GL should become involved in the process of completing the enrollment form and should review the form carefully when received from the enrolling state tax agency. If a state tax agency is ordering an extract not previously ordered, the GL must discuss how the state tax agency plans to use the information. If a state tax agency is not ordering an extract they have ordered in the past, the GL should question the omission of that extract. The more familiar a GL becomes with the operation of state tax agencies within their jurisdiction, the better able they will be to assist with their decision regarding which FTI to request.

Annual Optional Data Element Selection Process

  1. The Annual Optional Data Element Selection (ODES) Process takes place in the spring of each year. State tax agencies that have requested either the IMF/IRTF and/or BMF/BRTF extracts must complete an Annual ODES Package. The ODES forms are used by the enrolling state tax agency to identify which of the optional data elements they need for these extracts. Need and Use Justifications must accompany all data element selections. Need and Use Justifications, in this case, are statements used by state tax agencies to tell IRS why they need the specific optional data elements they are requesting and how they will use those optional data elements. An IRS DM must approve the Annual ODES Forms prior to receipt of the optional data elements by the state tax agency.

  2. The mechanics of the Annual ODES Process are as follows:

    • Each year in April an ODES package is sent electronically (via the IRS e-mail system) from GLDS Data Services to GLs in the field.

    • GLs must forward the package by e-mail to their state tax agency counterparts. The ODES package contains the Annual ODES Forms, instructions for completing the forms, an Authorization Document, and a cover memo. The cover memo contains submission instructions for these packages.

  3. The GL and DM will act as consultants to the enrolling state tax agency during the ODES Process. The GL should provide guidance to enrolling state tax agencies to ensure they accurately complete the ODES Package and carefully review the packages submitted to them to ensure they are accurate and complete. The Authorization Document, which is in PDF format, must be digitally signed by the state tax agency and be included as part of the ODES package. Since the forms are machine read, the ODES tables must remain in Microsoft Word.

  4. The ODES package contains Sensitive But Unclassified (SBU) information. State tax agencies must adhere to IRS encryption and media transport guidelines as stated in Pub 1075, Tax Information Security Guidelines for Federal, State and Local Agencies, Section 7.1.2 Encryption Requirements and Section 9.3.10.5 Media Transport (MP-5).

Specification Books

  1. Each data extract has a specification book, or "spec book" , that serves as a technical and administrative user guide for both state tax agency and IRS personnel. The spec books contain 3 basic sections:

    • Administrative Section

    • Record Layout

    • Core Record Layout

  2. The administrative section contains a basic description of each extract including information on production and distribution schedules, disclosure and security issues, annual changes to the extract, tickler file submission instructions, and labeling procedures. This section also has information on the file(s) from which the data is extracted.

  3. The record layout section contains a narrative description of the various data elements contained in the extract.

  4. The Core Record Layout section contains graphic representations of the data for use by programmers.

  5. The spec books are distributed in the following manner:

    • Spec books are revised annually and sent electronically from GLDS Data Services to GLs in the field via a Governmental Liaison and Disclosure Information System (GLADIS) Task on Automated Freedom of Information Act (AFOIA).

    • The GLs distribute the spec books to enrolled state tax agencies approximately two months prior to the distribution of the data extract. The spec books can be sent from the GLs to enrolled state tax agencies by e-mail. However if the spec book has an Official Use Only (OUO) supplement, the OUO supplement must be sent to the enrolled state tax agency by hard mail or fax (not e-mail).

    • The spec books are also posted on the Data Services Home Page Intranet site: https://program.ds.irsnet.gov/sites/PGLDds/gldep/SitePages/Home.aspx.

  6. The GL is responsible for ensuring each participating state tax agency receives a current copy of a spec book for each data extract the state tax agency has enrolled.

Description of the Extracts

  1. There is a great deal of variance among the extracts with regard to production and distribution schedules, how the data is sorted, and the time period upon which the extract is based. Some extracts are based on tax year and some on "extract year." If an extract is based on tax year, all data in that extract is from a specific tax year. The term extract year indicates that IRS has determined the time period of the extract based on various factors that affect production. These factors may include the due date of returns included in the extract or availability of resources for extract production.

  2. Extracts are sorted by various criteria including state code, ZIP code, Social Security Number (SSN) or Employer Identification Number (EIN). Some extracts require a tickler file be submitted by participating state tax agencies to request information about specific taxpayers. A tickler file is an input file that is merged with IRS data to produce the requested extract. For example, a state tax agency may provide IRS with a tickler file of SSNs to be used in production of the IMF/IRTF extract by SSN. The formats for the various tickler files are found in the respective spec books.

  3. Extracts that are distributed on an annual basis have a 60-day data recreation period. This means that if a state tax agency notifies the IRS computing center within 60 days that a file cannot be read, the computing center can recreate the extract file for the state tax agency. For extracts that are distributed on a more frequent than annual basis the extract spec book will address the recreation period, if any. It is imperative that state tax agencies read extracts upon receipt. If it is determined that an extract is damaged after the data recreation period, the computing center may not be able to recreate the extract for the state tax agency.

1099-MISC

  1. Source of Data: Data is extracted from the IRS Information Returns Master File (IRMF). The 1099-MISC extract provides non-employee compensation information from the federal Form 1099-MISC , Miscellaneous Income.

  2. Distribution: The 1099-MISC extract is distributed annually in May.

  3. Uses:

    1. The 1099-MISC extract was developed in response to a request by the Federal Department of Labor (DOL), based on a recommendation by the DOL Office of Inspector General. The non-employee compensation information, as reported by payers, is to be used for state tax administration by the State Workforce Agencies (SWAs) as a component in the audit selection process to increase the discovery of unreported wages. Information provided under IRC §6103 (d) through the GLDEP may not be used for purposes other than state tax administration such as the administration of benefits. The payment information provided on the extract is limited to Box 7 (Non-employee Compensation) of the Form 1099-MISC .

    2. The 1099-MISC extract was initially developed to provide Form 1099-MISC non-employee compensation (Box 7) information to SWAs by payee state code, that is, the address of the recipient of the income. This information is also available on the IRMF extract but the IRMF provides more information than the SWAs need. After the initial year of distribution, an enhancement was added to include records on the extract by payer state code, that is, the address of the payer, in addition to payee state code. The SWAs would use the Non-employee compensation information as a component in the audit selection process to increase the discovery of unreported wages.

BMF/BRTF

  1. Source of Data: The BMF and BRTF are master files created from returns filed under the business income tax reporting requirements of the Internal Revenue Code (IRC). These extracts are developed by taking data from the BMF and BRTF master files annually by state code, ZIP code, and taxpayer identification number (TIN). The BRTF information is as initially processed and is not updated to reflect amended returns or adjustments. State tax agencies must receive the BMF to get the BRTF, as name and address information is only included on the BMF; the only exception is that an agency may obtain the BRTF only for the Form 706 which includes name and address information. Participants may enroll to receive the extracts by state code, ZIP code, and/or Employer Identification Number (EIN).

  2. Distribution: The BMF and BRTF extracts are created and transmitted separately. They are distributed annually in October, November and December, depending on the sort (State Code, ZIP Code and EIN).

  3. Uses: General uses of the BMF/BRTF extract include:

    • Identifying non-filers

    • Determining discrepancies between federal and state returns

    • Verifying taxpayer information in state tax agency records

    • Assisting with collections by identifying business assets and determining ability to collect

Corporate Affiliations

  1. Source of Data: Data is extracted from the IRS Business Master File.

  2. The extract will provide entity information on parent corporations filing a consolidated return as well as on the subsidiary corporations in the affiliated group on whose behalf the parent filed. When a parent corporation files a consolidated return (Form 1120 , U.S. Corporation Income Tax Return), a Form 851, Affiliations Schedule, is attached which lists the subsidiary corporations in the affiliated group. The Corporate Affiliations Extract by State Code (a range of ZIP codes will be used for city taxing agencies) will provide state tax agencies with entity information on parent and subsidiary corporations. Records for state tax agencies will be extracted based on a subsidiary corporation having an address within the state of the requesting state tax agency (by state code). When a subsidiary corporation's address matches the state of the requesting state tax agency, the requesting state tax agency will receive a set of records that will include all subsidiary corporations in the affiliated group and the parent corporation, regardless of what state the parent or the other affiliated subsidiaries are located.

  3. Records are extracted by state code based on the subsidiary corporation appearing on a Form 851 . A subsidiary corporation will only be associated with the most current parent corporation that is filing on their behalf.

  4. In addition to the state code sort, the extract is also available by an EIN sort based on a tickler file submission by enrolled state tax agencies. City tax agencies can receive the extract based on an approved list of ZIP codes or by EIN sort.

  5. Distribution: The Corporate Affiliations Extract by State Code and EIN are scheduled to be distributed annually in September.

  6. Uses: General uses of the Corporate Affiliations extract include:

    • Information used as a component in the audit selection process for corporations filing a consolidated return

    • To identify non-filers

CP 2000

  1. Source of Data: The CP 2000 extract contains information from IRS Underreporter cases. IRS matches information returns, such as Form W-2 and Form 1099 filed by employers, banks, businesses, and other payers with information from individual tax returns. Discrepancies are reviewed and, if not resolved at the campus, an Automated Underreporter (AUR) case is generated. The CP 2000 is sent to the taxpayer proposing an adjustment to their account. Taxpayer information from accounts, that result in additional federal assessments, is provided in the extract for participating state tax agencies.

  2. Only fully agreed cases are provided on the CP 2000 extract. After the assessment, a taxpayer may provide information that could result in an adjustment or abatement of the liability. If changes are made to the fully agreed cases, there is currently no way to capture the information by IRS. It may be necessary for the state tax agency to contact the taxpayer to resolve the issue. Partially agreed case amounts are not included in the file. Inventory levels on the CP 2000 extract vary as the inventory levels worked at the campuses fluctuate.

  3. Distribution: The CP 2000 extract has an irregular distribution schedule with 6 distributions over approximately 20 months, followed by a one-time SSN tickler option (Distribution #7).

  4. Uses: General uses of the CP 2000 extract include:

    • Generating a notice of proposed assessment based on federal tax changes

    • Identifying employers and payers not reporting to the state tax agency

    Note:

    The CP 2000 extract presents one of the easiest methods for state departments of revenue to generate correct assessments and increase collections. An automated program in the state tax agency can be developed to generate an assessment letter to the taxpayer based on the federal assessment. When automation is used, few cases need to be worked manually. State tax agencies which generate assessments and collect additional revenue based on the federal tax assessment, are able to do so with minimal cost.

Examination Operational Automation Database (EOAD)

  1. Source of data: Examination closing reports systems:

    • Reports Generation Software (RGS)

    • Audit Information Management System (AIMS)

    • Issues Management System (IMS)

    Enrolled state tax agencies provide specific criteria for use in getting information about the following return types:

    • Form 1040

    • Form 1065

    • Form 1120

    • Form 1120S

  2. Distribution: Monthly beginning in February of each year, with data extracted from previous month, for the period January through December.

  3. Uses: Uses of the Examination Operation Automation Database (EOAD) extract include (same as for Exam/Appeals):

    • Ensure reporting of audit changes on businesses operated in one state but registered in another

    • Identify individuals residing in one state but with a filing requirement in another

    • Develop leads on non-resident taxpayers to determine the impact of federal audit assessments on state tax liability

    • Determine the impact of federal audit assessments on state tax liabilities

Exam/Appeals

  1. Source of Data: Examination records reflect results of individual and/or business cases closed by Examination during a fiscal year (October 1st - September 30). The data is extracted annually from the IRS database, the Audit Information Management System (AIMS). The Appeals records provide the same type of information pertaining to cases closed by Appeals during a calendar year (January 1 - December 31). This information is taken from the IRS database, Appeals and Non-Docketed Reporting System (LAND).

  2. The state tax agency submits an annual tickler file of TINs to generate the extract. This tickler is due by April 30th each year.

  3. Distribution: The extract is distributed annually in May.

  4. Uses: General uses of the Exam/Appeals extract include:

    • Identifying individuals residing in one state but with a filing requirement in another

    • Developing leads on non-resident taxpayers

    • Determining the impact of federal audit assessments on state tax liabilities

    • Ensuring reporting of audit changes on businesses operated in one state but registered in another

    Note:

    Document 6036, Examination Division Reporting System Codes Booklet, is useful in interpreting the coding for this extract and should be supplied by the GL to the state tax agency receiving the extract.

Federal Employer Identification Number (FEIN)

  1. Source of Data: The data for the FEIN extract is obtained from the Business Master File using the EIN Research and Assessment System (ERAS). The source of that file is the federal Form SS-4, Application for Employer Identification Number. The newly issued FEINs will be provided monthly regardless of how the FEIN is issued i.e., Internet EIN, fax, or mail. This extract will be sorted by the address of the entity receiving the new FEIN for the state code sort and further sorted for the cities based on a pre-approved listing of ZIP codes. The majority of data elements (line items) from the Form SS-4 are captured.

  2. Distribution: The FEIN extract is distributed monthly. The distribution year runs from February to January. Each distribution will consist of new FEINs issued in the previous month.

  3. Uses: General uses of the FEIN extract include:

    • Validating master file accounts

    • Identifying businesses that are required to register

    • Identifying non-filers

    • Outreach

Individual Taxpayer Identification Number (ITIN)

  1. Source of Data: The data will be extracted from the Individual Taxpayer Identification Number (ITIN) Database which contains information captured from the Form W-7 application. ITIN information can also be obtained from the IMF/IRTF extracts. All of the FTI provided by the taxpayer will be included in the data fields provided to the requesting state tax agencies. The information on this extract is similar to the FEIN extract, except it is for individual returns instead of business returns. Only validated ITINs will show up in this extract. ITINs always begin with a "9" and will have the numbers 50 to 65,"70" to "88" , "90" to "92" or "94" to "99" as the 4th and 5th digits.

  2. Distribution: The ITIN extract is distributed from February through January on a monthly basis. All ITINs issued for the previous month will be included. There is also a TIN tickler option. The annual tickler is due in November, and the output file is distributed the following January. State tax agencies enroll for the tickler option separately on the annual enrollment form.

  3. Uses: General uses of ITINs include:

    • Reducing erroneous refunds

    • Determining the validity of state tax agency entity data

    • Providing state tax agency refunds to those taxpayers who rightfully are entitled to them

    • Identifying Non-Filers

Individual Master File/Individual Return Transaction File (IMF/IRTF)

  1. Source of Data: The IMF/IRTF extract contains data from the Individual Master File (IMF) and the Individual Returns Transaction File (IRTF).

  2. The IMF contains general entity information (SSN, name, address, wages, adjusted gross income, interest income, etc.) for individual income taxpayers.

  3. The IRTF contains fields currently transcribed from Form 1040, U.S. Individual Income Tax Return,Form 1040A, U.S. Individual Income Tax Return or Form 1040EZ , Income Tax Return for Single Filers and Joint Filers With No Dependents, and their accompanying forms and schedules. IRTF information is obtained from the tax return as originally filed by the taxpayer but can reflect math error corrections. The information is not updated to reflect amended returns or subsequent adjustments. Data in these records will reflect any corrections that were made by the campus before the return could be posted (math error corrections). Information that is obviously incorrect, such as math errors, cannot be posted to master file. When a math error is corrected, a notice is sent to the taxpayer explaining the change. Brief explanations of these notices are included in the IMF/IRTF spec book.

  4. Since the IMF contains entity information and IRTF does not, the files must be received together. The state tax agency may receive their IMF/IRTF extracts based on the address of the taxpayer (state code), by state supplied ZIP code (ZIP code tickler file) or state supplied SSNs (the SSN tickler file can include Individual Tax Identification Numbers, ITINs). IMF/IRTF extracts by ZIP code are most frequently requested by city tax agencies, allowing the city tax agencies to receive information on taxpayers located within their jurisdiction; city tax agencies cannot receive the extracts by state code.

  5. Production:

    1. At the end of August (cycle/week 34), a major extract is created from the IMF and the IRTF. It contains one record for every account posted during the past 12 months. The IMF/IRTF extract is created the same week in August each year and reflects any returns that have posted since the previous extract whether current or prior-year returns. It is sorted by state code and sent to each participating state tax agency.

    2. At the end of October, the same major extract is resorted by ZIP code and matched to ZIP code tickler files provided by the state tax agencies.

    3. At the end of November, the extract is again sorted, this time by SSN then matched with SSN tickler file provided by the state tax agencies.

  6. Distribution: The IMF/IRTF extract is distributed annually in September by state code sort, in October by ZIP code sort, and in November by SSN sort.

  7. Uses: General uses of the IMF/IRTF extract include:

    • Identifying non-filers

    • Determining discrepancies between federal and state reported income

    • Using Schedule C information for compliance leads

Identity Theft Protection Indicator (ITPI)

  1. Source of Data: The data for the ITPI extract is obtained from the Individual Master File. The extract includes entity information (name, address, taxpayer identification number) for an individual that has been identified as either at potential risk for identity theft (e.g. the taxpayer has reported an incident that could lead to identity theft) or the taxpayer has experienced identity theft which impacted a tax record or tax records.

  2. Distribution: The ITPI extract is distributed monthly. The distribution year runs from January to December. Records on the monthly extract will be cumulative so that all taxpayers that remain at risk from the previous month will be on the extract for the following month and any newly identified taxpayers.

  3. Uses: State tax agencies use the extract to identify a taxpayer that either is at potential risk for or has been impacted by identity theft in order to further scrutinize the processing of that taxpayer's returns.

Information Returns Master File (IRMF)

  1. Source of Data: The IRMF extract contains data from the Information Returns Master File (IRMF) which is a database containing all information returns transcribed by IRS. It contains data about both the payer (filer) as well as data about the payee (recipient of income) from various forms including Form 1099 , Form 1098, Schedule K-1, and Form W-2/W-2G.

  2. The IRMF Extract by Payee State Code is provided annually to the state tax agencies by payee state code. Records are included in this extract based on the payee (recipient of income) having an address within the requesting state tax agency’s state.

  3. The IRMF Non-resident extract includes records based on the address of the payer being within the requesting state tax agency’s state and the address of the payee being outside the requesting state tax agency’s state. Schedule K-1s for Form 1041, Form 1065 and Form 1120S are included on the Non-resident extract. Form W-2/W-2G and Form 1099-MISC can also be requested on the Non-resident extract option.

  4. The IRMF extracts are large files. Each file takes approximately 18 months to create.

  5. Distribution: The IRMF Extract by Payee State Code is scheduled for distribution in June. The IRMF Non-Resident Extract is scheduled for distribution in October. If multiple payee addresses are present for the same taxpayer on the IRMF by Payee State Code Extract, each state tax agency participating in the extract receives all information returns for that taxpayer.

    Example:

    If a taxpayer receives two Form W-2, one listing a home address in Illinois and the other listing a home address in Wisconsin, both state tax agencies will receive all FTI for that taxpayer.

  6. The IRMF extracts are divided into 26 segments (files) using the last two digits of the payee's TIN as the indicator for the divisions.

  7. Uses:

    • Identifying underreporters

    • Identifying excess deductions

    • Identifying employers who are withholding but not remitting

    • Matching Schedule K-1 data to state tax agency databases to identify resident and non-resident non-filers

Levy

  1. Source of Data: The Levy extract contains data extracted from the IRMF and reflects payer and payee data for specific taxpayers from Form 1099-INT, Form 1099-DIV, Form 1099-MISC, Form 1099-K, Form 5498, Schedule of Reimbursable Earnings, and Form W-2, as well as Schedule K-1.

  2. The data is extracted monthly using a state tickler file that contains the name control and TIN of payers. State tax agencies enrolled for the Levy extract will receive an output file for each month that they submit a tickler file; however, they need not submit a tickler file every month.

  3. Distribution: Distribution is on a monthly basis depending on a tickler file submission. The distribution year begins in February and ends in December.

  4. Uses: General uses of the Levy extract include:

    • Locating names of payers of income for levy sources

    • Identifying current address information

    • Identifying income from out-of-state sources

    • Identifying active military personnel for removal from non-filer lists

Military Combat Zone

  1. Source of Data: The Department of Defense (DOD) Active Duty Military Combat Zone personnel information (PC 500 Combat Zone) file is received by the IRS on a monthly basis and posted to the IRS Master File.

  2. The extract file contains a combat zone entrance date and exit date for all active duty military personnel that DOD has identified as deployed in a military combat zone. The file includes full-time and reserve personnel from the five branches of the military (Army, Navy, Air Force, Marines and Coast Guard) as well as National Guard personnel (Army and Air Force). Information is validated by each branch of service. The extract will be sorted by state code (address of taxpayer) using the legal state of residence from military records. This extract is not available to city tax agencies because the ZIP code is not captured by DOD and this would be the only way city tax agencies could be authorized to receive the information.

  3. Distribution: The Military Combat Zone extract will be distributed monthly beginning in January and ending in December each year.

  4. Uses: The Military Combat Zone extract will be used to suspend collection efforts and/or enforcement actions against military personnel while serving in a combat zone.

Non-Itemizer Extract

  1. Source of Data: Data is extracted from the IRS Individual Master File (IMF) and the Individual Return Transaction File (IRTF). This extract is available to state tax agencies based on state code and to city tax agencies based on ZIP Codes.

    The Non-Itemizer extract provides a list of individuals who did not itemize on their prior year federal income tax return. The extract is based on the address of the taxpayer as indicated on the federal tax return (state code sort). By matching extract data with state tax agency refund recipients, state tax agencies can identify those refund recipients who did not itemize on their prior year federal tax return. Because these taxpayers did not itemize, the state tax agency is not required to issue Forms 1099-G to these taxpayers, therefore providing a cost and resource savings to the state. There will be a record on the Non-Itemizer extract as long as there is not a duplicate or amended return posted for the same tax year.

  2. Distribution: The Non-Itemizer extract is distributed annually in November.

  3. Uses: Uses of the Non-Itemizer extract include:

    • Identification of state refund recipients who did not itemize on their prior year federal tax return, eliminating the need for a state tax agency to send Form 1099-G.

Preparer Tax Identification Number (PTIN)

  1. Source of Data: Data is extracted from the PTIN Database and the National Accounts Profile (NAP). The PTIN extract provides the SSN and PTIN for tax preparers nationwide who have been issued a PTIN. All tax preparers must apply for a PTIN as a result of the PTIN Initiative effective 1/1/2011. The PTIN must be used as an identifying number by paid tax preparers.

  2. Distribution: The PTIN extract is distributed weekly (January through December) and is cumulative.

  3. Uses: Providing the PTIN extract to state tax agencies allows practitioners the added security of using the IRS PTIN on the state returns while allowing the state tax agency to continue compliance and education programs with practitioners.

Taxpayer Address Request (TAR)

  1. Source of Data: The source of data for the TAR extract is the IRS Individual Master File (IMF). The extract contains taxpayer address data from the Individual Master File and is based on a state tax agency supplied tickler file containing the SSNs and name controls of specific taxpayers.

  2. Accounts for married individuals are established on the IMF using the SSN of one spouse as the primary SSN. Submissions for TAR will be run against the Spouse-Primary Cross-Reference File to determine the primary SSN. Primary and secondary SSNs and the taxpayer's name and address will be extracted for the file returned to the state tax agency. In addition, the latest tax module year is provided to establish currency of the information.

  3. Distribution: This extract is distributed weekly from February through January in response to a state-submitted tickler file. Participants who enroll during the enrollment period can begin to submit ticklers in February the following year.

  4. Uses: Some uses of the TAR extract include locating taxpayers that have moved as well as those who are delinquent.

    Note:

    Federal agencies may receive address information through TAR under IRC §6103(m)(2), (3), (4), (5), and (7). However, federal agencies are not permitted the same disclosures as the state taxing agencies. The federal TAR extract is separate from the GLDEP state TAR extract. The federal TAR extract is NOT part of the GLDEP, federal agencies reimburse the IRS for this service.

State Reverse File Match Initiative (SRFMI)

  1. Background: IRS provides state tax agencies with various extracts to match against their files and identify both individual and business non-compliant taxpayers. For SRFMI, IRS is asking the state tax agencies to provide data back to the Service when a state tax return has been filed but a federal tax return has not, or when the amounts reported on a state tax return are greater than those reported on a federal tax return. State tax agencies may have obtained these taxpayer returns through normal taxpayer filings, an amnesty program, or other compliance efforts.

  2. State tax agencies are asked to compare the last BMF/BRTF by State Code, BMF/BRTF by EIN, IMF/IRTF by State Code, and IMF/IRTF by SSN extracts received from the IRS against their business and individual master file records to produce an extract for the IRS. The extract should include records that exist on the state master file but not on IRS files or contain discrepancies between state and IRS amounts.

  3. Uses: The IRS uses for the SRFMI Extract include:

    • Identify federal non-filers - Identify records on the state tax agency's master file that are not present on the IRS master file.

    • Determine discrepancies between federal and state returns - The return appears on both the extract and state tax agency files but there are differences in income, expenses, credits, business type, etc.

    • Identify obsolete or out-of-business taxpayers.

    • Use state sales tax information as a comparison to gross receipts to identify federal underreporters and non-filers.

    • Compare wages on state withholding records with IRS employment tax records.

Legal Issues: Safeguards, Disclosure, Need and Use

  1. Safeguards: Each state tax agency receiving FTI via the GLDEP is responsible for safeguarding the confidentiality of FTI in accordance with IRC §6103(p)(4) and for maintaining the integrity of the FTI if commingled with information from other sources. The IRS Office of Safeguards is responsible for safeguard oversight of state tax agency compliance with IRC §6103(p)(4). Refer to IRM 11.3.36, Safeguard Review Program for more information.

  2. Disclosure: The sharing of FTI via the GLDEP is governed by IRC §6103(d). All requests for FTI from state tax agencies must be approved by an IRS DM.

  3. Need and Use: FTI may be obtained by state tax agencies via the GLDEP to the extent that the information is needed for and is reasonably expected to be used for state tax administration under the jurisdiction of that agency. The information may not be used for any purpose inconsistent with the state tax administration responsibilities of that state tax agency. Oversight of compliance with the need and use provisions is a function of both Disclosure and Safeguards. Refer to IRM 11.3.32, Disclosure to States for Tax Administration Purposes and IRM 11.3.36, Safeguard Review Program for more information.

Work Request (WR)

  1. An annual Work Request (WR) must be submitted through the Work Request Management System (WRMS) for each data extract. The WR must be submitted before the programming/processing of the extract can begin. Any request for changes must be included in the WR. The submission of WRs for the GLDEP is the responsibility of the GLDEP analysts on the Data Services staff.

  2. The WR process is used by the business area and IT to request, control, and monitor changes to information systems. The WR process provides a vehicle for formal communication about information systems requirements between the business area and the IT office being asked to do the work. The WR process serves as a communications, configuration management and documentation tool for the IRS to manage resources.

  3. The WR coordinator for a specific business area has primary responsibility for assisting the WR originator in entering and tracking individual WRs in the WRMS.

  4. The Demand Management Executive Advisory Committee sets the due date for work requests based on work request operational dates. In general work requests must be submitted eight to fourteen months in advance of the operational date.

Testing of Data Exchanges

  1. Validity Testing: Testing the validity of GLDEP extract data before extract distribution ensures the integrity of the data.

  2. Roles and responsibilities of participants in the testing process are as follows:

    1. IT will build checks into the GLDEP extract programming/processing to ensure extract output criteria are met. When extract programming/processing criteria is not met, it can cause extract processing to abort. At the IRS Computing Centers, IT Quality Review teams review the extract content to ensure that only agencies enrolled in the GLDEP receive the federal tax information for which they are enrolled.

    2. Secondary testing of the more complex extracts is also accomplished periodically in addition to the regular testing/quality review accomplished by IT. For secondary testing, IT provides a GLDEP analyst with an Automated Business Rule (ABR) report or sample of extract records for review. The GLDEP analyst examines the report or records to ensure that extract record selection criteria is being met.

  3. For certain extracts such as the IMF/IRTF and BMF/BRTF extracts, secondary testing can also be accomplished in conjunction with select state tax agencies, in addition to the regular testing/quality review accomplished by IT. Prior to the production run for the extract, IT sends out a test extract to the test state tax agencies. The GLDEP analyst provides the test state tax agencies with an advance copy of the extract record layout and test criteria. When a test state tax agency discovers a problem, they should notify their GL who should in turn notify the Data Services GLDEP team. The GLDEP team will work with IT personnel responsible for programming and production of the extract to resolve problems, keeping the GL informed of progress. In some cases, it is necessary for state tax agency and IRS programmers to communicate directly. In these cases, the contact will be coordinated through the GL and the GLDEP team.

Enhancement Request (Procedures for Requesting Changes to the GLDEP)

  1. State tax agencies that participate in the GLDEP may request enhancements or changes to the program. The "IRS Governmental Liaison Data Exchange Enhancement or Data Availability Request Form" must be used to request GLDEP enhancements. The form must also be used to ask about the feasibility of an enhancement.

    Example of a Request: If a state tax agency wants to know if a particular data element can be made available but has not yet decided whether or not they want to actually request that the data element be made available, the form must still be used. The reason for this is that it often takes as many resources and as much time to determine the availability of a data element as to actually make the data element available.

  2. The form includes detailed instructions on how to submit a request to GLDEP analysts and is designed to assist the GL in helping the state tax agency through the enhancement request process. The form prompts the GL and the state tax agency counterparts to think through the request and answer the many questions that arise. The request should be as specific and complete as possible.

  3. These enhancement request procedures apply only to the GLDEP extracts listed at IRM 11.4.2.3.

Enhancement Request General Procedures

  1. IRS can only provide data that is currently transcribed to IRS Master File. IRS cannot incur expenses for transcribing data not required for federal tax administration.

    Note:

    Participating state tax agencies requesting enhancements and data availability should recognize that the process within IRS could be a time-intensive process.

  2. If a tickler file will be submitted as part of the state tax agency request, the following information is required:

    • List all fields proposed to be included on the tickler file that is submitted to IRS

    • Indicate the frequency of proposed tickler submissions (annually, monthly or weekly)

    • Determine approximately how many records will be on each tickler file

    • List all fields requested to be part of the output file (IRS file sent to state tax agencies)

Enhancement Request Participating Agency Procedures

  1. Any state, city, or qualifying group of municipalities covered by IRC §6103 (d) and currently enrolled in the IRS GLDEP may use the enhancement process.

  2. The state tax agency must identify the specific information requested by preparing and submitting the request form to the GL. The GL can assist with research and preparation of the request form. A need and use justification must also be provided. If the request is for additional data elements, the request must contain the specific line items (data elements) requested.

Enhancement Request Governmental Liaison (GL) Procedures

  1. GLs must research the request to determine if it is a potential enhancement or a request for FTI availability.

  2. GLs must attach a statement of the detailed research conducted for the request. The following documents will help the GL in determining if the requested information is currently offered or if the request is valid:

    • Extract spec book for the presence of the form or data

    • Annual Enrollment Form and Annual ODES Form to determine if the data is already offered and if the state tax agency has previously requested the data elements

    • IRS forms and publications to confirm the information description

    • Document 6209 ,IRS Processing Codes and Information , for status indicators not found on forms

  3. The GL will forward the request to the appropriate DM (based on the requesting state) for review and approval before submitting it to GLDEP.

Enhancement Request Disclosure Manager (DM) Procedures

  1. The DM reviews the request for appropriate need and use justification and approves/denies the proposed need and use. If approved, the DM signs the request form indicating approval of the need and use based on the information available and returns the request to the GL.

Enhancement Request Data Services Responsibilities

  1. The request will be assigned to a Data Services GLDEP analyst who will review and forward the request to Information Technology (IT) as appropriate. The analyst will work with IT to prepare a Work Request (WR) or any other required documents and will keep the GL informed of progress. The response from IT may take as long as 90 days. Once the GLDEP analyst receives a definitive response from IT, they will complete the Enhancement Response portion of the form to be signed by the Chief, Data Exchange and Quality Initiatives and return to the GL. The GL will then prepare a response to the requesting state tax agency.

Terminology

Term Definition
Basic Agreement: Agreement on Coordination of Tax Administration executed by the Commissioner of the Internal Revenue Service and the head of a state tax agency.
Data Element: Any item of information such as an SSN that can be selected from a return. May also be called a field.
Extract: A computer-generated file that contains specific data elements.
Record: A set of data elements.
Work Request (WR): A process used to request services from Information Technology (IT) through the Work Request Management System (WRMS). The WR serves as the official agreement or contract between IT and the requesting office. The term WR is also used to refer to the resulting document containing the specifics of the WR process.
Specification Book: A technical and administrative user guide for extracts that are part of the Governmental Liaison Data Exchange Program (GLDEP) for use by both state and IRS personnel. Also called a “spec book”.
Secure Data Transfer (SDT): Secure Data Transfer (SDT) is a means to exchange files with FedState agencies electronically in a secure and automated environment over the Internet. SDT is currently used to deliver outgoing GLDEP files to FedState agencies and accept incoming files.
Safeguard Security Report: Report to IRS on agency processes, procedures, and security controls in place to protect Federal Tax Information (FTI) in accordance with IRC 6103(p)(4).
Tickler File: A tickler file is an input file that is merged with IRS data to produce a specific output data extract. Tickler files must be submitted to IRS via SDT.

Acronyms

Acronym Definition Acronym Definition
ABR Automated Business Rule IRMF Information Returns Master File
AFOIA Automated Freedom of Information Act IRS Internal Revenue Service
AIMS Audit Information Management System IRTF Individual Return Transaction File
ATAT Abusive Tax Avoidance Transactions IT Information Technology
BMF Business Master File ITIN Individual Taxpayer Identification Number
BRTF Business Return Transaction File ITPI Identity Theft Protection Indicator
CP Computer Program LAND Appeals and Non-Docketed Reporting System
DM Disclosure Manager MCZ Military Combat Zone
DOD Department of Defense NAP National Accounts Profile
DOL Department of Labor OD Operating Division
EIN Employer Identification Number ODES Optional Data Element Selection
EOAD Examination Operational Automation Database OUO Official Use Only
ERAS EIN Research and Assessment System PDF Portable Document Format
FEIN Federal Employer Identification Number PGLD Privacy, Governmental Liaison, Disclosure and Safeguards
FTA Federation of Tax Administrators PTIN Preparer Tax Identification Number
FTI Federal Tax Information RGS Reports Generation Software
GAO Government Accountability Office SBU Sensitive But Unclassified
GL Governmental Liaison SDT Secure Data Transfer
GLADIS Government Liaison and Disclosure Information System SRFMI State Reverse File Match Initiative
GLDEP Governmental Liaison Data Exchange Program SSN Social Security Number
GLDS Governmental Liaison, Disclosure and Safeguards SWA State Workforce Agencies
IDRS Integrated Data Retrieval System TAR Taxpayer Address Request
IMF Individual Master File TIN Taxpayer Identification Number
IMS Issues Management System WR Work Request
IRC Internal Revenue Code WRMS Work Request Management System
IRM Internal Revenue Manual