All software developers and transmitters are required to test their transmission software with the NCDOR.  In addition, they must submit test scenarios to the IRS and the test scenarios provided must be accepted with no error reject codes before acceptance as an electronic filer for tax year 2007.

Under the concurrent testing rule, software developers may begin State testing prior to obtaining final acceptance from the IRS for the Federal PATS process.  The primary home service center is defined as the IRS center that supports the state where the software developer is physically located. The NCDOR is assigned to the IRS Philadelphia Submission Processing Center.  The IRS anticipates PATS testing to begin November 13, 2007.   Each software developer must submit a “Response Form” to the E-File Development Unit to schedule State testing.  The list of contact personnel is in Chapter 2.

Testing ensures, prior to live processing, that:

• the software is correctly formatted;
• edits agree with North Carolina specifications;
• returns will have no math errors;
• required fields are present; and,
• required fields will post to the NCDOR master file.

The 2007 North Carolina test package consists of 10 return scenarios.  All of the returns are eligible for North Carolina e-file.  Each test is comprised of State test data followed by the applicable federal test data.  It may be necessary to add or change some of the federal data as specified by North Carolina.  Knowledge of federal and North Carolina State tax laws and tax preparation is necessary.  The returns must be correctly prepared and computed prior to transmitting the tests and each transmitted record must contain valid software developer identification.  Any records received by NCDOR that do not contain a valid identification will not be processed.

NCDOR will notify software developers via email of the results of the PATS testing within two business days of receipt of the test data.  Upon receipt of the test scenarios, NCDOR will send the e-file contact person an email listing the test returns received as well as the test returns missing in the transmission (i.e. We received tests #’s 1, 2, 3, 4, 6, 7, 8, 9, and 10 in the AM drain.  We are missing test #5.).  If a test return is missing from the transmission, please wait until the next transmission to send the missing return.  All 10 test scenarios should be retransmitted as soon as corrections have been made.  You must continue to transmit all 10 test returns until no errors are detected on any of the test scenarios.

If you wish to offer software capable of online filing North Carolina returns, you will be required to transmit all 10 test returns using your online filing product with IRS Field #0049 filled with a value of “O.”

Test return #10 is available to test the transmission of a State Only return. You must place “SO” in IRS Field 0019, State Only Indicator, for this test.

The range of test social security numbers assigned by the IRS for use by the NCDOR for Federal/State testing is 400-00-4900 to 400-00-4999.  The IRS will only accept these social security numbers during testing.  These social security numbers will be rejected if submitted during live processing.

The last date to submit your initial State test transmission is December 31, 2007.    All State software testing must be completed by January 9, 2008.  Since much of our testing process is automated and requires manual effort to separate test data from live data, we do not intend to extend the testing period beyond January 9, 2008.  Please do not wait until the last minute to begin or complete testing.

Software Approval

PATS testing approval is a two-step process.  A software developer must test their software designed to electronically file a North Carolina return and test all North Carolina Individual Income Tax Forms, including the D-400, D-400TC and D-400V.  Software developers will be notified in writing of their e-file approval after completing the e-file testing process.  The acceptance letter will be emailed and the original copy mailed.  If, after acceptance, your software company has production problems, the NCDOR reserves the right to disapprove the company for the remainder of the filing season.

Once testing is complete and you have been sent an approval letter, you may release your software product for e-file even if your forms have not been approved for paper filing. You will need to place a banner over the D-400, D-400TC and D-400V stating the form has not been approved for paper filing.  In addition, you must do all of the following:

• Notify the Department, customers, and clients immediately if computation errors or other variable data errors are found.  Promptly correct errors and provide the Department with proof that the company corrected the errors and notified customers and clients of the corrections.  Errors made by the North Carolina Department of Revenue and software developers will be placed on the Department’s website for public viewing.
• Submit a copy of your company’s software within 15 days after it is released to the public.  The software will be used for research purposes only.  Under no circumstances will the software be used by the Department to prepare or submit tax returns for processing.  Security measures have been put into place to prohibit unauthorized access and improper or illegal usage of your software product.  Failure to comply may hinder the approval of your e-file product for the next approval season.  Send a copy of the software to:

North Carolina Department of Revenue
Attn: Allison Brown
PO Box 871
Raleigh NC  27602-0871

A master file of software developers approved by North Carolina will be maintained by NCDOR and listed on the Department’s website at www.dornc.com.

Forms Approval

Each software developer must gain approval to produce paper substitute tax forms.  A substitute tax form is a computer-generated tax form that is produced by a software company for use in lieu of a form produced by the Department. A substitute tax form must meet the specifications set forth in the Requirements for Approval of Substitute Tax Forms to be approved by the Department. It is the responsibility of the software developer to submit tax forms for approval based upon the latest edition of this document. 

This document provides an overview of the process for creating and submitting substitute tax forms for approval.  It is critical that each company meet specified deadlines to ensure that the Department may accept returns filed from your company. 

Step One: Agreement to Comply
The Department requires each software developer to file an Agreement to Comply annually.  The deadline for submitting this agreement was August 21, 2007.  This agreement, divided into three parts, provides the Department with verification that the software developer will follow all regulations stipulated by the Department.  In addition, software developers enter product information and personnel contact information on the Agreement and identify all forms that will be reproduced. 

Step Two: Obtain a Software Developer ID Number
A unique two-digit developer ID number is assigned to each developer.  All substitute tax forms must include this Software Developer ID Number.  Once assigned, this number becomes your permanent ID number.  The Software Developer ID Number must be placed in the proper position in the barcode and in parentheses after the Form Number located in the top left-hand corner of every published tax form.  If your company needs a Software Developer ID Number, contact Trudy Ivey, Administrative Assistant, at (919) 733-3117.

Step Three: Accessing Tax Forms and Publications
The Department posts information necessary to produce substitute tax forms on the web site for software developers.  Draft and final tax forms, form specifications, and other relevant information is posted on this site.  This web site is located at www.dornc.com/forms/generated.html or you may access the site by going to the NCDOR homepage at www.dornc.com, selecting Tax Forms, and selecting Software Programs.

Step Four: Designing Tax Forms for Processing
Software developers may choose two options to design substitute tax forms. The developer may choose to obtain templates of the forms from a form provider, such as Nelco or Alpine Data, or the developer may design the forms in-house.

Step Five: Submitting Forms for Approval
All forms must be sent by courier (UPS, FED EX, etc.) or in PDF format via email.  Submit all courier mail packages to:

North Carolina Department of Revenue
Attn: Trudy Ivey, Forms Development & Testing Unit
501 N. Wilmington St.
Raleigh NC  27604-8001

Submit all PDF forms to SDFormsUpdate@dornc.com