1099s and Backup
Withholding -
Insights Into Compliance
The following information was
presented at a workshop conducted by James Medlock, CPP, Director of Training
Development for the American Payroll Association
Under law, payors may be
required to withhold 31% from all reportable payments made to recipients
(payees) for whom an information return is required to be filed that has either
a missing or incorrect taxpayer identification number (TIN). A TIN can be
either a social security number (SSN) or an employer identification number
(EIN). The payor has the responsibility to solicit the TIN from the payee.
A solicitation is a request for a payee's correct TIN. The
payor must make the initial solicitation when the payee opens the account or
when the reportable transaction occurs. If the payee does not provide a TIN
with the initial solicitation, payors must begin backup withholding and make a
first annual solicitation by December 31 of the year in which the account is
opened (for accounts opened or payments made before December) or January 31 of
the following year (for accounts opened or payments made the preceding
December).
If the payee
does not provide a TIN after the first annual solicitation, payors must
continue backup withholding and make a second annual solicitation by December
31 of the year following the calendar year in which the account was opened.
The
following payments are subject to backup withholding:
·
Rents and commissions, fees, or other forms of
compensation for services and other fixed or determinable gains, profits or
income payments reported on Form 1099-MISC.
·
Dividends, reported on Form 1099-DIV.
·
Patronage dividends, reported on Form 1099-PATR.
·
Interest and original issued discounts, reported on
Forms 1099-INT and 1099-OID.
·
Certain transactions made by brokers and barter
exchanges, reported on Form 1099-B.
The IRS considers a TIN
missing when it is not provided or when it is obviously incorrect. Examples of
obviously incorrect TINs are those with less than 9 digits, or with a mixture
of digits and letters within the 9position sequence. For accounts with missing
TINs, backup withholding begins with the first payment and continues from all
payments until a TIN is received. Payors who have not begun backup withholding
generally must:
·
Begin backup withholding on any reportable payment
made and continue backup withholding until a certified TIN is received.
·
Report amounts withheld on Form 945, Annual Return
of Withheld Federal Income Tax,
·
Make the required deposit, AND
·
Get a certified TIN from the payee by asking for a
signed Form W-9. Keep the Form W-9 for their records.
In general, a TIN is
required for each payee on any account, even for "onetime" transactions.
Failing to obtain TINs may subject the payor to a penalty for failing to begin
backup withholding.
A CP2100A notice from the IRS identifies accounts for which an
information return was filed with an incorrect name/TIN combination. The CP2100
notice includes a listing(s) of the information returns filed that included
missing, incorrect, and/or not currently issued TINs.
After comparing the listing(s) to the records that produced the
1099, the following required actions, including sending B-Notices, must be
taken.
The IRS considers a TIN
missing when it is not provided or when it is obviously incorrect. Examples of
TINs obviously incorrect are those:
·
With less than 9 digits, or
·
With a mixture of digits and letters.
For accounts with missing TINs on CP2100, make sure backup
withholding has begun and continue backup withholding on these accounts until a
certified TIN is received. If backup withholding has not begun:
·
Begin backup withholding on any reportable payment
made and continue backup withholding until a certified TIN is received.
·
Report amounts withheld on Form 945, Annual Return
of Withheld Federal Income Tax, and make the required deposit.
·
Solicit a certified TIN from the payee by asking
for a signed Form W-9. Keep the Form W-9 in the records. If a TIN is not
received by December 31 of the year in which the solicitation was made,
complete another solicitation by December 31 of the following calendar year. Do
not send a first or second "B" Notice, if received.
For
accounts with incorrect TINs on CP2100 review tile records to insure the TIN
reported on the Form 1099 agrees with the TIN provided by the payee. If the
TINs agree; make sure backup withholding has begun and continue backup withholding
on these accounts until a TIN is received. If backup withholding has not begun:
·
Begin backup withholding on any reportable payment
made and continue backup withholding until a certified TIN is received.
·
Report amounts withheld on Form 945, Annual Return
of Withheld Federal Income Tax, and make the required deposit.
·
Solicit a certified TIN from the payee by asking
for a signed Form W-9. Keep the Form W-9 in the records. If a TIN is not
received by December 31 of the year in which the solicitation was made,
complete another solicitation by December 31 of the following calendar year. Do
not send a first or second "B" Notice, if received.
If the TIN reported on Form 1099 and the CP2100 notice
disagrees with the TIN provided by the payee, correct the records that produced
the 1099.
When
and how are "B" Notices sent to the payee?
15 business days from the date shown on the CP2100/CP2100A
notice, the "B" Notice must be sent to the payee. Send a notice to
only those payees whose name and TIN combinations and account numbers on your records
agree with the combination that IRS identified as incorrect. A substitute
"B" Notice is acceptable as long as it follows the guidelines in
Revenue Procedure 93-37.
If this is the first time IRS has notified the payor about a
specific name and TIN combination and account number, the payor must give the
payee:
(1)
The first "B" Notice;
(2)
A copy of Form W-9 (or acceptable substitute), and
(3)
An optional reply envelope.
The outer envelope must be clearly marked "IMPORTANT TAX
INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT
ENCLOSED."
Once CP2100A is received
and it is determined that the payor's records are in agreement with information
provided by the payee, payors must send the first "B" Notice with a
Form W-9 to the payee soliciting a correct name and TIN combination from the
payee within 15 days of the date of the CP2100 notice or when it was received
whichever is later. Date the "B" Notice no later than 30 business
days after the date of the CP2100 notice or the date you received it (whichever
is later). The outer envelope must be clearly marked "IMPORTANT TAX
INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT
ENCLOSED."
Ensure that the necessary
information (i.e., date, account no., etc.) is entered on the "B"
Notice BEFORE mailing to the payee.
Update the records with
the corrected information received from the payee and include it on any future
information returns filed. Do not send the signed Form W-9 to the IRS.
Begin backup withholding
on payments made to payees who don't respond to the first "B" Notice
within 30 business days after the date of the CP2100 notice. Backup withholding
may begin after the date you receive the CP2100 notice.
The
following is an example of a First B-Notice that is sent by the payor to the
payee who was listed on the CP2100A notice.
IMPORTANT
TAX NOTICE * * * * * * * * * * * * * * ACTION IS REQUIRED.
Backup
Withholding Warning!
WE
NEED A FORM W-9 FROM YOU BEFORE THE DATE SHOWN BELOW.
DATE:
_____. Otherwise, backup withholding will begin.
Account
Number_____
Current
Name on Account_____
Current
TIN on Account _____
The Internal Revenue Service (IRS) has notified us that the
taxpayer identification number (TIN) on your account with us does not match
their records. The IRS considers a TIN as incorrect if either the name or
number shown on an account does not match a name and number combination in
their files or the files of the Social Security Administration (SSA). If you do
not take appropriate action to help us correct this problem before the date
shown above, the law requires us to withhold 31 percent of the interest,
dividends, and certain other payments that we make to your account. This is
called backup withholding.
In addition to
backup withholding, you may be subject to a $50 penalty by the IRS for failing
to give us your correct name/TIN combination.
This
notice tells you how to help us make your account records accurate and how to
avoid backup withholding and the penalty.
Why Your TIN May Be Considered As Incorrect.
An individual's TIN is
his or her social security number (SSN). Often a TIN does not match IRS records
because a name has changed through marriage, divorce, adoption, etc., and the
change has not been reported to SSA, so it has not been recorded in SSA's
files.
Sometimes an account or
transaction may not contain the correct SSN of the actual owner. For example,
an account in a child's name may reflect a parent's SSN. (An account should be
in the name and SSN of the actual owner.)
What You Need To Do.
Individuals
If you have never been
assigned a social security number (or if you lost your social security card and
do not know your SSN):
1. Call your local SSA
office and find out how to obtain an original (or a replacement) social
security card. Then apply for it.
2. Read the enclosed Form W-9; write the words "applied
for" on the form; sign it, and return it to us. This is called an awaiting
TIN certificate and applies only to those persons who have never been issued an
SSN.
3. When you receive your
social security card, send us another Form W-9 with your SSN and name as shown
on the card. An awaiting TIN certification will only stop or prevent backup
withholding before September 1, 1993. After September 1, 1993 backup
withholding will begin.
If you already have a
social security number, compare the name and SSN on your account with us (shown
at the beginning of this notice) with the name and SSN shown on your social
security card. Then use the chart below to decide what action to take.
IF THEN
1. The last name and SSN
on your account agree with the last name and SSN on your social security card
1. Contact your local SSA office to ascertain whether the information on SSA's
records is different from that on your social security card, and to resolve any
problem. Also, put your name and SSN on the enclosed Form W9 following the
instructions on the form. Sign the Form W9 and send it to us.
2. The SSN on your
account is different from the last name on your social security card, but the
SSN is the same on both
2. Put your name
and SSN, as shown on your social security card, on the enclosed Form W-9,
following the instructions on the form, sign it, and send it to us. You do not
need to contact SSA.
3. The last name on your
account is different from the last name on your social security card, but the
SSN is the same on both
3. Take one of the
following steps (but not both):
(a) If the last name on
your account is correct, contact SSA to correct the name on your social
security card. Put your SSN and name
shown on your account on the enclosed Form W-9 following the instructions on
the form, sign it, and send it to us. However, if you are not able to contact
SSA at this time, you can provide us with both last names. Put your SSN and the
name shown on your social security card plus the last name shown on your
account (in that order) on the enclosed Form W-9 following the instructions on
the form, sign it, and return it to us.
For example, if your social security card lists your maiden name, give
us your SSN and your name in the following order: First/maiden/married name.
Please note, however, that you should contact SSA as soon as possible so they can
correct their records.
(b) If the last name on
your social security card is correct, put that name and your SSN on the
enclosed Form W-9 following the instructions on the form. Sign it, and return
it to us. You do not need to contact SSA.
4. Both the last name and
SSN on your account are different from the last name and SSN on your social
security card
4. (a) If the last name and SSN on your social security card
are correct, put that name and SSN on the enclosed Form W-9 following the instructions
on the form. Sign it, and send it to us.
You do not need to
contact SSA.
(b) If the last name on
your account and the SSN on your social security card are correct, follow the
procedure in section 3(a) above. Be sure to put the name shown on your account
and the name shown on your social security card on the Form W-9.
Once you have resolved what your correct name and TIN
combination is, you must provide this information to us (and all your other
payors) for all of your accounts to avoid a problem ii1 the future. If you are
required to visit a SSA office, take this notice, your social security card,
and any other related documents with you. Before you go, you should call SSA so
that they can explain what other documents you need to bring.
For most nonindividuals (such as trusts, estates, partnerships,
and similar entities), the TIN is the employer identification number (EIN). The
EIN on your account may be incorrect because it does not contain the number of
the actual owner of the account. For example, an account of an investment club
or bowling league should reflect the organization's own EIN and name, rather
than the SSN of a member. Please put the name and EIN on the enclosed Form W-9,
sign it, and send it to us.
A sole proprietor may
furnish his or her individual name and either his or her SSN or the EIN for his
or her sole proprietorship. In addition to his or her individual name, the
sole proprietor may also furnish the business name for the sole proprietorship,
provided his or her individual name is listed before the business name. A sole
proprietor must not furnish only the business name. Please put the individual
name and SSN or EIN on the enclosed Form W-9, sign it, and send it to us.
Important Reminder!
YOU MUST SEND US A SIGNED IRS FORM W-9 BEFORE THE DATE OF THIS
NOTICE even if the name and number (SSN or EIN) on your account with us match
the name and number (SSN or EIN) on your social security card or the document
issuing you an EIN. If we do not receive your Form W-9, and any other documents
that we need to change the name or TIN (or both) on your account before the
date of this notice, we are required by law to withhold 31 percent from any
reportable payment that we pay to your account until we receive the necessary
documents. A Form W-9 is enclosed for your convenience, as well as any
additional documents allowing us to change the name/TIN combination on your
account.
END
OF FIRST B-NOTICE
If
this is the second time within a three-year period that IRS has notified the
payor that an account contains an incorrect name and TIN combination, the payor
must give the payee:
(1) the
second "B" Notice, and
(2) an
optional reply envelope.
The outer envelope must be clearly marked "IMPORTANT TAX
INFORMATION ENCLOSED" or "IMPORTANT TAX RETURN DOCUMENT
ENCLOSED." Do not send a Form W-9.
The CP2100/CP2100A notice
does not indicate whether it is the first or second notification for a specific
account. Under the backup withholding regulations, the payor is responsible for
tracking the status of these notices. Payors are only required to mail one
"B" Notice a year, even if the second "B" Notice relates to
a different tax year.
When the "B" Notice is returned as
"undeliverable" try to get the correct address for the payee and
remail the notice. If a correct address cannot be obtained, keep the
undelivered document with the records and start backup withholding on future
payments.
Backup
withholding must begin following receipt of the CP2100/2100A notice.
If the payee refuses or neglects to provide a TIN, begin backup
withholding on any reportable payments immediately. Make the required annual
solicitations for a valid TIN.
A payee may claim exemption from backup withholding if their
type of organization is listed in the Instructions for the Requester of Form
W-9.
The following is an example of a Second B-Notice that is sent
by the payor to the payee who was listed on the CP2100A notice twice within
three years.
The second "B" Notice to the payee should not include
a Form W-9. It should instruct the payee to contact either SSA or IRS to obtain
the correct name/TIN combination. Generally, payers are not required to send a
"B" Notice more than twice within three calendar years to the same
account.
IMPORTANT
TAX NOTICE * * * * * * * * * * * * * * ACTION IS REQUIRED.
Backup
Withholding Warning!
WE
NEED A FORM W-9 FROM YOU BEFORE THE DATE SHOWN BELOW.
DATE:
_____. Otherwise, backup withholding will begin.
Account
Number _____
Current
Name on Account _____
Current
TIN on Account ______
We have received notice from the Internal Revenue Service (IRS)
twice within 3 years stating that the combination of the name and taxpayer
identification number (name/TIN combination) on your account with us is
incorrect. (Your account number, current name on the account and current
taxpayer identification number (TIN) on the account are shown above.) A
name/TIN combination is incorrect if it does not match a name/TIN combination
shown on the records of the Social Security Administration (SSA) or the IRS.
You should follow the instructions below to correct this
problem and send the corrected information to us before the date shown above.
If we do not have the correct information before that date, the law requires us
to withhold 31% of the interest, dividends, and certain other payments that we
make to your account.
Section 3406 of the Internal Revenue Code requires that we
withhold 31% in tax, called backup withholding, when you do not give us your
correct name/TIN combination. Because of the notices we received from the IRS,
we are now required to disregard any further name/TIN combinations you furnish
us for your account (whether or not you certify your TIN under penalties of
perjury) unless SSA (or, in the case of an incorrect employer identification
number, the IRS) validates your name/TIN combination. Also, the IRS may charge
you a $50 penalty for failing to provide us with your correct name/TIN combination.
Follow
the instructions below to correct your account record to avoid backup
withholding on your account (or to stop it once it has begun) and to avoid the
penalty.
Individuals/Instructions
for Incorrect Social Security Numbers
If
the incorrect TIN you furnished us is a social security number, you must:
1.
Contact your local SSA office by telephone at
1-800-SSA-1213 and ask what you need to do to correct the problem for backup
withholding tax purposes;
2.
Give a copy of this notice to the SSA; and
3.
Request and authorize the SSA to send Form
SSA-7028, Notice of Third Party of Social
Security Number Assignment, directly to us with a copy of this notice
attached.
Instructions
for Incorrect Employer Identification Numbers
If
the incorrect TIN you furnished is an employer identification number, you must:
1.
Write the IRS Service Center (attn: Entity Section)
where you file your income tax return, and ask the IRS to send you a Letter
147C;
2.
Enclose a copy of this notice in your letter to the
IRS Service Center; and
3.
When the IRS sends you the Letter 147C, send it to
us with a copy of this notice attached.
END
OF SECOND B-NOTICE
When must the B-Notice responses be received?
Allow 30 business days after
the date the B-Notice is sent to a payee to receive either SSA Form 7028,
Notice to Third Party of Social Security Number Assignment, from the SSA or a
copy of IRS Letter 147C from the payee.
Begin backup withholding on payments made to payees if SSA Form
7028, or IRS Letter 147C are not received within the 30 business days. Continue
to backup withhold until receiving either validation.
NOTE: It is the payor's
responsibility to send the appropriate "B" notice to the payee, when
required, to obtain the correct name/TIN. This information should not be
solicited from the payee by telephone because a TIN (i.e., Form W-9) that the
payee certifies in writing as correct is needed in order to stop or prevent
this backup withholding from starting.
"Third and Subsequent Notices"
In general, ignore a
third or subsequent notice of missing or incorrect TINs if the required actions
for the First and Second Notice have been completed and the incorrect payee
name and TIN combination and account number remain the same. However, if the
CP2100 notice and listing(s) relates to the same payee, but with a different
name/TIN combination from the "first" and "second" notice,
treat the notice as a "first" notice.
Payments to attorneys.
Attorneys' fees of $600 or more paid in the course of your trade or
business are and continue to be reportable in box 7 of Form 1099-MISC. However,
for 1998 and later years, if you make a payment in the course of your trade or
business to an attorney in connection with legal services and the attorney's
fee cannot be determined, the total amount paid to the attorney (gross
proceeds) must be reported in box 13 with new Code A.
Example: An insurance
company pays an attorney $100,000 to settle a claim. The attorney's fee cannot
be determined by the insurance company. The insurance company must report
$100,000 in box 13 of Form 1099-MISC with Code A. If the insurance company
knows that the attorney's fee is, for example, $34,000, the insurance company
must report $34,000 in box 7 and nothing in box 13.
These
rules apply;
(1)
Whether or not the legal services are provided to the payor, and
(2)
Whether or not the attorney is the exclusive payee (e.g., the attorney's and
claimant's names on one check).
However,
these rules do not apply to:
·
Profits distributed by a partnership to its
partners that are reportable on Schedule K-1 -- Form 1065, Partner’s Share of Income, Credits, Deductions, etc.,
·
Wages paid to attorneys that are reportable on Form
W-2, Wage and Tax Statement, or
·
Services provided by the attorney which can be
determined and is reported on Form 1099-MISC, Miscellaneous Income, in box 7 (Nonemployee Compensation).
The
term "attorney" includes a law firm or other provider of legal
services.
Payments to corporations for legal services.
The exemption from reporting payments made to corporations no longer applies to
payments for legal services. Therefore, for 1998 and later years, you must
report attorneys' fees (in box 7) or gross proceeds (in box 13) as described
above to corporations that provide legal services.
TINs for Attorneys. To report payments to
attorneys on Form 1099-MISC, the payor must obtain the attorney's taxpayer
identification number (TIN). Form W-9, Request
for Taxpayer Identification Number and Certification, may be used to obtain
the attorney's TIN. But Form W-9 is not required for initial solicitation of
the TIN. An attorney is required to promptly supply its TIN whether it is a
corporation or other entity. If the attorney fails to provide its TIN, the
attorney may be subject to a penalty under section 6723 of $50 for each failure
to provide the TIN not to exceed $100,000 for all failures in a calendar year,
and the reportable payments are subject to backup withholding at 31%.
State and local sales taxes. If state or local
sales taxes are imposed on the service provider and you (as the buyer) pay them
to the service provider, report them on Forth 1099-MISC as part of the
reportable payment. However, if sales taxes are imposed on you (as the buyer)
and collected from you by the service provider, do not report the sales taxes
on Form 1099-MISC.
Termination payments to former self-employed insurance agents. These
payments are not subject self-employment tax and are reported in box 3 I Other
Income, (rather than box 7 -- Nonemployee Compensation) if all the following
apply:
a)
The payments are received from an insurance company
because of services performed as an insurance agent for the company.
b)
The payments are received after termination of the
agent's agreement to perform services for the company.
c)
The agent performs no services for the company
after termination and before the end of the tax year.
d)
The agent enters into a covenant not to compete
against the company for at least 1 year after the date of termination.
e)
The amount of the payments depend primarily on
policies sold by the agent or credited to the agent's account during the last
year of the service agreement or on the extent to which those policies remain
in force for some period after termination, or both.
f)
The amount of the payments does not depend at all
on length of service or overall earnings from the company (regardless of
whether eligibility for payment depends on length of service).
If
the payments do not meet these requirements, report them in box 7.
Fish purchases. If you are in the trade
or business of purchasing fish for resale, you must report total cash payments
of $600 or more paid during the year to any person who is engaged in the trade
or business of catching fish. Report these payments in box 7 -- Nonemployee
Compensation. You are required to keep records showing the date and amount of
each cash payment made during the year, but you must report the total amount
paid for the year on Form 1099-MISC. "Fish" means all fish and other
forms of aquatic life. "Cash" means (1) U.S. and foreign coin and
currency and (2) a cashier's check, bank draft, traveler's check, or money
order. Cash does not include a check drawn on your personal or business
account.
Federal executive agencies' payments to corporations. A
federal executive agency is required to report payments for services of $600
or more to corporations. These payments were previously exempt form the
reporting requirements. An exemption applies to payments on certain classified
or confidential contracts. This provision was effective for 1997 payments as
part of the Taxpayer Relief Act of 1997.
A
Form 1099-MISC, Miscellaneous Income, is
filed for each person, a non-corporate entity, who has been paid
1)
At least $10 in royalties or broker payments in
lieu of dividends or tax-exempt interest,
2)
At least $600 in rents, services (including parts
and materials), prizes and awards, other income payments, medical and health
care payments, and gross proceeds to an attorney in connection with legal
services, or
3)
Any fishing boat proceeds.
Trade or Business
Report payments only when they are made in the course of a
trade or business. Personal payments are not reportable. However, nonprofit
organizations and governmental entities are considered to be engaged in a trade
or business and are subject to the reporting requirements. Nonprofit
organizations subject to the reporting requirements include trusts of qualified
pension or profit-sharing plans of employers, certain organizations exempt from
tax under section 501 (c) or (d), and farmers = cooperatives that are exempt
from tax under section 521. Payments made by federal, state, or local
government agencies are also reportable.
Some
payments are not required to be reported on Form 1099-MISC, although they may
be taxable to the recipient. Payments for which a Form 1099-MISC is not
required include:
(1) Payments
to a corporation, except those required to be reported in Box 6 (Medical and
Health Care payments), Box 8 (Substitute payments in lieu of dividends or
interest), Box 13 with Code A (Gross proceeds paid to an attorney in
connection with legal services),
(2) Payments
for merchandise,
(3) Payments
of rent to real estate agents,
(4) Wages
paid to employees (report on Form W-2),
(5) Business
travel allowances paid to employees (may be reportable on Form W-2), and
(6) PS
58 costs (report on Form 1099-R).
In addition, use Form 1099-MISC to report direct sales of at
least $5,000 of consumer products to a buyer for resale. File Form 1099-MISC
for each person from whom any federal income tax was withheld under the backup
withholding rules regardless of the amount of the payment. Report only payments
made in the course of the payor's trade or business, including those payments
made by federal, state, or local government agencies and nonprofit
organizations.
CAUTION: Be sure to
report payments in the proper box because the IRS uses this information to
determine whether the recipient has properly reported the payment.
NOTE: Generally, amounts
reportable in Box 7 are subject to self-employment tax. If payments are not
subject to this tax and they are not reportable elsewhere on Form 1099-MISC,
report the payments in Box 3. However, report Section 530 "reasonable basis"
employee payments in Box 7. The employee should then contact the IRS as to how
to report the payments on his or her personal income tax return.
When To File.-- File 1998 Form 1096 with Forms 1098,
1099, or W-2G by February 29, 2000. The requirement to file is met if the form
is properly addressed and mailed on or before the due date. If the regular due
date falls on a Saturday, Sunday, or legal holiday, file on the next business
day. A business day is any day that is not a Saturday, Sunday, or legal
holiday.
For
tax year 1999, Forms 1099 filed electronically with the 1RS receive an
automatic 30-day extension and are not due until March 30, 2001.
Reporting period.-- Forms
1098 and 1099 are used to report amounts received, paid, or credited during the
calendar year.
Extension.-- For paper or magnetic
media filing, all extension of time to file may requested by sending Form 8809,
Request for Extension of Time To File
Information Returns, to the address shown on the form. The extension must
requested by the due date of the returns for the request to be considered, if
the request for an extension is approved, an additional 30 days to file is
granted. An additional extension may be requested.
NOTE:
If requesting an extension of time to file For more than 50 payors, the request
must be submitted magnetically or electronically.
Keeping copies.-- Generally, keep copies of
information returns filed with the IRS or have the ability to reconstruct the
data for at least 3 years from the due date of the returns. If backup
withholding was imposed keep copies of information returns for 4 years.
Recipient Names and Taxpayer Identification Numbers.-- Taxpayer
identification numbers (TINs) are used to associate and verify amounts reported
to the IRS with corresponding amounts on tax returns. Therefore, it is
important that you furnish correct names, social security numbers (SSNs),
individual taxpayer identification numbers (ITINs), or employer identification
numbers (EINs) for recipients on the forms or magnetic media sent to the IRS.
Note: If the recipient does not provide a TIN,
leave the box for providing the TIN to the IRS blank on the Form 1098, 1099,
5498, or W-2G. Only one recipient TIN can be entered on the
form.
The TIN for individual recipients of information returns is the
social security number. For other recipients, including
corporations, partnerships, and estates, the TIN is the EIN.
Show the full name and
address in the section provided on the return. If payments have been made
to more than one recipient or the account is in more than one name, show as the
ONLY name on the first name line the name of the recipient whose TIN is shown
on the return. Show the names of any other individual recipients in the
area below the first line, if desired.
For sole proprietors, show the individual's name on the first name
line; on the second name line, the business name may be entered. Do not enter
only the business name. For the TIN, enter either the individual's SSN or the
EIN of the business (sole proprietorship).
Statements to Recipients (Participants, Payors/Borrowers,
Policyholders or Transferors).-- If required to file a
return with the IRS, the return also must be furnished to recipients containing
information furnished to the IRS. Be sure that the statements provided to
recipients are clear and legible.
No additional enclosures,
such as advertising, promotional material, or a quarterly or annual report, are
permitted to be sent with Form 1099. Even a sentence or two on the year-end
statement describing new services offered by the payor is not permitted. Logos
are permitted on the envelope and on any nontax enclosures.
Note: The IRS allows the use of certain logos and
identifying slogans on substitute statements to recipients that are subject to
the statement mailing requirements.
A recipient statement may
be perforated to a check or to a statement of the recipient's specific account.
The check or account statement to which the recipient statement is perforated
must contain, in a bold and conspicuous type, the legend "Important Tax Return Document Attached." The legend
"Important Tax Return Document Enclosed" must appear in a bold and
conspicuous manner on the outside of the envelope and on each letter explaining
why no check is enclosed, or check or account statement that is not perforated
to the recipient statement. The legend is not required on any tax form, tax
statement, or permitted letter of tax consequences included in a statement
mailing.
Note: When providing recipient statements in a "separate
mailing" that contains only recipient statements, Forms W-8 and W-9, and a
letter explaining the tax consequences of the information shown on a recipient
statement included in the you are not required to include the legend "Important
Tax Return Document Enclosed" on the envelope.
Generally, payments to
independent contractors are reported on Form 1099-MISC in Box 7.
NOTE: To qualify for
relief under Section 530 of the Revenue Act of 1978, employers must file Form
1099-MISC.
Directors' fees and other remuneration, including payments made after retirement, are reportable on Form 1099-MISC and must be reported