Issuance of Information Returns Policy

Types of Information Returns

Form 1042, Annual Withholding Tax Return for U.S. Source Income and Foreign Persons
Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding
Form 1099-A, Information Return for Acquisition or Abandonment of Secured Property
Form 1099-B, Statement for Recipients of Proceeds from Broker and Barter Exchange Transactions
Form 1099-C, Cancellation of Debt
Form 1099-DlV, Statement for Recipients of Dividends and Distributions
Form 1099-G, Statement for Recipients of Certain Government Payments
Includes payments to individuals for unemployment compensation, state income tax refunds, discharges of indebtedness, taxable grants, and U.S.D.A. agricultural subsidy payments.
Form 1099-INT, Statement for Recipients of Interest Income
Form 1099-MISC, Statement for Recipients of Miscellaneous Income
Includes payments for nonemployee compensation for services rendered, office rent, machine rent, equipment rent, royalties, prizes and awards that are not for services rendered (not including gambling winnings reported on a W-2G Form), federal income tax withheld for nonemployees (backup withholding), fishing boat proceeds, medical and healthcare payments, for direct sales of $5,000 or more of consumer products for resale, crop insurance proceeds, and state income tax withheld for nonemployees.
Form 1099-R, Statement for Recipients of Total Distributions from Profit Sharing, Retirement Plans, Individual Retirement Arrangements, Insurance Contracts, Etc
Form 1099-S, Statement for Recipients of Proceeds from Real Estate Transactions . Used to report the sale or exchange of from one-to-four family real estate.
Form W2-G, Certain Gambling Winnings

Information Returns Publications and Forms

Telephone 1-800-829-3676 to obtain Federal tax forms, instructions, and publications.
IRS Forms and Publications Center, located in Raleigh in the Somerset Business Park at 4405 Bland Road, off Falls of the Neuse Road, 1st Floor.
Greensboro District Director of the IRS, 320 Federal Place, Greensboro, N.C. 27401.
Publication 1045, Information for Tax Practitioners , lists many of the IRS forms, instructions and publications.
Instructions for Forms 1099, 1098, 5498, 1096, and W-2G . This publication includes the requirements for issuing each type of information return, discusses how to issue corrections, refers to the magnetic media requirements for filing returns and corrected returns with the IRS, and includes information on backup withholding (at a rate of 31%).
Instructions for Forms 1042 and 1042-S . This publication includes the requirements for issuing Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, discusses how to issue corrections, refers to the magnetic media requirements for filing retums and corrected returns with the IRS, and includes information on withholding.
Publication 15 (Circular E): Employer's Tax Guide . This circular is provided each year to employers and includes information on payroll withholding and other payroll matters. The circular also discusses the issue of whether an individual should be classified as an employee or a nonemployee.
Publication 515: Withholding of Tax on Non Resident Aliens and Foreign Corporations.
Publication 519: U.S. Tax Guide for Aliens.
Publication 525: Taxable and Nontaxable Income . This publication is written for individuals and companies to assist them in determining the reportability of certain types of income.
Publication 535: Business Expenses . Includes information on valuation of taxable fringe benefits for nonemployees, which should be reported in Box 7 of the 1099 MISC Form.
Publication 575: Pension and Annuity Income . Provides information to assist in preparing the 1099-R Returns, Total Distributions from Profit-Sharing, Retirement Plans, Individual Retirement Arrangements, Insurance Contracts, etc.
Publication 901: U.S. Tax Treaties.
Publication 937: Employment Taxes and Information Returns . This publication defines the criteria for an "employee," as the IRS defines it. Agencies are responsible for reporting income paid to those individuals who provide services to your organization who are considered nonemployees.
Publication 1281: Backup Withholding on Missing and Incorrect TINs . Includes information about the requirements for backup withholding, how to process "B" notices, and the deposit and year end filing requirements for backup withholding taxes.
Publication 1527: What is the Information Returns Programs Bulletin Board System?
Revenue Procedure 93-16: Specifications for filing Form 1042-S, Foreign Person's U. S. Source Income Subject to Withholding, Electronically or on Magnetic Tape, and 51/4 or 31/2 inch Magnetic Diskettes .
Revenue Procedure 94-35: Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096,1098,1099 Series, 5498, and W-2G . Provides the requirements for reproducing IRS acceptable paper substitute information returns and the transmittal Form 1096 and for furnishing substitute statements to recipients and for furnishing paper document reporting to the IRS. (This publication is revised annually to explain the requirements for format and content of substitute statements to recipients.)
Revenue Procedure 94-43: Specifications for Filing Forms 1098,1099,5498 and W-2G Magnetically or Electronically .
Form 1001, Ownership, Exemption, or Reduced Rate Certificate
Form 1078, Certificate of Alien Claiming Residence in the United States
Form 1096, Annual Summary and Transmittal of U.S. Information Returns
Form 4419, Application for Filing Information Returns Magnetically/Electronically
Form 4802, Transmittal of Information Returns Reported Magnetically/Electronically (Continuation)
Form 4804, Transmittal of Information Returns Reported on Magnetic Media
Form 5064, Preparation Instructions for Media Label
Form 8233, Exemption from Withholding of Compensation for Personal Services Used by Non-resident Aliens to Claim Exemption from Withholding
Form 8508, Request for Waiver from Filing Information Returns on Magnetic Media
Form 8809, Request for Extension of Time to File Information Returns
Form SS-8, Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding
Form W-8, Certificate of Foreign Status
Form W-9, Request for Taxpayer Identification Number and Certification. This form is used to obtain taxpayer name, address and taxpayer identification number and certification concerning backup withholding. The instructions include information about who is subject to backup withholding and when you must backup withholding.

Procedures for Issuing Information Returns

Identify the reporting entity (Payer).
Prepare written agency procedures for accumulating and reporting 1099 Returns
Include internal controls and the records retention information.
Identify the reportable payees.
Use the IRS Form W-9 or substitute form to obtain payee identifying data.
Identify the reportable payment transactions.
1099 reportable payments should be totaled by type of payment. An example follows;
- Rents are reported on a 1099-MISC Form;
- Interest payments are reported on a 1099-INT Form;
- Royalties of $10 or more paid to an individual must be reported on a 1099-MISC Form; and,
- Non-employee compensation of $600 or more must be reported on a 1099-MISC Form.
Returns must be prepared accurately using the correct names and TINs provided by the payees.
Accumulate payments on a calendar-year basis.
Include checks written dated January 1 - December 31 and any cash payments, or other adjustments made during this period.
Prepare the appropriate information return. When the total reportable amount paid to each reportable payee is equal to or exceeds the IRS minimum reporting dollar limits for each type of reportable payment, prepare an Information Return Form.
- Be sure to use the correct TIN, name, address, and report the dollar amount(s) on the appropriate 1099 return(s) in the appropriate boxes.
- Verify information before furnishing copy B to the recipients.
- For sole proprietors, the TIN is the EIN. This number must match the individual owner's name on the return. If the sole proprietor does not have an EIN, the individual's SSN and name are required.
- For example: TIN: 229-48-5555 Business Owner's Name: Mary Smith (first line) Name Trading As or D/B/A (Doing Business As) list on second line of payee record.
Furnish Copy B to each recipient on or before January 31. Agencies may hold the IRS copies (Copy A) until the filing date of February 28.
Recipients of information returns, Copy B, should contact the agency immediately if any of the information is incorrect. When necessary, issue a replacement return to each recipient as soon as possible.
- If the IRS copies have not been filed with the IRS, you may mark the erroneous copy "Void" and type or print a replacement return. Be sure to inform the recipient that Copy B is a replacement return.
- If Copy A has been filed with the IRS, the agency must prepare a corrected 1099 Return and a corrected Transmittal Form 1096 (Exhibit I).
- Review the IRS information instructions for the proper procedures to follow when creating corrected returns.
Mail Copies A and the Transmittal Form 1096 to the IRS on or before February 28.
Issue corrected information returns and corrected Transmittal Form 1096 as soon as possible. Penalties are assessed for returns submitted after February 28.

Magnetic Media
Magnetic media filing is required for 250 or more corrected 1099 Returns.

Follow the procedures outlined in Revenue Procedure 94-43. Maintain documentation as required for audit purposes.

IRS Information Returns Filing

Paper Forms
Paper forms or acceptable substitute forms may be filed if the total of any one type of 1099 Return filed is equal to or less than 250. Revenue Procedure 94-35 provides guidance for preparation of substitute forms.

There are three 1099 forms to a page. Submit Copy A to the IRS; Copy B is furnished to the payee; Copy C is for the reporting entity.

Use the official forms; do not photocopy. Do not cut, separate, tear, tape, or staple copies A and C of the form.

Use current year forms. Be sure to order enough forms for future corrections.

Use decimal points to indicate dollars and cents.

Do not use ampersands (&), asterisks (*), commas (,), dollar signs ($), or other special characters. Do not enter number signs (#). For example, type Rt. 2, rather than Rt. #2.

Mail Copy A to the Internal Revenue Service in a large envelope. Do not fold the forms.

Because the IRS optically scans the 1099 Returns, it is imperative that the agency follows the precise requirements for the preparation and mailing of the returns.

File Form 8809, Request for Extension of Time to File Information Returns , before February 28. The extension pertains only to the filing of 1099 Returns.

Use Form 1096 to transmit each type of 1099 Return to the IRS.

Verify the accuracy of the data on the 1099 Returns and the Form 1096.

Whenever 250 or more of one type of 1099 Return are required, the returns must be filed with the IRS by magnetic media (unless the agency has obtained a wavier from the IRS).

Agencies can file their information returns using the following media types:

1/2 inch magnetic tape,'
IBM 3480/3490 AS400 tape cartridges (18 track or 36 track parallel);
51/4 inch diskette;
31/2 inch diskette;
electronic filing using bulletin board;
8 inch diskette (asynchronous or bisynchronous).

Note

When submitting data on diskettes, the IRS encourages filers to use high density diskettes and a filename of 1RSEOT. Diskette filers may not use character commas (,) as a delimiter.

Data submitted on tape cartridges may be compressed using EDRC (Memorex) or IDRC (IBM) compression.

Tape cartridges created on an IBM A 5400 are compatible with IRS/MCC computers.

Agencies should attach a Form 4804, Letter of Explanation for each return filed with a missing TIN.

Test data can be submitted to the IRS Martinsburg Computer Center after October. The IRS will process the test tapes and advise the filer of any problems between November 1 and December 31.

Do not transmit data between January 1 and January 10 because the IRS is updating their files during that time. Any data transmitted may be lost or corrupted.

Whenever 250 or more of one type of 1099 Return are required, the return must be filed with the IRS by magnetic media. Magnetic media reporting would generally follow the above steps. Magnetic media reporting is required for original submissions to the IRS of 250 or more of any one type of 1099 Return.

Magnetic Media Reporting
If you must file 250 or more corrections for any one type of 1099 Return, you must use magnetic media. For example, if your agency files 865 1099-MlSC Returns, the agency must file magnetically. If the agency is also filing 13 1099-G Returns, the agency may file paper copies (Copy A) with the IRS.

If the agency has 29 corrected 1099-MlSC Returns, the agency may submit paper copies of the 1099-MlSC Forms, however if 250 or more of the 1099-MlSC Returns require correction, the agency must file using magnetic media.

File Form 4419, Application for Filing Information Returns on Magnetic Media , at least 90 days before the due date of the returns. File this form before November 30.

File Form 8508, Request for Waiver from Filing Information Returns on Magnetic Media , at least 90 days before the due date of the returns. File the form before November 30. The agency may file Form 4419 and Form 8508 at the same time.

Follow the specifications for electronic or magnetic media filing (disk, magnetic tape, and electronic transmission using a modem) which are contained in Publication 1120.

Use Form 4804, Transmittal of Information Returns Reported on Magnetic Media , to transmit the original tape and any corrected tape. Form 4802 (Exhibit N) is a continuation sheet for Form 4804. Note: A Form 4804 must be submitted for each tax year.

Verify the accuracy of the information being transmitted to the original input records.

File Form 8809, Request for Extension of Time to File Information Returns , if necessary, before the due date of February 28. IRS Penalty Assessments

Assessed when an agency has not issued 1099 Returns by the required date.

For issuing incomplete/inaccurate 1099 Returns and corrected returns.

For not issuing 1099 Returns to the recipients and/or the IRS by the required due dates.

For failing to use magnetic media when filing 250 or more 1099 Returns or corrected returns with the IRS.

The amount of the penalty is based on the date the correct information is filed. The penalty is:

$15 per return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $75,000 per year.

$30 per return if you correctly file by August 1; maximum penalty $150,000 per year.

$50 per return if you file after August 1 or you do not file required information returns; maximum penalty is $250,000.

Intentional disregard of filing requirements may result in the following penalty:

The greater of $100 or 10% of the corrected amount of the information return. For example, if you intentionally did not report payments of $150,000 (regardless of the number of vendors involved), the penalty would be $15,000.

Failure to Furnish Correct Payee 1099 Returns will result in a penalty assessment as follows:

If you fail to furnish 1099 Returns to eight different payees, the penalty would be 8 x $50 = $400.

Failure to file using Magnetic Media (when required)

If you are required to file via magnetic media but fail to do so, and you do not have an approved waiver Form 8508 on record at the IRS, you may be subject to a penalty of $50 per return unless you establish reasonable cause. For example, if you have 300 payees but failed to file those returns on magnetic media, the penalty would be $15,000.

Penalties vary depending on whether the return is an original or corrected form.

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