Breaking News on new Form 1099-K filing requirements!
The IRS announced in late December a delay in the $600 reporting threshold for third-party settlement organizations, which had been in effect for the 2022 calendar year. As a result, the IRS says third-party settlement organizations will not have to report tax year 2022 transactions on a Form 1099-K, Payment Card and Third Party Network Transactions, to the IRS or the payee for the lower, $600 threshold amount that was enacted as part of the American Rescue Plan Act (ARPA) of 2021.
Until the changes enacted by ARPA, third-party settlement organizations were allowed a de minimis exception to filing Form 1099-K with respect to payees with 200 or fewer such transactions during the calendar year with an aggregate gross amount of $20,000 or less. ARPA amended this de minimis amount to $600, with no minimum number of transactions, effective for calendar years beginning after Dec. 31, 2021.
Third-party settlement organizations generally include banks or other organizations that process credit card transactions on behalf of a merchant and make an interbank transfer of funds to the merchant from a customer.
OVERVIEW OF 2022 Form 1099 Reporting Requirements:
Who Should File?
Payers file specific information returns depending on the type of reportable payments made to recipients. This is an overview of the Form 1099 reporting requirements, including the types of payments reportable on the most commonly encountered forms in the Form 1099 series.
Forms 1099 are not required to be filed or furnished to a payee if total payments during the calendar year are less than the minimum reporting requirement for a particular form. However, the payer may choose to furnish a Form 1099 for all payments (even those under the minimum filing requirement), and the IRS encourages payers to do this.
Form 1099-MISC (Miscellaneous Information) is filed for each payee that received-
1.at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
2.at least $600 in rents, prizes, awards, other income payments, crop insurance proceeds, or generally, cash paid from a national principal contract to an individual, partnership, or estate;
3.any fishing boat proceeds; or
4.medical and health care payments of $600 or more.
Direct sales of $5,000 or more of consumer products to a buyer for resale (other than to a permanent retail establishment) are reported on either Form 1099-MISC or Form 1099-NEC.
Form 1099-MISC is also filed for each payee who has any federal income tax withheld under the backup withholding rules (see Key Issue 26E), regardless of the amount of the payment.
Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the payee. Examples of payments for which a Form 1099-MISC is not required include the following:
- 1.Payments made to a corporation (including an S corporation and a limited liability company that has elected to be classified as a corporation for federal tax purposes), although there are exceptions.
- 2.Payments for merchandise, telegrams, telephone, freight, storage, and similar payments.
- 3.Payments of rent to real estate agents or property managers.
- 4.Wages paid to employees, including differential wage payments made while an employee is on active duty in the Armed Forces.
- 5.Payments to a tax-exempt organization, the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.
- 6.Certain payment card transactions.
Form 1099-NEC (Nonemployee Compensation) is filed for each payee who received payments of at least $600 for services performed in a trade or business by someone who is not treated as an employee. Nonemployee compensation (NEC) is reported in box 1 of Form 1099-NEC. (Prior to the 2020 calendar year, NEC was reported in box 7 of Form 1099-MISC).
Form 1099-NEC is also used to report payments made to an attorney in the course of the trade or business. Direct sales of $5,000 or more of consumer products to a buyer for resale (other than to a permanent retail establishment) can be reported on either Form 1099-NEC or Form 1099-MISC.
Form 1099-R (Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) is filed for each payee who received at least $10 from profit-sharing or retirement plans, any IRAs, annuities, pensions, insurance contracts, survivor income benefit plans, permanent and total disability payments under life insurance contracts, charitable gift annuities, etc.
Death benefit payments made by employers that are not made as part of a pension, profit-sharing, or retirement plan and reportable disability payments made from a retirement plan are also reported on Form 1099-R.
Payments subject to withholding of social security and Medicare taxes generally are not reported on Form 1099-R. Instead, such payments are reported on Form W-2. Amounts totally exempt from tax, such as workers’ compensation are also not reported on Form 1099-R. However, if part of the distribution is taxable and part is nontaxable, the entire distribution is reported on Form 1099-R.
Form 1099 -DIV (Dividends and Distributions) is filed for each payee that-
- 1.received at least $10 in dividends (including capital gains dividends and exempt-interest dividends) or other distribution on stock,
- 2.had any foreign tax withheld and paid on dividends and other distributions on stock regardless of the amount of the payment,
- 3.had any federal income tax withheld under the backup withholding rules (see Key Issue 26E) regardless of the amount of the payment, or
- 4.received at least $600 as part of a liquidation.
Form 1099-DIV generally does not have to be filed for payments made to certain payees including a corporation, a tax-exempt organization, any IRA, Medical Savings Account (MSA), health savings account (HSA), a U.S. agency, a state, the District of Columbia, a U.S. possession, or a registered securities or commodities dealer.
Form 1099-INT (Interest Income) is filed for each payee that-
- 1.received at least $10 in interest (or for certain payees at least $600),
- 2.had any foreign tax withheld and paid on interest regardless of the amount of the payment, or
- 3.had any federal income tax withheld under the backup withholding rules (see Key Issue 26E) regardless of the amount of the payment.
Form 1099-INT generally does not have to be filed for payments made to certain payees including a corporation; a tax-exempt organization; any IRA, MSA, or HSA; a U.S. agency; a state; the District of Columbia; a U.S. possession; a registered securities or commodities dealer; a nominee or custodian; a broker; or a notional principal contract (swap) dealer.
Paper Forms 1099 are multi-copy forms and each form has at least three official copies that must be completed by the payer. The payer files Copy A (and transmittal Form 1096) with the IRS. Copy B is for the recipient’s records and Copy C is for the payer’s records. However, for Form 1099-R, if federal income tax has been withheld, Copy B is attached to the recipient’s federal income tax return, Copy C is for the recipient’s records, and Copy D is for the payer’s records. Copies 1 and 2, if necessary, are for state, city, and local government reporting.
Copies B, C, D, 1, and 2 for many of the 1099 forms can now be completed in an online fillable format accessed from the “Forms and Instructions” section at www.irs.gov .
Statements to Recipients
Filers of Forms 1099 are required to furnish statements to recipients containing the information reported to the IRS and, in some cases, additional information. The statements must either be official IRS forms or substitute forms that comply with the format and content requirements specified in IRS Pub. 1179 (General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns). Generally, a substitute statement is any statement other than Copy B (and Copy C in some cases) of the official form.
Different rules (e.g., providing a contact person’s telephone number, statement mailing requirements, and permitted enclosures) apply to furnishing statements to recipients depending on the type of payment that is being reported and the type of form that is being filed.
Electronic Recipient Statements
Information returns may be provided electronically (including by email) to any recipient who has consented to receive them in this manner. This includes Forms 1097-BTC, 1098, 1098-E, 1098-F, 1098-MA, 1098-Q, 1098-T, 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-K, 1099-LS, 1099-LTC, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-QA, 1099-R, 1099-S, 1099-SA, 1099-SB, 3921, 3922, 5498, 5498-ESA, 5498-QA, 5498-SA, and certain Forms W-2G. Form 1098-C may not be furnished electronically. The following criteria must be met to be treated as furnishing the statement timely:
- 1.The recipient must affirmatively consent to electronically receive the information return statement. The recipient’s consent must be made electronically in a way that shows that the recipient can access the statement in the electronic format in which it will be furnished.
- 2.The consent requirement in item 1 is not satisfied if the recipient withdraws the consent and the withdrawal takes effect before the statement is furnished. The furnisher may provide that a withdrawal of consent takes effect either on the date it is received by the furnisher or on a later date. The furnisher may also provide that a request for a paper statement will be treated as a withdrawal of consent.
- 3.Prior to a change in hardware or software, a recipient must be notified of the hardware or software changes if such changes create a material risk that the recipient will not be able to access the statement electronically. A new consent to receive the statement electronically is required after the new hardware or software is put into service.
- 4.Before or at the time of a recipient’s consent, a separate disclosure statement must be provided to the recipient that contains the following information [Reg. 31.6051-1(j)(3)]:a.A statement that if the recipient does not consent to receive the statement electronically, a paper copy will be provided.
- b.The scope and duration of the consent (e.g., whether the consent applies to every year after the consent is given until it is withdrawn or only to the first form required to be furnished after the consent is given).
- c.How to obtain a paper copy of the statement after giving consent to receive it electronically and whether a request for a paper statement will be treated as a withdrawal of consent.
- d.How to withdraw the consent. The consent may be withdrawn at any time by furnishing the withdrawal in writing (electronically or on paper) to the person or department whose name, mailing address, telephone number, and email address are provided on the disclosure statement. A written (electronically or on paper) confirmation of the withdrawal and the date it takes effect should also be furnished.
- e.Notice of termination (i.e., under what conditions the statement will no longer be furnished electronically to the recipient).
- f.Procedures to update the information needed by the furnisher to contact the recipient. The furnisher must inform the recipient of any change in the furnisher’s contact information.
- g.A description of the hardware and software required to access, print, and retain a statement, and a date the statement will no longer be available on the website where it is posted.
- 5.The electronic format must contain all the information required of an information statement and comply with the applicable revenue procedure for substitute statements to recipients.
- 6.The recipient must be informed electronically or by mail of the posting and how to access and print the information statements. The notification must include the following statement in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notification is given by email, this statement should be on the email’s subject line.
- 7.The furnisher must maintain access to the statements on the website through October 15 of the year following the calendar year to which the statements relate.
- 8.If the recipient withdraws consent to receive a statement electronically and the withdrawal takes effect before the statement is furnished electronically, a paper statement must be furnished. A paper statement furnished after the statement due date must be furnished within 30 days after the date the withdrawal of consent is received by the furnisher.
When to Furnish Recipient Forms or Statements
Forms 1099 generally must be furnished to recipients by January 31 of the year following the calendar year for which Form 1099 is required. However, certain forms have a later due date (see the following discussion). The requirement to furnish the statement to the recipient is met if the payer properly addresses and mails it (if paper) or posts it to a website (if electronic) on or before the due date. If the regular due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) and Form 1099-S (Proceeds from Real Estate Transactions) have a later due date. They must be furnished to the recipient no later than February 15 of the year following the calendar year for which Form 1099 is required. Forms 1099-MISC that are reporting amounts in only box 8 (substitute payments in lieu of dividends or tax-exempt interest) or box 10 (gross proceeds paid to an attorney) also do not have to be provided to the recipient until February 15. If February 15 falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
If a payer is reporting more than one type of payment during a calendar year to the same recipient, it may report the required information to the recipient on one document, as a composite statement. Composite statements are substitute forms that must meet the requirements of IRS Pub. 1179 . A composite statement is permitted for reporting payments on the following forms:
- • 1099 -B.
- • 1099 -DIV [except for Section 404(k) dividends].
- • 1099 -INT (except for interest reportable under IRC Sec. 6041).
- • 1099 -MISC (only for royalties/substitute payments in lieu of dividends and interest).
- • 1099 -OID.
- • 1099 -PATR.
- • 1099 -S (only for royalties).
A composite statement cannot be filed with the IRS.
Statements from brokers that include proceeds from broker and barter exchange transactions (that are reported on Form 1099 -B), as well as interest, dividends, original issue discount, patronage dividends, and/or royalties are consolidated statements. Consolidated statements do not have to be furnished to recipients until February 15 of the year following the calendar year for which Form 1099 is required.
Certain Forms 1099 may be issued earlier in some situations. For example, a Form 1099-INT may be issued to the recipient on redemption of U.S. Savings Bonds at the time of redemption. Also, brokers may furnish Form 1099-B anytime during the calendar year (e.g., on a transactional basis). Similarly, Form 1099-S may be furnished when the real estate transaction is closed.
Extension of Time to Furnish Statements to Recipients
An extension of time to provide statements to recipients can be requested by faxing a request to (877) 477-0572 (Internal Revenue Service Technical Services Operation; Attn: Extension of Time Coordinator). The IRS will not accept an extension by mail. The extension request must include all of the following information:
- 1.Payer’s name, taxpayer identification number, and complete address.
- 2.Type of return.
- 3.A statement that the extension request is for providing statements to recipients.
- 4.Reason for the delay.
- 5.Signature of the payer or authorized agent.
The extension request must be received by the date the statements are due to recipients. If the extension request is approved, the IRS generally grants a maximum of 30 extra days to furnish the recipient statements.
Form 8809 (Application for Extension of Time to File Information Returns), which is used to obtain an extension of time to file with the IRS, cannot be used to request an extension of time to furnish statements to recipients.
Recipient Names and Taxpayer Identification Numbers
The IRS uses Taxpayer Identification Numbers (TINs) to associate and verify amounts reported on Forms 1099 with corresponding amounts reported on recipients’ income tax returns. Therefore, it is important to furnish correct names, social security numbers (SSNs), individual taxpayer identification numbers (ITINs), or employer identification numbers (EINs) for recipients on Forms 1099 sent to the IRS.
A payer uses Form W-9 (Request for Taxpayer Identification Number and Certification) [or, if appropriate, Form W-9S (Request for Student’s or Borrower’s Social Security Number and Certification)] to request a U.S. person’s (including a U.S. resident alien’s) TIN. Forms in the Form W-8 series are used to request a foreign person’s TIN (see Key Issue 16F for information on Form W-9). If a recipient does not provide a TIN, the box on Form 1099 for providing the TIN to the IRS is left blank and payments to the recipient may be subject to backup withholding.
A payer may be subject to a penalty for an incorrect or missing TIN on a Form 1099. Therefore, to avoid errors and omissions when reporting TINs to the IRS, payers should verify the following:
- 1.Only one recipient’s TIN is entered on Form 1099.
- 2.The recipient’s full name and address are shown in the name and address section provided on Form 1099. If payments have been made to more than one recipient or the account is in more than one name, the only name on the first name line should be the name of the recipient whose TIN is entered on Form 1099. At the payer’s option, names of other recipients may be shown in the area below the first line.
- 3.The TIN for individuals is their social security number (SSN), IRS individual taxpayer identification number (ITIN), or adoption taxpayer identification number (ATIN). These numbers have nine digits separated by two hyphens (i.e., 000-00-0000). Alternatively, a payer may use a truncated SSN, ITIN, ATIN, or EIN on Forms 1099 sent to individual recipients (Reg. 301.6109-4).Truncated numbers are referred to as TTINs. The number is truncated by replacing the first five digits of the number with either asterisks or Xs (e.g., ***-**-6789 or XXX-XX-6789). The payer may not truncate its own taxpayer identification number (e.g., EIN, SSN). Additionally, the recipient’s SSN, ITIN, ATIN, or EIN may not be truncated on the Forms 1099 sent to the IRS or state and local governments.
- 4.The TIN for sole proprietorships is either the owner’s SSN or the sole proprietorship’s EIN; however, the IRS prefers the owner’s SSN to be used. The owner’s name should be entered on the first name line of Form 1099, and the sole proprietorship’s name (i.e., the “DBA” name) should be entered on the second name line. Do not enter only the sole proprietorship’s DBA name.
- 5.The TIN for corporations, partnerships, estates, and trusts is the EIN. EINs have nine digits separated by only one hyphen (i.e., 00-0000000).
- 6.For a single-member LLC (including a foreign LLC with a U.S. owner) that is disregarded as an entity separate from its owner for federal income tax purposes, the TIN is the owner’s SSN if the owner is an individual; otherwise, it is the EIN if the owner is a corporation, partnership, etc. The owner’s name should be entered on the first name line of Form 1099, and the LLC’s name should be entered on the second name line.
- 7.An expired ITIN may be used for information return purposes regardless of whether the ITINs have expired for individual income tax return filing purposes. (However, if the individual is required to file a tax return, the ITIN will have to be renewed at that time.) Third parties who file and furnish information returns with an expired payee ITIN will not be subject to Section 6721 or Section 6722 penalties solely because the ITIN is expired (IRS Notice 2016-48).
- 8.If an individual recipient has notified the payer that he or she is in Chapter 11 bankruptcy, the payer should use the bankruptcy estate’s name and EIN for post-petition reportable payments.
The IRS may waive penalties assessed for incorrect TINs if the payer participates in the IRS’s TIN matching program and presents documentation of a name and TIN match as required by IRS Pub. 2108-A (On-Line TIN Matching Program).
A nominee recipient generally receives a Form 1099 for amounts that actually belong to another person. The nominee recipient, not the original payer, is required to file the Form(s) 1099 (the same type of Form 1099 as received) with the IRS, along with Form 1096, showing the amounts allocable to each recipient. The nominee recipient must also furnish a copy of this new Form 1099 to each recipient. On each new Form 1099, the nominee recipient is listed as the payer and the actual payee as the recipient. The nominee recipient is listed as the filer on the new Form 1096. A spouse is not required to file a nominee return to show amounts owned by the other spouse.
Nominee Forms 1099 have the same filing deadlines as other Forms 1099; that is, they must be issued by the nominee to the actual payee by January 31 (or February 15 for Forms 1099-B, Forms 1099-S, and certain Forms 1099-MISC) and, generally, be filed with the IRS by February 28 (March 31 if filed electronically). A penalty can be imposed for failure to file a timely information return with the IRS.
A middleman makes payments on behalf of another person who is the actual source of the funds. Under certain circumstances, the middleman (and not the person who is the actual source of the funds) must report these payments to the payee. IRS regulations address middlemen and their obligation to report transactions on Form 1099-MISC.
For Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, a successor business and a predecessor business may agree that the successor business will file one information return for each recipient combining the predecessor’s and successor’s reportable amounts, including any withholding. The combined reporting procedure applies only when all of the following conditions are met:
- 1.The successor business entity (e.g., corporation, partnership, or sole proprietorship) acquires substantially all the property (a) used in the predecessor’s trade or business (including when one or more corporations are absorbed by another corporation under a merger agreement) or (b) used in a separate unit of the predecessor’s trade or business.
- 2.During the pre-acquisition portion of the year, the predecessor makes payments or withholds or collects taxes that require the predecessor to file information returns.
- 3.During the post-acquisition portion of the year, the predecessor does not make payments or withhold or collect taxes that would require the predecessor to file information returns.
Combined Reporting Agreement
The predecessor and the successor must agree on the specific forms to which the combined reporting procedure applies and that the successor assumes the predecessor’s entire information reporting obligations for these forms. For example, the predecessor and successor may agree to (1) use the combined reporting procedure for all Forms 1097, 1098, 1099, 3921, 3922, 5498, or W-2G or (2) limit the use of the combined reporting procedure to specific forms or specific reporting entities (i.e., any unit, branch, or location within a particular business entity that files its own separate information returns).
Combined Reporting Procedure
On each appropriate form (i.e., each form to which the agreement applies), the successor must combine the predecessor’s (before the acquisition) and successor’s reportable amounts, including any withholding for the acquisition year, and report the aggregate amount. If amounts are required or permitted to be reported transactionally (for example, broker sales of stock that are required to be reported on Forms 1099-B), the successor must report each transaction of the predecessor and each of its own transactions on the appropriate form. The successor may include additional information for the recipient explaining the combined reporting by the predecessor and successor.
The successor must file a statement with the IRS indicating that the appropriate forms are being filed on a combined basis in accordance with the provisions of Rev. Proc. 99-50. The statement must:
- 1.Include the name, address, telephone number, and EIN of both the successor and predecessor, and the name and telephone number of the person responsible for preparing the statement.
- 2.Reflect separately the amount of any federal income tax withheld by the predecessor and by the successor for each type of form being filed on a combined basis.
- 3.Be sent separately from Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G by the due date of the applicable form to Internal Revenue Service, Information Returns Branch, 230 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430.
The Foreign Account Tax Compliance Act (FATCA) targets tax noncompliance by U.S. taxpayers with foreign financial accounts. FATCA requires reporting by U.S. taxpayers about certain foreign financial accounts and by foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities with a substantial ownership interest held by U.S. taxpayers. Generally, a foreign financial institution (FFI) is a financial institution that is a foreign entity, including a foreign branch of a U.S. financial institution with a qualified intermediary (QI) agreement in effect.
Entities with a FATCA reporting requirement generally use Form 8966 (FATCA Report) to report the required account information. However, certain U.S. payers and FFIs may be eligible to elect to report the required account information on the appropriate Form 1099 (e.g., Form 1099-INT or Form 1099-DIV) instead of Form 8966. The eligibility requirements to make an election to report an account on Form 1099 are included in the general instructions for certain information returns.
A checkbox in the 1099 series forms is used to indicate to the IRS and the recipient that the form is being filed to meet FATCA filing requirements. FFIs that elect to report FATCA information on a Form 1099 must include (1) the name, address, and TIN (e.g., SSN) of the account holder; (2) the account number; and (3) the jurisdiction of the branch that maintains the account.
Generally, furnishing the account number on a Form 1099 is optional. However, if the Form 1099 is being filed to comply with a FATCA reporting obligation, the account number is required.
Some FFIs may have a sponsoring entity that is registered with the IRS to provide certain U.S. due diligence, withholding, and reporting obligations for the FFI. The sponsoring entity must include the name of the sponsored FFI on the first line of the payer’s name box and the sponsoring entity’s name on the second line. The sponsoring entity’s address is entered on the address line and the sponsored FFI’s EIN is used.
If an FFI elects to report the account information on Form 1099, any reportable payments made to the account under IRC Secs. 6041, 6042, 6045, and 6049 must be reported on the Form 1099.
Payments to Foreign Persons
Form 1099 is never used to report U.S. source income of foreign persons. Except for income that must be reported on Form W-2, every U.S. withholding agent must use Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding) instead of Form 1099, to report income subject to withholding paid to nonresident aliens, foreign partnerships, foreign corporations, or nonresident alien or foreign fiduciaries of estates or trusts. A withholding agent is any person that has control, receipt, or custody of an amount subject to withholding, or who makes a withholdable payment. A withholding agent may be an individual, trust, estate, partnership, corporation, government agency, association, or tax-exempt foundation.