US Internal Revenue Service: i1099--1994

8/14/2019 US Internal Revenue Service: i1099--1994

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Cat. No. 11409F

Paperwork Reduction Act Notice.Weask for the information on these forms tocarry out the Internal Revenue laws of theUnited States. You are required to give usthe information. We need it to ensure thatyou are complying with these laws and toallow us to figure and collect the rightamount of tax.

The time needed to complete and filethe following forms will vary depending onindividual circumstances. The estimated

average times are:1099-A 10 minutes

1099-B 15 minutes

1099-C 10 minutes

1099-DIV 14 minutes

1099-G 11 minutes

1099-INT 12 minutes

1099-MISC 14 minutes

1099-OID 10 minutes

1099-PATR 11 minutes

1099-R 20 minutes

1099-S 8 minutes

1098 7 minutes

5498 7 minutes1096 10 minutes

W-2G 19 minutes

If you have comments concerning theaccuracy of these time estimates orsuggestions for making these forms moresimple, we would be happy to hear fromyou. You can write to both the InternalRevenue Service, Attention: ReportsClearance Officer, PC:FP, Washington, DC20224; and the Office of Managementand Budget, Paperwork Reduction Project(1545-0112), Washington, DC 20503. DONOT send these tax forms to either ofthese offices. Instead, see Where To Fileon page 5.

Items You Should Note

Changes to Where To File

You may have to file with an InternalRevenue Service Center that is differentfrom the one you filed with for 1993.Check the addresses listed on page 5under Where To File for your proper filinglocation.

Form 1098Reimbursement ofOverpaid Interest

The requirement to report reimbursementsof overpaid interest on Form 1098,Mortgage Interest Statement, has changed.You are required to report reimbursementsof overpaid interest aggregating $600 ormore. You are not required to reportreimbursements aggregating less than$600 unless you are otherwise required to

file Form 1098. See Reimbursement ofOverpaid Interest on page 9.

Form 1099-CNew Form ToReport Cancellation of DebtBox5, Form 1099-G, Eliminated

The Revenue Reconciliation Act of 1993added new section 6050P to requirecertain financial entities, including financialinstitutions, credit unions, and FederalGovernment agencies, to reportcancellation of a debt. For 1994 and lateryears, use new Form 1099-C, Cancellationof Debt, for this purpose. FederalGovernment agencies will no longer reportcanceled debts on Form 1099-G, Certain

Government Payments. See the Form1099-C instructions on page 13.

Form 1099-MISCChange toBox 3

The title of box 3 of Form 1099-MISC,Miscellaneous Income, was changed toOther income. This title change does notchange what you must report in box 3.Therefore, continue to report in box 3prizes and awards, a deceased employeeswages paid to an estate or beneficiary, andany other income required to be reportedon the form that should not be reported inone of the other boxes on the form.

Form 1099-R ChangesYou can now use Form 1099-R,Distributions From Pensions, Annuities,Retirement or Profit-Sharing Plans, IRAs,Insurance Contracts, etc., to report twostate or local tax withholdings. See the1994 Form 1099-R.

Form 945New Withholding TaxReturn for 1994

For 1994 and later years, backupwithholding, withholding on gamblingwinnings, and withholding from pensions,

annuities, and IRAs must be reported oncea year on Form 945, Annual Return ofWithheld Federal Income Tax. Form 941,Employers Quarterly Federal Tax Return,which was previously filed to report suchwithholdings, will be used to report onlywithholdings from wages. Form 941E,Quarterly Return of Withheld FederalIncome Tax and Medicare Tax, which alsomay have been used for suchwithholdings, has been eliminated. The firstfiling of new Form 945 will be January 31,1995. For more information, including the

separate deposit requirements for Form945, see the January 1994 revision ofCircular E, Employers Tax Guide.

Use Form 1096 To Send Formsto the IRS

You must send Copies A of all paperForms 1099, 1098, 5498, and W-2G to theIRS with Form 1096, Annual Summary andTransmittal of U.S. Information Returns.Instructions for completing Form 1096 arecontained on Form 1096.

REMINDERSubstituteStatements to Recipients

The IRS is concerned that some payers

who are not using the official IRS form(generally Copy B) to furnish statements torecipients may be using substitutestatements that do not comply with therules in Pub. 1179, Specifications forPaper Document Reporting and PaperSubstitutes for Forms 1096, 1098, 1099Series, 5498, and W-2G. Pub. 1179, whichis revised annually, is a revenue procedurethat explains the requirements for formatand content of substitute statements torecipients. If you are using a substituteform to furnish information to recipients,it must comply with the requirements inPub. 1179.

Guide to Information ReturnsSee the chart on pages 31 and 32 for abrief summary of information returnreporting rules.

Answers to Your InformationReporting Questions

The IRS operates a centralized call site toanswer questions about reporting oninformation returnsForms 1096, 1098,1099, 5498, W-2, W-2G, and W-3. Youcan get answers to your questions whetheryou are a paper filer or a magnetic mediafiler. If you have questions related toreporting on any of these forms, you maycall 304-263-8700 (not a toll-free number)

Monday through Friday from 8:30 A.M. to4:30 P.M. eastern time.

The IRS also operates an electronicbulletin board (IRP-BBS). The IRP-BBSoffers changes and updates that affectinformation reporting. By using yourpersonal computer and modem, you cancontact the IRP-BBS by dialing304-263-2749. For more information, seePub. 1220, Specifications for Filing Forms1098, 1099, 5498 and W-2G Magneticallyor Electronically.

Instructions for Forms 1099,1098, 5498, and W-2G(Including Instructions for Forms 1099-A, 1099-B,

1099-C, 1099-DIV, 1099-G, 1099-INT, 1099-MISC,1099-OID, 1099-PATR, 1099-R, 1099-S, and 5754)Section references are to the Internal Revenue Code unless otherwise noted.

Department of the TreasuryInternal Revenue Service


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Current Tax Information

The Internal Revenue Bulletin (IRB),published weekly, contains newly issuedregulations, as well as notices,announcements, legislation, courtdecisions, and other items of generalinterest. You may find this publicationuseful to keep you up to date with currentdevelopments. The IRB is sold by theSuperintendent of Documents, U.S.Government Printing Office, Washington,DC 20402, and is available on asubscription basis. To order the IRB, youcan write to the Superintendent ofDocuments or call 202-783-3238 (not atoll-free number).

To Order Forms and Instructions

You may order forms and instructionsby calling 1-800-TAX-FORM(1-800-829-3676).

Backup Withholding

Interest, dividends, rents, royalties,commissions, nonemployee compensation,and certain other payments (includingbroker and barter exchange transactions,

and certain payments made by fishing boatoperators) may be subject to backupwithholding at a 31% rate. To be subjectto backup withholding, a payment must bea reportable interest or dividend paymentunder section 6049(a), 6042(a), or 6044 (ifthe patronage dividend is paid in money orqualified check), or an other reportablepayment under section 6041, 6041A(a),6045, 6050A, or 6050N. If the payment isone of these reportable payments, backupwithholding will apply if:

1. The payee fails to furnish his or hertaxpayer identification number (TIN) to you,OR

2. The IRS notifies you to impose

backup withholding because the payeefurnished an incorrect TIN, OR

3. You are notified that the payee issubject to backup withholding (undersection 3406(a)(1)(C)), OR

4. For interest and dividend accountsopened or instruments acquired after 1983,the payee fails to certify to you, underpenalties of perjury, that he or she is notsubject to backup withholding under 3above, OR

5. For interest, dividend, broker, or barterexchange accounts opened or instrumentsacquired after 1983, or broker accountsconsidered inactive in 1983, the payee failsto certify, under penalties of perjury, that

the TIN provided is correct.Except as explained in 5 above,

reportable other payments are subject tobackup withholding only if 1 or 2 aboveapplies.

Some payees are exempt from backupwithholding. For a list of types of exemptpayees and other information, please seeForm W-9, Request for TaxpayerIdentification Number and Certification,and its instructions.

Real estate transactions reportable undersection 6045(e) and canceled debts

reportable under section 6050P are notsubject to backup withholding.

Generally, the period for which the 31%should be withheld is as follows:

1. Failure to furnish TIN in the mannerrequired.Withhold on payments madeuntil the TIN is furnished in the mannerrequired. Special backup withholding rulesapply if the payee has applied for a TIN.The payee may certify to this on Form W-9by noting Applied For in the TIN blockand by signing the form. This form thenbecomes an awaiting-TIN certificate, and

the payee has 60 days to obtain a TIN andfurnish it to you. For information aboutwhether backup withholding applies duringthe 60-day period, see TemporaryRegulations section 35a.9999-3, Q/A-59A.If you do not receive a TIN from the payeewithin 60 days and you have not alreadybegun backup withholding, begin backupwithholding and continue until the TIN isprovided.

2. Notice from the IRS that payees TINis incorrect (B notice).You may electto withhold on any reportable paymentmade to the account(s) subject to backupwithholding after receipt of the B notice,but you must withhold on any reportable

payment made to the account more than30 business days after you received theB notice. Stop withholding within 30days after you receive a certified Form W-9(or acceptable substitute).

Note: The IRS will furnish a notice to you,and you are required to promptly furnish acopy of such notice, or an acceptablesubstitute, to the payee. For furtherinformation, see Regulations section31.3406(d)-5 and Rev. Proc. 93-37,1993-29 I.R.B. 76.

If you receive two incorrect TIN noticeswithin 3 years for the same account, followthe procedures in Regulations section31.3406(d)-5(g) and Rev. Proc. 93-37.

3. Notice from the IRS that payee issubject to backup withholding due tonotified payee underreporting.Startwithholding on payments made on the 31stday after the date you receive notificationfrom the IRS, or you may elect to withholdany time before the 31st day. The IRS willnotify you in writing when to stopwithholding, or the payee may furnish youa written certification from the IRS statingwhen withholding is to stop. In mostcases, the stop date will be January 1 ofthe year following the year of the notice.

Note: You must notify the payee whenwithholding under this procedure starts.For further information, see Temporary

Regulations section 35a.3406-2.4. Payee failure to certify that he or sheis not subject to backup withholding.Withhold on reportable interest anddividends until certification has beenreceived.

For exceptions to these general timingrules, see section 3406(e).

Note: For information about backupwithholding on gambling winnings, see theSpecific Instructions for Form W-2G for thespecific type of gambling winnings later.

Reporting and Payment of BackupWithholding.Backup withholding mustbe reported on Form 945, Annual Returnof Withheld Federal Income Tax. For moreinformation, see the instructions for Form945. Also report backup withholding oneach Form W-2G, 1099-B, DIV, G, INT,MISC, OID, or PATR used to report thepayment.

Additional Information.For moreinformation about backup withholding, seeTemporary Regulations sections35a.9999-1, 2, and 3, and 35a.3406-1 and

2.

Penalties

The following penalties generally apply tothe person required to file informationreturns. The penalties apply to paper filersas well as magnetic media/electronic filers.

Failure To File Correct InformationReturns by the Due Date (Section6721)

If you fail to file a correct information return(including new Form 1099-C) by the duedate and you cannot show reasonablecause, you may be subject to a penalty.The penalty applies if you fail to file timely,you fail to include all information requiredto be shown on a return, or you includeincorrect information on a return. Thepenalty also applies if you file on paperwhen you were required to file on magneticmedia, you report an incorrect TIN or fail toreport a TIN, or you fail to file paper formsthat are machine readable.

The amount of the penalty is based onwhen you file the correct informationreturn. The penalty is:

$15 per information return if youcorrectly file within 30 days (by March 30 ifthe due date is February 28); maximum

penalty $75,000 per year ($25,000 for smallbusinesses, defined later).

$30 per information return if youcorrectly file more than 30 days after thedue date but by August 1; maximumpenalty $150,000 per year ($50,000 forsmall businesses).

$50 per information return if you file afterAugust 1 or you do not file requiredinformation returns; maximum penalty$250,000 per year ($100,000 for smallbusinesses).

Exceptions to the Penalty.

1. The penalty will not apply to anyfailure that you can show was due to

reasonable cause and not to willful neglect.2. An inconsequential error or omissionis not considered a failure to includecorrect information. An inconsequentialerror or omission does not prevent orhinder the IRS from processing the return,from correlating the information required tobe shown on the return with theinformation shown on the payees taxreturn, or from otherwise putting the returnto its intended use. Errors and omissionsthat are never inconsequential are thoserelating to (a) a TIN, (b) a payees surname,and (c) any money amounts.


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3. De Minimis Rule for Corrections.Even though you cannot show reasonablecause, the penalty for failure to file correctinformation returns will not apply to acertain number of returns if:

a. You filed those information returns,

b. Either you failed to include all theinformation required to be shown on areturn or you included incorrectinformation, and

c. You filed corrections of theseinformation returns by August 1.

If you meet all the conditions in athrough c, the penalty for filing incorrectreturns (but not for filing late) will not applyto the greater of 10 information returns or12 of 1% of the total number of informationreturns you are required to file for thecalendar year.

Lower Maximum Penalties for SmallBusinesses.For purposes of the lowermaximum penalties shown in parenthesesabove, you are a small business if youraverage annual gross receipts for the 3most recent tax years (or for the periodyou were in existence, if shorter) endingbefore the calendar year in which theinformation returns were due are $5 millionor less.

Intentional Disregard of FilingRequirements.If any failure to file acorrect information return is due tointentional disregard of the filing andcorrect information requirements, thepenalty is at least $100 per informationreturn with no maximum penalty.

Failure To Furnish Correct PayeeStatements (Section 6722)

If you fail to provide correct payeestatements (including those required undernew section 6050P) and you cannot showreasonable cause, you may be subject to apenalty. The penalty applies if you fail to

provide the statement by January 31 (seepart H under General Instructions later),you fail to include all information requiredto be shown on the statement, or youinclude incorrect information on thestatement. Payee statement has thesame meaning as statement to recipientas used in part H under GeneralInstructions.

The penalty is $50 per statement,regardless of when the correct statementis furnished, with a maximum of $100,000per year. There is no reduction in thepenalty for furnishing a correct statementby August 1.

Exception.An inconsequential error oromission is not considered a failure toinclude correct information. Aninconsequential error or omission cannotreasonably be expected to prevent orhinder the payee from timely receivingcorrect information and reporting it on hisor her income tax return or from otherwiseputting the statement to its intended use.Errors and omissions that are neverinconsequential are those relating to(a) a dollar amount, (b) a payees address,(c) the appropriate form for the informationprovided (i.e., whether the form is anacceptable substitute for the official IRSform), and (d) whether the statement was

furnished in person or by statementmailing, when required.

Intentional Disregard of PayeeStatement Requirements.If any failureto provide a correct payee statement isdue to intentional disregard of therequirements to furnish a correct payeestatement, the penalty is at least $100 perpayee statement with no maximumpenalty.

Forms 1099-R and 5498

The penalties under sections 6721 and

6722 do not apply to Form 1099-R, whichis filed under section 6047. The penalty forfailure to timely file Form 1099-R is $25 perday with a maximum of $15,000 per year.See section 6652(e).

The penalties under sections 6721 and6722 do not apply to Form 5498, which isfiled under section 408(i). The penalty forfailure to timely file Form 5498 is $50 perreturn with no maximum. See section6693.

Caution: Congress has considered, andmay consider again, legislation that wouldapply the penalties under sections 6721and 6722 to Forms 1099-R and 5498.

Magnetic Media/ElectronicReporting

Magnetic media reporting may be requiredfor filing all information returns discussedin this publication, including new Form1099-C. Acceptable forms of magneticmedia are magnetic tape, tape cartridge,312-, 514-, and 8-inch diskette. Pub. 1220,Specifications for Filing Forms 1098, 1099,5498 and W-2G Magnetically orElectronically, is the revenue procedure formagnetic media and electronic reporting,available at Internal Revenue Servicedistrict off ices. Different types of

payments, such as interest, dividends, andrents, may be reported on the same tapeor other submission.

Electronic submissions are filed usingthe Information Reporting Bulletin BoardSystem (IRP-BBS). The IRP-BBS operates24 hours a day, 7 days a week, and isaccessed using your personal computerand modem at 304-263-2749. For moreinformation, see Pub. 1220.

Note: Filing electronically will satisfy themagnetic media filing requirements. Anyreference to magnetic media in theseinstructions includes electronic filing.

Due Dates.The due dates for magneticmedia reporting are the same as for paper

document reporting.Extension of Time To File.Forinformation about requesting an extensionof time to file, see part B under GeneralInstructions later.

Caution: If you file on magnetic media, donot file the same returns on paper.

Who Must File on Magnetic Media.Ifyou are required to file 250 or moreinformation returns, you must file onmagnetic media. The 250-or-morerequirement applies separately to eachtype of form. For example, if you must file

500 Forms 1098 and 100 Forms 1099-A,you are not required to file Forms 1099-Aon magnetic media, but you must fileForms 1098 on magnetic media.

Note: Even if you are not required to fileon magnetic media, the IRS encouragesyou to do so. Also, you may fileelectronically even if you are not requiredto file on magnetic media.

The magnetic media filing requirementdoes not apply if you apply for and receivean undue hardship waiver. See How ToRequest a Waiver From Filing on

Magnetic Media later.Filing Requirement Applies Separately toOriginals and Corrections.The magneticmedia filing requirements below applyseparately to original returns and correctedreturns. Originals and corrections are notaggregated to determine whether you arerequired to file on magnetic media. Forexample, if you file 400 Forms 1098 onmagnetic media and you are making 75corrections, your corrections can be filedon paper because the number ofcorrections for Form 1098 is less than the250 filing requirement. However, if youwere filing 250 or more Form 1098corrections, they would have to be filed on

magnetic media.How To Get Approval To File onMagnetic Media.File Form 4419,Application for Filing Information ReturnsMagnetically/Electronically, at least 30days (45 days for some electronic filing)before the due date of the returns. Onlyone Form 4419 need be filed for all typesof returns that will be filed on magneticmedia. Once you have received approval,you need not reapply each year. The IRSwill provide a written reply to the applicantand further instructions at the time ofapproval, usually within 30 days. Amagnetic media reporting package, whichincludes all the necessary transmittals,

labels, and instructions, will be mailed toall approved filers.

How To Request a Waiver From Filingon Magnetic Media.To receive a waiverfrom the required filing of informationreturns on magnetic media, submit Form8508, Request for Waiver From FilingInformation Returns on Magnetic Media,requesting an undue hardship waiver fromfiling on magnetic media. You cannot applyfor a waiver for more than 1 tax year at atime. If you need a waiver for more than 1tax year, you must reapply at theappropriate time each year.

If a waiver for original returns isapproved, any corrections for the sametypes of returns will be covered under thewaiver. However, if you submit originalreturns on magnetic media but you want tosubmit your corrections on paper, a waivermust be approved for the corrections if thecorrections exceed the 250 filingrequirement.

Waiver requests generally must be filedat least 45 days before the due date of thereturns. However, new brokers and newbarter exchanges may request an unduehardship waiver by filing Form 8508 by theend of the second month following the


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month in which they became a broker orbarter exchange.

If you are seeking, in a singleapplication, approval for filing returns onmagnetic media and, if approval is notgranted, a waiver from the magnetic mediafiling requirement, submit both Forms 4419and 8508.

If you receive an approved waiver, donot send a copy of it to the service centerwhere you file your paper returns. Keep thewaiver for your records only.

Penalty.If you are required to file onmagnetic media but fail to do so, and youdo not have an approved waiver on record,you may be subject to a penalty of $50 perreturn for failure to file information returnson magnetic media unless you establishreasonable cause. However, you can fileup to 250 returns on paper; those returnswill not be subject to a penalty for failureto file on magnetic media.

The penalty applies separately to originalreturns and corrected returns. See FilingRequirement Applies Separately toOriginals and Corrections earlier.

Paper Document Reporting

If you are required to file 250 or moreinformation returns, see MagneticMedia/Electronic Reporting earlier.

Common Errors.Please be sure tocheck your returns to prevent the followingcommon errors:

1. Duplicate filing. Sending the sameinformation to the IRS more than once.

2. Filers name, address, and taxpayeridentification number are not the same onForm 1096 and Forms 1099, 1098, 5498,or W-2G.

3. Decimal point to show dollars andcents omitted (1000.00).

4. Two or more types of returnssubmitted with one Form 1096 (e.g., Forms1099-INT and 1099-MISC with one Form1096). You must submit a separate Form1096 with each type of document.

5. Failure to make an entry in box 1a,Gross dividends and other distributions onstock, on Form 1099-DIV. An amountmust be entered in box 1a if any amount isentered in box 1b, 1c, 1d, or 1e.

Required Format.Because paper formsare read by machines (optical characterrecognition equipment), all Forms 1096,1098, 1099, and 5498 must be prepared inaccordance with the following instructions.If these instructions are not followed, you

may be subject to a penalty of $50 perincorrectly f iled document.

1. DO NOT CUT OR SEPARATE theforms that are printed two or three to asheet. Forms 1098, 1099, and 5498 areprinted two or three to an 8- by 11-inchsheet. Form 1096 is printed one to an 8-by 11-inch sheet. These forms must besubmitted to the IRS on the 8- by 11-inchsheet. If at least one form on the page iscorrectly completed, you must submit theentire page.

Send the forms to the IRS in a flatmailing (not folded). Note: Large envelopesmay require extra postage.

2. NO PHOTOCOPIES of any forms areacceptable. Official forms are availablefrom your IRS district office.

3. DO NOT STAPLE, tear, or tape any ofthese forms. It will interfere with the IRSsability to scan the documents.

4. Pinfeed holes on the form are NOTacceptable. Pinfeed strips outside the 8-by 11-inch area must be removed beforesubmission, without tearing or ripping theform. Substitute forms prepared incontinuous or strip form must be burst andstripped to conform to the size specifiedfor a single sheet (8 by 11 inches) beforethey are filed with the IRS.

5. DO NOT change the title of any boxon any form. Do not use a form to reportinformation that is not properly reportableon that form. If you are unsure of where toreport the data, call 304-263-8700 or yourlocal IRS office.

6. Report information only in theappropriate boxes provided on the forms.Make only one entry in each box unlessotherwise indicated in these instructions.

7. DO NOT submit any copy other thanCopy A to the IRS.

8. DO NOT use prior year forms unlessyou are reporting prior year information; donot use subsequent year forms for thecurrent year. Because forms are read bymachine, you MUST use the current yearform to report current year information.

9. Use the official forms or substituteforms that meet the specifications in the1994 Pub. 1179, Specifications for PaperDocument Reporting and PaperSubstitutes for Forms 1096, 1098, 1099Series, 5498, and W-2G. If you submitsubstitute forms that do not meet thecurrent specifications and that are notmachine scannable, you may be subject toa penalty of $50 for each return forimproper format.

10. DO NOT use dollar signs ($) (theyare preprinted on the forms), ampersands(&), asterisks (*), commas (,), or otherspecial characters in money amountboxes.

Suggested Format.Below aresuggestions that will allow the IRS toprocess the submitted forms in the mosteconomical manner:

1. Type or machine print data entriesusing 10 pitch (pica) or 12 pitch (elite)black type. Use block print, not scriptcharacters. Entries should not be

handwritten. Insert data in the middle ofthe blocks well separated from otherprinting and guidelines, and take othermeasures to guarantee a dark black, clear,sharp image.

2. Do not enter -0- or None in moneyamount boxes when no entry is required.Leave the boxes blank unless theinstructions specifically require that youenter a zero.

3. You may use the account numberbox for an account number designation.This number must not appear anywhereelse on the form, and this box may not be

used for any other item. Showing theaccount number is optional. However, itmay be to your benefit to include therecipients account number on paperdocuments if your system of records usesthe account number rather than the name,social security number, or employeridentification number for identificationpurposes. If you furnish the accountnumber, the IRS will include it in futurenotices to you about backup withholding. Ifyou are using window envelopes to mailstatements to recipients, and if you are

using reduced rate mail, be sure theaccount number does not appear in thewindow because the Postal Service maynot accept these for reduced rate mail.

4. Do not enter number signs (#); forexample, enter Rt. 2, not Rt. #2.

General Instructions

A. Who Must File.See the SpecificInstructions for each form.

Nominee/Middleman Returns.Generally, anyone receiving a Form 1099for amounts that actually belong to anotherperson should file a Form 1099 showing

the actual owner as the recipient and thenominee as the payer. The nominee, notthe original payer, is responsible for filingthe subsequent Forms 1099.

Mergers.If two corporations merge andthe surviving corporation becomes theowner of all the assets and assumes all theliabilities of the absorbed corporation, thereporting requirements explained in thispublication will be met if the survivingcorporation files Forms 1098, 1099, 5498,and/or W-2G for reportable payments ofboth corporations. See Rev. Rul. 69-556,1969-2 C.B. 242.

For information on filing Form 1099-INTfor a successor/predecessor corporation,

see Form 1099-INT later.Qualified Settlement Funds.A qualifiedsettlement fund must file informationreturns as explained in this publication fordistributions to claimants if any transferorto the fund would have been required tofile if the transferor had made thedistributions directly to the claimants.

For distributions to transferors, a fund issubject to the information reportingrequirements of sections 6041 and 6041Aand may be required to file Form1099-MISC. For payments made by thefund on behalf of a claimant or transferor,the fund is subject to these same rules andmay have to file Form 1099-MISC for the

payment to a third party. For informationreporting purposes, a payment made bythe fund on behalf of a claimant ortransferor is considered a distribution tothe claimant or transferor and is alsosubject to information reportingrequirements.

The same filing requirements,exceptions, and thresholds apply toqualified settlement funds as apply to anyother payer. That is, the fund mustdetermine the character of the payment(e.g., interest, fixed and determinableincome, or gross proceeds from broker


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transactions) and to whom the payment ismade (e.g., corporation or individual).

For more information, see Regulationssection 1.468B-2(l).

Payments to Foreign Persons.See theInstructions for Forms 1042 and 1042-S,relating to U.S. source income of foreignpersons, and for reporting requirementsrelating to payments of income items toforeign persons.

B. When To File.File Form 1096 andForms 1098, 1099, or W-2G by February28, 1995. Brokers may file Forms 1096 and1099-B anytime after the reporting periodthey elect to adopt (month, quarter, oryear), but not later than February 28, 1995.File Form 1096 and Forms 5498 by May31, 1995. If the regular due date falls on aSaturday, Sunday, or legal holiday, file onthe next business day. A business day isany day that is not a Saturday, Sunday, orlegal holiday. See part H later aboutproviding Forms 1098, 1099, 5498, andW-2G or statements to recipients.

Reporting period.Forms 1098, 1099,and W-2G are used to report amountsreceived, paid, credited, or canceled in thecase of Form 1099-C, during the calendaryear. Form 5498 is used to report amounts

contributed for the calendar year.Extension.For paper or magnetic

media filing, you may request an extensionof time to file by sending Form 8809,Request for Extension of Time To FileInformation Returns, to the address shownon the form. You must request theextension by the due date of the returnsfor your request to be considered. If yourrequest for an extension is approved, youwill have an additional 30 days to file. Youmay request an additional extension. SeeForm 8809. (If you need an extension oftime for filing new Form 1099-C, enter1099-C in the blank space below 5498in item 8 on Form 8809). For information

on extensions for providing statements torecipients, see page 7.

Note: If you are a magnetic mediatransmitter requesting extensions of timefor more than 50 payers, you areencouraged to submit the extensionrequests on tape or diskette. Forinstructions on submitting extensionrequests on magnetic media, see Pub.1220.

C. Where To File

Caution: NEW FILING LOCATIONS. Checkthe addresses below carefully because youmay have to file in a service center that isdifferent from the one where you filed last

year. Please note that all California filersnow file in Ogden and all New York filersfile in Cincinnati.

Send all information returns filed onpaper to the following:

If your principal business,office or agency, or legal

residence in the caseof an individual, is

located in

Use the followingInternal RevenueService Center

address

Arkansas, Idaho, Kansas,Louisiana, Nebraska,Nevada, New Mexico, NorthDakota, Oklahoma,Pennsylvania, SouthDakota, Texas, WestVirginia

Austin, TX 73301

Connecticut, Kentucky,Maine, Massachusetts, NewHampshire, New Jersey,New York, Ohio, RhodeIsland, Vermont

Cincinnati, OH 45999

Alabama, Illinois, Indiana,Iowa, Michigan, Minnesota,Mississippi, Missouri,Wisconsin

Kansas City, MO 64999

Delaware, District ofColumbia, Florida, Georgia,Maryland, North Carolina,South Carolina, Tennessee,Virginia

Memphis, TN 37501

Alaska, Arizona, California,Colorado, Hawaii, Montana,Oregon, Utah, Washington,Wyoming

Ogden, UT 84201

If you have no legal residence, principalplace of business, or principal office oragency in any Internal Revenue district, fileyour return with the Internal RevenueService Center, Cincinnati, OH 45999.

Send all information returns filedmagnetically to IRS-MartinsburgComputing Center, P.O. Box 1359,Martinsburg, WV 25401-1359.

D. Filing Returns With the IRS.The IRSstrongly encourages the quality review ofdata before filing to prevent erroneousnotices being mailed to payees (or othersfor whom information is being reported).

If you must file any Form 1098, 1099,5498, or W-2G with the IRS, and you arefiling paper documents, you must send aForm 1096, Annual Summary andTransmittal of U.S. Information Returns,with each type of form as the transmittaldocument. You must group the forms byform number and submit each group witha separate Form 1096. For example, if youfile Forms 1098, 1099-A, and 1099-MISC,complete one Form 1096 to transmitForms 1098, another Form 1096 totransmit Forms 1099-A, and a third Form1096 to transmit Forms 1099-MISC.Specific instructions for completing Form1096 are included on Form 1096. Also seeTransmitters, paying agents, etc. later.

For information about filing correctedreturns, see Corrected and Void Returnslater.

If you are filing on magnetic media,Form 4804, Transmittal of InformationReturns Reported Magnetically/Electronically, must accompany yoursubmissions.

For information on the preparation oftransmittal documents for magnetic mediaand paper document reporting (Forms4804 and 1096), see Rev. Proc. 84-24,1984-1 C.B. 465, or other current revenueprocedure.

If you use paper forms, report paymentson the appropriate form, as explained inthe Specific Instructions later.

See Pub. 1179 on specifications forprivate printing of information documents.You may not request special consideration.Only forms that conform with the officialform and the specifications in Pub. 1179are acceptable.

Transmitters, paying agents, etc.Atransmitter, service bureau, paying agent,or disbursing agent (hereafter referred toas agent) may sign Form 1096 or 4804

on behalf of any person required to file(hereafter referred to as payer) if theconditions in items 1 and 2 below are met:

1. The agent has the authority to signthe form under an agency agreement (oral,written, or implied) that is valid under statelaw, and

2. The agent signs the form and addsthe caption For: (Name of payer).

Signing of the form by an authorizedagent on behalf of the payer does notrelieve the payer of the liability for penaltiesfor not filing a correct, complete, andtimely Form 1096 or 4804 andaccompanying returns.

Forms 1098, 1099, 5498, W-2G, or otherstatements to recipients issued by aservice bureau or agent should show thesame payers name as shown on theinformation returns filed with the IRS.

For information about the election toreport and deposit backup withholdingunder the agents TIN and how to prepareforms if the election is made, see Rev.Proc. 84-33, 1984-1 C.B. 502 (Pub. 1272).

Keeping copies.Generally, keepcopies of information returns you filed withthe IRS or have the ability to reconstructthe data for at least 3 years from the duedate of the returns. If backup withholdingwas imposed and for Form 1099-C, keepcopies of information returns for 4 years.

E. Shipping and Mailing.If you aresending many forms, you may send themin conveniently sized packages. On eachpackage write your name and TIN, numberthe packages consecutively, and placeForm 1096 in package number one. Postalregulations require forms and packages tobe sent by First-Class Mail.

F. Recipient Names and TaxpayerIdentification Numbers.Taxpayeridentification numbers (TINs) are used toassociate and verify amounts reported tothe IRS with corresponding amounts ontax returns. Therefore, it is important thatyou furnish correct names, social securitynumbers (SSNs) or employer identificationnumbers (EINs) for recipients on the formsor magnetic media sent to the IRS.

Use Form W-9 to request the recipientsTIN. (You may be subject to a penalty foran incorrect or missing TIN. See Penaltieson page 2.) You are required to maintainthe confidentiality of information obtainedon Form W-9 relating to the taxpayersidentity (including SSNs), and you may usesuch information only to comply with thetax laws.

Note: If the recipient does not provide aTIN, leave the box for providing the TIN to


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the IRS blank on the Form 1098, 1099,5498, or W-2G. SeeBackup Withholdingon page 2. Only one recipient TIN can beentered on the form.

The TIN for individual recipients ofinformation returns is the social securitynumber. But see the information aboutsole proprietors below. For otherrecipients, including corporations,partnerships, and estates, it is the EIN.

SSNs have nine digits separated by twohyphens (000-00-0000), and EINs havenine digits separated by only one hyphen

(00-0000000).Show the full name and address in the

section provided on the return. Ifpayments have been made to more thanone recipient or the account is in morethan one name, show as the ONLY nameon the first name line the name of therecipient whose TIN is shown on thereturn. Show the names of any otherindividual recipients in the area below thefirst line, if desired. Form W-2G filers seeForm 5754 later.

For sole proprietors, show theindividuals name on the first name line; onthe second name line, you may enter thebusiness name. You may not enter only

the business name. For the TIN, entereither the individuals SSN or the EIN ofthe business (sole proprietorship).

G. Filers Name, Identification Number,and Address.The TIN for filers ofinformation returns, including soleproprietors and nominees/middlemen, isthe Federal EIN. However, sole proprietorsand nominees/middlemen who are nototherwise required to have an EIN shoulduse their social security numbers. A soleproprietor is not required to have an EINunless he or she must file excise oremployment tax returns. See Pub. 583,Taxpayers Starting a Business.

The filers name and TIN should be

consistent with the name and number usedon the filers other tax returns. The nameof the filers paying agent or service bureaumust not be used in place of the name ofthe filer.

To obtain an EIN, file Form SS-4,Application for Employer IdentificationNumber, with the IRS. If you do not haveyour EIN by the time you must fileinformation returns, enter Applied For inany space where the number must beentered.

Include the room, suite, or other unitnumber after the street address.

H. Statements to Recipients (Borrowers,Debtors, Participants, Payers/Borrowers,

Transferors, or Winners on CertainForms).Be sure that the statements youprovide to recipients are clear and legible.

If you are not using the official IRS formto furnish statements to recipients, seePub. 1179, Specifications for PaperDocument Reporting and PaperSubstitutes for Forms 1096, 1098, 1099Series, 5498, and W-2G, for specific rulesabout providing substitute statements torecipients. A substitute is any statementother than Copy B (generally) of the officialform. You may develop them yourself orbuy them from a private printer. However,

the substitutes must comply with theformat and content requirements specifiedin Pub. 1179.

Different rules apply to furnishingstatements to recipients depending on thetype of payment you are reporting and theform you are filing. See the heading belowfor the type of payment you are reporting.The headings are (1) Interest, dividend,and royalty payments; (2) Real estatetransactions; and (3) Other payments.

Interest, dividend, and royaltypayments.For payments of dividends or

interest (including original issue discount)under section 6042, 6044, or 6049(reported on Forms 1099-DIV, 1099-PATR,1099-INT, or 1099-OID), you are requiredto furnish an official or substitute Form1099 to a recipient either in person or in astatement mailing by First-Class Mail.Payers of royalties are also required tofurnish the statement in person or in astatement mailing by First-Class Mail, butthe statement need not be the official form.Statements may be sent by intraoffice mailif you use intraoffice mail to send accountinformation and other correspondence tothe recipient.

Statement mailing requirements for

Forms 1099-DIV, 1099-INT, 1099-OID,and 1099-PATR, and forms reportingroyalties only.The statement mailingrequirements apply only to Forms1099-DIV (except for section 404(k)dividends), 1099-INT (except for interestreportable under section 6041), 1099-OID,1099-PATR, and royalties reported undersection 6050N (on Form 1099-MISC or1099-S). In addition to Forms W-2, W-8,W-9, or other 1098, 1099, and 5498statements, the following enclosures arepermitted in a statement mailing: (1) acheck, (2) a letter explaining why no checkis enclosed, (3) a statement of the personsaccount shown on Form 1099, and (4) aletter limited to an explanation of the taxconsequences of the information shown ona recipient statement.

A recipient statement may be perforatedto a check with respect to the accountreported on the recipient statement or to astatement of the recipients specificaccount if payments on such account arereflected on the recipients statement. Thecheck or account statement to which therecipient statement is perforated mustcontain, in a bold and conspicuous type,the legend Important Tax ReturnDocument Attached.

No additional enclosures, such asadvertising, promotional material, or aquarterly or annual report, are permitted.

Even a sentence or two on the year-endstatement describing new services offeredby the payer is not permitted. However,logos are permitted on the envelope andon any enclosures.

For a statement mailing, the legendImportant Tax Return DocumentEnclosed must appear in a bold andconspicuous manner on the outside of theenvelope and on each letter, or check oraccount statement that is not perforated tothe recipient statement. This legend is notrequired on any tax form, tax statement, orpermitted letter of tax consequences

included in a statement mailing. Further,you need not pluralize the worddocument in the legend simply becausemore than one recipient statement isenclosed.

Note: If you provide recipient statements ina separate mailing that contains onlyrecipient statements, Forms W-8 and W-9,and a letter limited to the explanation ofthe tax consequences of the informationshown on a recipient statement included inthe envelope, you are not required toinclude the legend Important Tax Return

Document Enclosed on the envelope.Substitute forms.You may furnish to

the recipient Copy B of the official form, oryou may use substitute Forms 1099-DIV,1099-INT, 1099-OID, and 1099-PATR ifthey contain the same language as theofficial forms and you comply with theprocedures in Pub. 1179, relating tosubstitute Forms 1099. Applicable boxcaptions and numbers must be clearlyidentified, using the same wording andnumbering as the official form. However,for Form 1099-INT, if your substitute doesnot contain box 3, Interest on U.S.Savings Bonds and Treas. obligations,you may omit not included in box 3 from

the box 1 caption.If you are using substitutes, the IRSencourages you to use boxes so that thesubstitute has the appearance of a form.The substitute form must contain theapplicable instructions as on the front andback of Copy B of the official form. SeePub. 1179 for additional requirements. Forinformation about substitute Form1099-MISC for royalties, see Otherpayments below.

Real estate transactions.You mustfurnish a statement to the transferorcontaining the same information reportedto the IRS on Form 1099-S. You may useCopy B of Form 1099-S or a substitute

form that complies with Pub. 1179 andRegulations section 1.6045-4(m). You mayuse a Uniform Settlement Statement (underRESPA) as the written statement if it isconformed by including on the statementthe legend shown on Form 1099-S and bydesignating which information is reportedto the IRS on Form 1099-S. You mayfurnish the statement to the transferor inperson or by mail. Furnish the statement ator after closing but by January 31 of thefollowing year. The statement mailingrequirements explained earlier do not applyto statements to transferors for proceedsfrom real estate transactions reported onForm 1099-S. However, the statementmailing requirements do apply to

statements to transferors for timberroyalties reportable under section 6050Non Form 1099-S.

Other payments.Statements torecipients for Forms 1098, 1099-A, 1099-B,1099-C, 1099-G, 1099-MISC, 1099-R,5498, W-2G, 1099-DIV only for section404(k) dividends reportable under section6047, or 1099-INT only for interestreportable under section 6041 need notbe, but can be, a copy of the paper formfiled with the IRS. If you do not use a copyof the paper form, all information (includingbox numbers) required to be reported must


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be titled on the substitute in substantiallythe same manner as on the official form.However, if you are reporting a payment asOther income in box 3 of Form1099-MISC, you may substituteappropriate explanatory language for thebox title. For example, for payments ofaccrued wages to a beneficiary of adeceased employee required to bereported on Form 1099-MISC by Rev. Rul.86-109, you might change the title of box3 to Beneficiary payments or somethingsimilar.

Appropriate instructions to the recipient,similar to those on the official form, mustbe provided to aid in the proper reportingof the items on the recipients income taxreturn. For payments reported on Form1099-B, rather than furnish appropriateinstructions with each Form 1099-Bstatement, you may furnish to the recipientone set of instructions for all statementsrequired to be furnished to a recipient in acalendar year.

The statement mailing requirementsexplained earlier do not apply tostatements to recipients for informationreported on Forms 1098, 1099-A, 1099-B,1099-C, 1099-G, 1099-MISC (except for

royalties), 1099-R, 5498, W-2G, 1099-DIVfor section 404(k) dividends only, and1099-INT for interest reportable undersection 6041 only. You may combine thestatements with other reports or financialor commercial notices, or expand them toinclude other information of interest to therecipient. Be sure that all copies of theforms are legible.

Certain composite statements arepermitted. See Pub. 1179.

Time for furnishing forms orstatements.Generally, you must provideForms 1098, 1099, and W-2G informationby January 31, 1995. However, you mayissue them earlier in some situations, as

provided by the regulations. For example,you may furnish Form 1099-INT to therecipient on redemption of U.S. SavingsBonds at the time of redemption. Brokersand barter exchanges may furnish Form1099-B anytime but not later than January31.

Trustees or issuers of IRAs or SEPsmust provide participants with a statementof the value of the participants account byJanuary 31, 1995. IRA contributioninformation must be furnished to theparticipant by May 31, 1995.

For real estate transactions, you mayfurnish the statement to the transferor atclosing or by mail on or before January 31,1995.

Filers of Form 1099-G who report stateor local income tax refunds, credits, oroffsets must furnish the statements torecipients during January 1995.

If the regular due date falls on aSaturday, Sunday, or legal holiday, the duedate is the next business day. A businessday is any day that is not a Saturday,Sunday, or legal holiday.

Extension.You may request anextension of time to provide thestatements to recipients by sending a letterto IRS-Martinsburg Computing Center,

P.O. Box 1359, Martinsburg, WV25401-1359 or to your district director. Theletter must include (a) your name, (b) yourTIN, (c) your address, (d) type of return, (e)reason for delay, and (f) the signature ofthe payer or authorized agent. Yourrequest must be postmarked by the dateon which the statements are due to befurnished to recipients. If your request foran extension is approved, you will begranted an extra 15 days to furnish therecipient statements.

I. Corrected and Void Returns.If a

return has been incorrectly prepared andsubmitted to the IRS, you must file acomplete corrected return as soon aspossible. To determine whether you arerequired to submit corrected returns onmagnetic media, see MagneticMedia/Electronic Reporting earlier. Allboxes must be completed on theappropriate forms with the correctinformation, not just the boxes needingcorrection. Submit Form 1096 and CopiesA of corrected forms to the appropriateservice center as soon as possible. If youare making corrections on magnetic media,see Pub. 1220.

Note: If you fail to file correct information

returns, you may be subject to a penalty.SeeFailure To File Correct InformationReturns by the Due Date (Section 6721)on page 2.

Statements to the recipient (etc.)identified as corrected must be providedas soon as possible.

On all Forms 1098, 1099, and 5498, abox is provided for the account number. Ifthe account number was provided on theoriginal return, use this number on thecorrected return to help identify theappropriate incorrect return filed whenmore than one return was filed for aparticular individual. The account numbermay be a checking account number,

savings account number, serial number, orany other number assigned to the payeeby the filer that is unique and willdistinguish the specific account. Thisnumber must appear on both the originaland corrected returns to properly identifyand process the correction.

DO NOT CUT or separate the forms thatare two or three to a page. The entire pagemust be submitted.

A Form 1096 must be used to transmitall paper forms including corrections. Donot staple the paper forms to Form 1096.Use a separate Form 1096 for each typeof return being corrected.

CORRECTED box.Enter an X in the

CORRECTED box on Copy A only whenyou are correcting a form you previouslysubmitted to the IRS. Enter an X in theCORRECTED box on the copies you giveto the recipient (generally, Copy B) onlywhen you are correcting a form previouslyfurnished to the recipient.

VOID box.If a completed or partiallycompleted Form 1098, 1099, or 5498 isincorrect and you want to void it, enter anX in the VOID box at the top of theform. For example, if you make an errorwhile typing or printing a form, you shouldvoid it. The return will then be disregarded

during processing by the IRS. Go to thenext form on the page, or to another page,and enter the correct information; but donot mark the CORRECTED box.

Caution: An X in the VOID box will notcorrect a previously filed information return.

The following chart gives step-by-stepinstructions for filing corrected returns forthree of the most frequently made errors.Correction of errors may require thesubmission of more than one return. Besure to read each section thoroughly.

Note: Regulations section 301.6724-1(relating to information return penalties)does not require you to file correctedreturns for missing or incorrect TINs if youmeet the reasonable cause criteria. You aremerely required to include the correct TINon the next original return you are requiredto file. However, if you do not meet thereasonable cause criteria, you should filecorrected returns by August 1 to besubject to a reduced penalty.

In addition, even if you meet thereasonable cause criteria, the IRSencourages you to file corrections forincorrect or missing TINs so that the IRScan update the payees records.

Guidelines for Filing CorrectedReturns on Paper FormsError (on OriginalReturn)

How To File the CorrectedReturn on Paper Forms

1. No payee TIN (SSNor EIN) or incorrectpayee TIN, orincorrect name andaddress. This willrequire twoseparatetransactions tomake thecorrection properly.Read and follow allinstructions forboth Transactions1 and 2.

TRANSACTION 1: Identifyincorrect return submitted.

A. Form 1096:

1. Prepare a newtransmittal Form 1096.

2. This Form 1096 willbe used to transmityour correctedreturns. Therefore,complete Form 1096showing your correctname, address, andTIN, and in the other

boxes enter onlyinformation about thecorrected returns. Forexample, enter in box3 of Form 1096 onlythe number ofcorrected returnsbeing submitted.

B. Form 1098, 1099, 5498,or W-2G:

1. Prepare a newinformation return(s).

2. Enter an X in theCORRECTED box atthe top of the form(s).

3. Enter the payer,recipient, and accountnumber informationexactly as it appeared

on the originalincorrect return;HOWEVER, enter 0(zero) for all moneyamounts.

4. File Form 1096 andCopies A of thereturns with theappropriate servicecenter.

5. Do NOT includecopies of the originalreturn(s) that was filedincorrectly.


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Error (on OriginalReturn)


TRANSACTION 2: Reportcorrect information.

A. Form 1096:

1. Prepare a newtransmittal Form 1096.

2. Enter the words FiledTo Correct TIN, Name,and/or Address in thebottom margin of theform.

3. Provide all requestedinformation on the

form as it applies tothe return(s) preparedin B, below.

B. Form 1098, 1099, 5498,or W-2G:


2. Do NOT enter an Xin the CORRECTEDbox at the top of theform(s). Submit thenew return(s) asthough it was anoriginal.

3. Include all the correctinformation on theform including thecorrect TIN and nameand address.

4. File Form 1096 andCopies A of thereturns with theappropriate servicecenter. You MUSTNOT use the sameForm 1096 used inTransaction 1.


2. Incorrect moneyamount(s) orincorrect address.(Follow theinstructions underError 1, instead of

these instructions,if you must correctan address AND aname or TIN.)

A. Form 1096:

Follow the instructionsunder Error 1,Transaction 1A.

B. Form 1098, 1099, 5498,or W-2G:


2. Enter an X in theCORRECTED box atthe top of the form(s).

3. Enter the payer,recipient, and accountnumber informationexactly as it appearedon the originalincorrect return;HOWEVER, enter allcorrect moneyamounts in thecorrect boxes as theyshould have appearedon the original return,and enter therecipients correctaddress.

4. File Form 1096 andCopies A of thereturns with theappropriate servicecenter.


Error (on OriginalReturn)


3. Original return wasfiled using theWRONG type ofreturn. Forexample, a Form1099-DIV was filedwhen a Form1099-INT shouldhave been filed.This will requiretwo separatetransactions tomake the

correction properly.Read and follow allinstructions forboth Transactions1 and 2.

TRANSACTION 1: Identifyincorrect return submitted.

A. Form 1096:

Follow the instructionsunder Error 1,Transaction 1A.

B. Form 1098, 1099, 5498,or W-2G:

Follow the instructionsunder Error 1,Transaction 1B, usingthe same type of form

that was used initially.TRANSACTION 2: Reportcorrect information on thecorrect type of return.

A. Form 1096:

Follow the instructionsunder Error 1,Transaction 2A, exceptenter the words Filed ToCorrect Document Typein the bottom margin ofForm 1096.

B. Form 1098, 1099, 5498,or W-2G:

Follow the instructionsunder Error 1,Transaction 2B, usingthe proper type of form.

J. Other Information Returns.The

income information you report on thefollowing returns must not be repeated onthe returns discussed in the SpecificInstructions in this publication:

1. Form W-2 reporting wages and otheremployee compensation.

2. Forms 1042-S and 1000 reportingincome.

3. Form 2439 reporting undistributedlong-term capital gains of a regulatedinvestment company.

4. Schedule K-1 of Form 1065 reportingdistributive shares to members of apartnership.

5. Schedule K-1 of Form 1041 reporting

distributions to beneficiaries of trusts orestates.

6. Schedule K-1 of Form 1120Sreporting distributive shares toshareholders of S corporations.

7. Schedule K of Form 1120-IC-DISCreporting actual and constructivedistributions to shareholders and deferredDISC income.

8. Schedule Q of Form 1066 reportingincome from a REMIC to a residual interestholder.

K. Payments to Corporations andPartnerships.Reporting generally is notrequired for payments to corporations

except in the case of (1) medical payments(Form 1099-MISC), (2) withheld Federalincome tax or foreign tax, (3) barterexchange transactions (Form 1099-B),(4) substitute payments in lieu of dividendsand tax-exempt interest (Form 1099-MISC),(5) interest or original issue discount paidor accrued to a regular interest holder of aREMIC (Form 1099-INT or 1099-OID),(6) acquisitions or abandonments ofsecured property (Form 1099-A), and(7) cancellation of debt (Form 1099-C). Forexample, reporting is not required for

payments of architectural fees tocorporations.

However, reporting generally is requiredfor payments to partnerships. For example,payments of $600 or more made in thecourse of your trade or business to a lawfirm that is a partnership are reportable onForm 1099-MISC.

L. Earnings on an IRA or SEP.Generally, any income with respect to anIRA or SEP, such as interest or dividends,is not reported on Forms 1099. Butdistributions should be reported on Form

1099-R.

Specific Instructions

If a distribution includes noncash property,show the fair market value of the propertyat the time of payment.

Although, generally, you are not requiredto report payments smaller than theminimum described for each form, youmay prefer, for economy and your ownconvenience, to file Copies A for allpayments. The IRS encourages this.

Form 1098Use Form 1098, Mortgage InterestStatement, to report mortgage interest(including reportable points, defined later)of $600 or more received by you duringthe year in the course of your trade orbusiness from an individual, including asole proprietor. File a separate Form 1098for each mortgage. The term interest, asused in these Form 1098 instructions,includes reportable points unless otherwisespecified.

If an overpayment of interest on anadjustable rate mortgage (ARM) or othermortgage was made in a prior year and

you refund (or credit) such overpayment,you may have to file Form 1098 to reportthe refund (or credit) of the overpayment.See Reimbursement of Overpaid Interestlater.

Exceptions.You need not file Form 1098for interest received from a corporation,partnership, trust, estate, association, orcompany (other than a sole proprietor)even though an individual is a coborrowerand all the trustees, beneficiaries, partners,members, or shareholders of the payer ofrecord are individuals.

Mortgage Defined.An obligationincurred after 1987 is a mortgage if realproperty that is located inside or outside

the United States secures all or part of theobligation, even though the interestrecipient classifies the obligation as otherthan a mortgage, for example, as acommercial loan.

An obligation incurred after 1984 butbefore 1988 is a mortgage only if securedprimarily by real property.

An obligation in existence on December31, 1984, is not a mortgage if, at the timethe obligation was incurred, the interestrecipient reasonably classified theobligation as other than a mortgage, realproperty loan, real estate loan, or other


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similar type of obligation. For example, ifan obligation incurred in 1983 was securedby real property, but the interest recipientreasonably classified the obligation as acommercial loan because the proceedswere used to finance the borrowersbusiness, the obligation is not considereda mortgage for purposes of this reportingrequirement. However, if over half of theobligations in a class established by theinterest recipient are primarily secured byreal property, it is not reasonable toclassify those obligations as other than

mortgages for purposes of this reportingrequirement.

Real property includes a manufacturedhome with a minimum living space of 400square feet and a minimum width of morethan 102 inches of a kind customarily usedat a fixed location, including certain mobilehomes. See section 25(e)(10).

Lines of credit and credit cardobligations.Interest (other than points)received on any mortgage that is in theform of a line of credit or credit cardobligation is reportable regardless of howyou classified the obligation. A borrowerincurs a line of credit or credit cardobligation when the borrower first has the

right to borrow against the line of credit orcredit card, whether or not the borroweractually borrows an amount at that time.

Who Must File.File this form if you areengaged in a trade or business and, in thecourse of such trade or business, youreceive from an individual $600 or more ofmortgage interest on any one mortgageduring the calendar year. You are notrequired to file this form if the interest isnot received in the course of your trade orbusiness. For example, you hold themortgage on your former personalresidence. The buyer makes mortgagepayments to you. You are not required tofile Form 1098.

You must file a separate Form 1098 foreach mortgage on which you receivedinterest of $600 or more. If you receivedless than $600 of interest on a mortgage,you may, but you are not required to,report the interest on that mortgage.

If you receive $600 or more of mortgageinterest in the course of your trade orbusiness, you are subject to therequirement to file Form 1098, even if youare not in the business of lending money.For example, if you are a real estatedeveloper and you provide financing to anindividual to buy a home in yoursubdivision, and that home is security forthe financing, you are subject to thisreporting requirement. However, if you are

a physician not engaged in any otherbusiness and you lend money to anindividual to buy your home, you are notsubject to this reporting requirementbecause you did not receive the interest inthe course of your trade or business as aphysician.

A governmental unit (or any subsidiaryagency) receiving mortgage interest froman individual of $600 or more must file thisform.

Cooperative housing corporation.Acooperative housing corporation is an

interest recipient and must file Form 1098to report an amount received from itstenant-stockholders that represents thetenant-stockholders proportionate share ofinterest described in section 216(a)(2). Thisrule applies only to tenant-stockholderswho are individuals and from whom thecooperative has received at least $600 ofinterest during the year.

Collection agents.Generally, if youreceive reportable interest payments (otherthan points) on behalf of someone else andyou are the first person to receive the

interest, for example, if you are a servicingbank collecting payments for a lender, youmust file this form and enter your name,address, and TIN in the recipient entityarea. You must file this form even thoughyou do not include the interest received inyour income but you merely transfer it toanother person. If you wish, you may enterthe name of the person for whom youcollected the interest in box 4. The personfor whom you are receiving the interestneed not file Form 1098.

However, there is an exception to thisrule for any period that (1) the first personto receive or collect the interest does nothave the information needed to report on

Form 1098, and (2) the person for whomthe interest is received or collected wouldreceive the interest in its trade or businessif the interest were paid directly to suchperson. If (1) and (2) apply, the person onwhose behalf the interest is received orcollected is required to report on Form1098. If interest is received or collected onbehalf of another person other than anindividual, such person is presumed toreceive the interest in a trade or business.

Foreign interest recipient.If you arenot a U.S. person, you must file Form 1098if the interest is received in the UnitedStates. A U.S. person is a citizen orresident of the United States, a domesticpartnership or corporation, or a nonforeignestate or trust. If the interest is receivedoutside the United States, you must fileForm 1098 if (1) you are a controlledforeign corporation, or (2) at least 50% ofyour gross income from all sources for the3-year period ending with the close of thetax year preceding the receipt of interest(or for such part of the period as you werein existence) was effectively connectedwith the conduct of a trade or business inthe United States.

Reimbursement of Overpaid Interest.You are required to report reimbursementsof overpaid interest aggregating $600 ormore to a payer of record on Form 1098.You are not required to report

reimbursements of overpaid interestaggregating less than $600 unless you areotherwise required to file Form 1098. Thatis, if you did not receive at least $600 ofmortgage interest during the year ofreimbursement from the person to whomyou made the reimbursement, you are notrequired to file Form 1098 merely to reportthe reimbursement.

The reimbursement must be reported onForm 1098 for the year in which thereimbursement is made. No change shouldbe made to the prior year Form 1098because of this reimbursement. Report the

total reimbursement even if it is foroverpayments made in more than 1 year.

To be reportable, the reimbursementmust be a refund or credit of mortgageinterest received in a prior year that wasrequired to be reported for that prior yearby any interest recipient on Form 1098.Only the person who makes thereimbursement is required to report it onForm 1098. For example, if you bought amortgage on which interest was overpaidin a prior year, you made a reimbursementof the overpaid interest, and the previous

mortgage holder was required to reportmortgage interest on Form 1098 in theprior year, you must file Form 1098 toreport the reimbursement because you arethe one making the reimbursement.

If you reimburse interest in the sameyear it is overpaid, do not report theoverpayment on Form 1098 as interestreceived during the year or as areimbursement of overpaid interest. Forexample, if the borrower paid $5,000 andyou reimbursed $500 of that amount in1994, $4,500 should appear in box 1 asinterest paid by the borrower. The $500reimbursement must not appear in box 3.

Example.In 1991, you received $5,000

of mortgage interest from thepayer/borrower and reported that amounton Form 1098 for 1991. In 1994, youdetermined that interest due on themortgage for 1991 was $4,500, and thepayer/borrower had overpaid $500. Yourefunded the $500 overpayment to thepayer/borrower in 1994. If you received$600 or more of interest on the mortgagefrom the payer/borrower in 1994, you mustreport the $500 refund in box 3 of the1994 Form 1098. No change to the 1991Form 1098 is required. If, instead ofrefunding the $500 overpayment, youcredited the payer/borrowers 1994mortgage interest payments due, $500 isstill shown in box 3, and the interest

received from the payer/borrower in 1994shown in box 1 must include the $500credit.

Interest on reimbursement.Afinancial institution (or its middleman) thatpays interest of $10 or more on thereimbursement must report that interest(under section 6049) on Form 1099-INT,Interest Income. Others that pay interest of$600 or more on the reimbursement mustreport that interest (under section 6041) onForm 1099-INT. Do not include suchinterest on Form 1098.

Nonresident Alien Interest Payer.Youmust file Form 1098 to report interest paidby a nonresident alien only if all or part of

the security for the mortgage is realproperty located in the United States.

Payer of Record.The payer of record isthe individual carried on your books andrecords as the principal borrower. If yourbooks and records do not indicate whichborrower is the principal borrower, youmust designate one.

If you permit a subsequent purchaser ofthe property to assume the loan withoutreleasing the first purchaser from personalliability, the subsequent purchaser is thepayer of record. Such subsequent


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purchasers name, address, and TIN mustappear on Form 1098.

Multiple Borrowers.Even though theremay be more than one borrower on themortgage, you are required to prepareForm 1098 only for the payer of record,and only if such payer of record is anindividual, showing the total interestreceived on the mortgage. Even if anindividual is a coborrower, no Form 1098 isrequired unless the payer of record is alsoan individual.

Payments by Third Party.Report all

interest received on the mortgage asreceived from the borrower, except asexplained under Seller Payments below.For example, if the borrowers mothermakes payments on the mortgage, theinterest received from the mother isreportable on Form 1098 as received fromthe borrower.

However, do not report mortgageinterest received from any governmentalunit (or any subsidiary agency). Forexample, do not report any interestreceived as housing assistance paymentsfrom the Department of Housing andUrban Development (HUD) on mortgagesinsured under section 235 of the National

Housing Act .Seller Payments.Do not report in box 1of Form 1098 any interest paid by a selleron a purchasers-borrowers mortgage,such as on a buy-down mortgage. Forexample, if a real estate developerdeposits an amount in escrow and tellsyou to draw on that escrow account to payinterest on the borrowers mortgage, donot report in box 1 the interest receivedfrom that escrow account. As anotherexample, do not report in box 1 any lumpsum paid by a real estate developer to payinterest on a purchasers-borrowersmortgage. However, if you wish, you mayuse box 4 to report to the payer of record

any interest paid by the seller.Rule of 78s Method of Accounting.Ifyou are permitted by Rev. Proc. 83-40,1983-1 C.B. 774, or any other revenueprocedure, to use the Rule of 78s methodto calculate interest earned with respect toa transaction, you may report interestearned under the Rule of 78s method onthat transaction as interest received fromthe borrower in a calendar year. In thiscase, you must notify borrowers that theRule of 78s method was used to calculateinterest received and that the borrowersmay not deduct the amount reportedunless the borrowers are also properlyusing the Rule of 78s method to determineinterest deductions. The notification must

also state that the Rule of 78s method maybe used only in the case of a self-amortizing consumer loan that requireslevel payments, at regular intervals (at leastannually), over a period not in excess of 5years (with no balloon payment at the endof the loan term), and only when the loanagreement provides for use of the Rule of78s method to determine interest earned(see Rev. Proc. 83-40 and Rev. Rul. 83-84,1983-1 C.B. 97). The notice must befurnished to the payer of record on or withthe statement of the interest received.

Points.You must report certain pointspaid for the purchase of a principalresidence on Form 1098. You may rely ona signed written statement of the borrowerthat states whether the proceeds of theloan are for the purchase of the borrowersprincipal residence. You may choose oneof two options for reporting the pointsdiscussed later.

Caution: At the time of publication,amendments to Regulations section1.6050H-1 and 2, dealing with reportablepoints, were proposed to be effective

January 1, 1994. If final regulations areissued based on those proposedamendments and are effective January 1,1994, you should follow those new rulesrather than these instructions to determinereportable points. Final regulations arepublished in the Federal Register and theInternal Revenue Bulletin.

Report the total points on Form 1098 forthe year of closing regardless of theaccounting method you use to report thepoints as income for Federal income taxpurposes.

The following points are not reportableon Form 1098: (1) points paid for loans toimprove a principal residence, (2) points

paid for loans to purchase or improve asecond home, vacation, investment, ortrade or business property, (3) points paidfor any refinancing, home equity, or line ofcredit loan, even if secured by the principalresidence, (4) points paid in excess of theamount generally charged in the area, e.g.,the payment of excess points to buydown the cost of money, and (5) pointspaid to acquire a principal residence to theextent the points are allocable to anamount of principal in excess of $1 million.

Lender of record.The lender of record(lender) or a designee is required to reportpoints on Form 1098. Either the lender orthe designee must report the total points

paid for the loan. The lender of record isthe person named as the lender in the loandocuments and whose right to receivepayments is secured by the borrowersprincipal residence at the time the loan ismade.

By a designation agreement, the lendermay transfer responsibility for reportingpoints to someone involved in the originalloan transaction (e.g., a mortgage broker),or to a subsequent purchaser of the loan.

The agreement must be in writing,identify the mortgage(s) for which thedesignee is to report, and be signed by thelender and the designee. If you use Option1 to report points, discussed below, thedesignation agreement must contain thedesignators representation that it did notlend the amount to be treated as paiddirectly by the borrower for this purpose aspart of the overall transaction. Theagreement need not be sent to the IRS butmust be retained by the lender for 4 years.

Option 1Safe Harbor.As a matter ofadministrative practice, the IRS treats thefollowing points as deductible by theborrower (subject to certain limits). UnderOption 1, report on Form 1098 points thatmeet all the following conditions:

1. They are designated on the UniformSettlement Statement (Form HUD-1) asloan origination fees (including amountsfor VA and FHA loans), loan discount,discount points, or points.

2. They are computed as a percentageof the stated principal loan amount.

3. They are charged under anestablished business practice of chargingpoints for loans for the acquisition ofpersonal residences in the area where theresidence is located, and the amount doesnot exceed the amount generally charged

in that area. Therefore, amountsdesignated as points but paid in lieu ofitems ordinarily separately stated on thesettlement sheet, such as appraisal fees,inspection fees, title fees, attorney fees,property taxes, and mortgage insurancepremiums, are not reportable as points.

4. They are paid for the acquisition of aprincipal residence, and the loan issecured by that residence.

5. They are paid directly by the taxpayer.That is, the taxpayer must provide anamount at least equal to the points. Theamount may include a down payment,escrow deposit, earnest money applied atclosing, and other funds actually paid over

at closing. However, the amount cannotcome from funds borrowed for thispurpose as part of the overall transaction.

For more information on Option 1, seeRev. Procs. 92-11, 1992-1 C.B. 662, and92-12, 1992-1 C.B. 663.

Option 2.If you prefer, you maychoose to report points that meet all thefollowing conditions:

1. The points are interest, i.e., for theuse or forbearance of money. Thus, do notreport points that are paid for services.

2. The points conform to an establishedbusiness practice of charging points in thearea where the loan was issued, and thepoints charged do not exceed the numberof points generally charged in that area.

3. The points are paid directly by theborrower. For purposes of reporting underOption 2, an amount charged to theborrower as points for the acquisition of aprincipal residence is treated as paiddirectly by the borrower.

4. The points are for the purchase of theborrowers principal residence, whichsecures the loan.

For more information on Option 2, seeNotice 90-70, 1990-2 C.B. 351.

Prepaid Interest.Report prepaid interest(other than points) only in the year in whichit properly accrues. For example, interest

received on December 20, 1994, thataccrues by December 31 but is not dueuntil February 1, 1995, is reportable on the1994 Form 1098.

Exception.Interest received during thecurrent year that will properly accrue in fullby January 15 of the following year may beconsidered received in the current year, atyour option, and is reportable on Form1098 for the current year. However, if anypart of an interest payment accrues afterJanuary 15, then only the amount thatproperly accrues by December 31 of thecurrent year is reportable on Form 1098 for


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the current year. For example, if youreceive a payment of interest that accruesfor the period December 20 throughJanuary 20, you cannot report any of theinterest that accrues after December 31 forthe current year. You must report theinterest that accrues after December 31 onForm 1098 for the following year.

Statements to Payers of Record.Forinformation about the requirement tofurnish a statement to the payer of record,see part H under General Instructionsearlier.

Recipients/Lenders Name and AddressBox.Enter the name and address of thefiler of Form 1098. Use this same nameand address on Form 1096.

Payers/Borrowers Name and AddressBox.Enter the name and address of theperson who paid the interest (payer ofrecord).

Note: Be careful to enter the recipientsand payers information in the properboxes.

Box 1.Enter the interest (not includingpoints) received on the mortgage fromborrowers during the calendar year.Include interest on a mortgage, a homeequity loan, or a line of credit or creditcard loan secured by real property. Do notinclude government subsidy payments,seller payments, or prepaid interest thatdoes not meet the exception explainedearlier under Prepaid Interest. Interestincludes prepayment penalties and latecharges unless the late charges are for aspecific service provided with respect tothe mortgage.

Box 2.Enter points paid directly on thepurchase of a principal residence. For anexplanation of reportable points, seePoints earlier.

Box 3.Enter the total refund or credit ofa prior year(s) overpayment of interest. SeeReimbursement of Overpaid Interest

earlier.Box 4.Enter any other item you wish toreport to the payer, such as real estatetaxes, insurance, or if you are a collectionagent, the name of the person for whomyou collected the interest. This box isoptional and is provided only for yourconvenience. You do not have to report tothe IRS any information provided in thisbox. You are not required to report theaverage balance of the mortgage.

Form 1099-A

File Form 1099-A, Acquisition or

Abandonment of Secured Property, foreach borrower if you lend money inconnection with your trade or businessand, in full or partial satisfaction of thedebt, you acquire an interest in propertythat is security for the debt, or you havereason to know that the property has beenabandoned. You need not be in thebusiness of lending money to be subject tothis reporting requirement.

Note: If a debt is canceled in a transactionreportable on Form 1099-A, you also arerequired to file Form 1099-C. See theinstructions for Form 1099-C on page 13.

Property.Property means real property(such as a personal residence), intangibleproperty, or tangible personal property heldfor investment or used in a trade orbusiness. No reporting is required for aloan made to an individual and secured byan interest in tangible personal propertythat is neither held for investment nor usedin a trade or business. However, you mustfile Form 1099-A if the personal property isheld for both personal use and either foruse in a trade or business or forinvestment.

No reporting is required if the propertysecuring the loan is located outside theUnited States and the borrower hasfurnished the lender a statement, underpenalties of perjury, that the borrower is anexempt foreign person (unless the lenderknows that the statement is false).

Who Must File.In addition to the generalrule specified above, the following rulesapply.

If there are multiple owners ofundivided interests in a single loan, suchas is the case in pools, fixed investmenttrusts, or other similar arrangements, thetrustee, record owner, or person acting ina similar capacity must file Form 1099-A

on behalf of all the owners of beneficialinterests or participations. In this case,only one form for each borrower must befiled on behalf of all owners with respect tothe loan. Similarly, in the case of bondissues, only the trustee or similar person isrequired to report.

A governmental unit, or any of itssubsidiary agencies, that lends moneysecured by property must file Form1099-A.

A subsequent holder of a loan istreated as the lender for purposes of thereporting requirement for events occurringafter the loan is transferred to the newholder.

If more than one person lends moneysecured by property and one lenderforecloses or otherwise acquires aninterest in the property and the sale orother acquisition terminates, reduces, orotherwise impairs the other lenderssecurity interests in the property, the otherlenders must file Form 1099-A for each oftheir loans. For example, if a first trustholder forecloses on a building, and thesecond trust holder knows or has reasonto know of such foreclosure, the secondtrust holder must file Form 1099-A for thesecond trust even though no part of thesecond trust was satisfied by the proceedsof the foreclosure sale.

Abandonment.An abandonment occurswhen the objective facts andcircumstances indicate that the borrowerintended to and has permanentlydiscarded the property from use. You havereason to know of an abandonmentbased on all the facts and circumstancesconcerning the status of the property. Youwill be deemed to know all the informationthat would have been discovered througha reasonable inquiry when, in the ordinarycourse of business, the lender becomesaware or should become aware ofcircumstances indicating that the property

has been abandoned. If you expect tocommence a foreclosure, execution, orsimilar sale within 3 months of the dateyou had reason to know that the propertywas abandoned, reporting is required as ofthe date you acquire an interest in theproperty or a third party purchases theproperty at such sale. If you expect to butdo not commence such action within 3months, the reporting requirement arises atthe end of the 3-month period.

Statements to Borrowers.Forinformation about the requirement of

furnishing a statement to the borrower, seepart H under General Instructions earlier.

Box 1.Enter the date of your acquisitionof the secured property or the date youfirst knew or had reason to know that theproperty was abandoned. An interest in theproperty generally is acquired on the earlierof the date title is transferred to the lenderor the date possession and the burdensand benefits of ownership are transferredto the lender. If an objection period isprovided by law, use the date the objectionperiod expires. If you purchase theproperty at a sale held to satisfy the debt,such as at a foreclosure or execution sale,use the later of the date of sale or the date

the borrowers right of redemption expires.Please use the following format to indicatethe date: MMDDYY. For example, forJanuary 7, 1994, enter 010794.

For an abandonment, enter the date youknew or had reason to know that theproperty was abandoned unless youexpect to commence a foreclosure,execution, or similar action within 3months, as explained earlier. If a thirdparty purchases the property at aforeclosure, execution, or similar sale, theproperty is treated as abandoned, and youhave reason to know of its abandonmenton the date of sale.

Box 2.Enter the balance of the debt

outstanding at the time the interest in theproperty was acquired or on the date youfirst knew or had reason to know that theproperty was abandoned. Include onlyunpaid principal on the original debt. Donot include accrued interest or foreclosurecosts.

Box 3.For a foreclosure, execution, orsimilar sale, enter the gross foreclosure bidprice accepted at the sale. If there was nosuch sale, leave box 3 blank.

Box 4.For recourse loans only, if anabandonment or a voluntary conveyance tothe lender in lieu of foreclosure occurs,enter the appraised value of the property.For a foreclosure, execution, or similarsale, you are not required to enter theappraised value.

Box 5.Enter an X in the applicable boxto indicate whether the borrower waspersonally liable for repayment of the debtat the time the debt was created or, ifmodified, at the time of the lastmodification.

Box 6.Enter a general description of theproperty. For real property, generally youmust enter the address of the property, or,if the address does not sufficiently identifythe property, enter the section, lot, andblock. For personal property, enter the


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applicable type, make, and model. Forexample, describe a car as Car1993Buick Regal. Use a category such asOffice Equipment to describe more thanone piece of personal property, such as sixdesks and seven typewriters. Enter CCCfor crops forfeited on Commodity CreditCorporation loans.

Form 1099-B

Any person, including a governmental unit

and any subsidiary agency, doing businessas a broker or barter exchange must fileForm 1099-B, Proceeds From Broker andBarter Exchange Transactions, for eachperson (a) for whom the broker has sold(including short sales) stocks, bonds,commodities, regulated futures contracts,foreign currency contracts, forwardcontracts, debt instruments, etc., or(b) who exchanged property or servicesthrough the barter exchange.

Note: Report real estate transactions onForm 1099-S discussed later.

Brokers

The term broker means a person who, in

the ordinary course of a trade or business,stands ready to effect sales to be made byothers. A corporation is a broker if itregularly stands ready to redeem its stockor retire its debt. However, if there are nofacts that indicate otherwise, a corporationthat purchases odd-lot shares from itsstockholders is not a broker. If youmanage a farm for someone else, you arenot considered a broker.

For a sale of securities through a cashon delivery or similar account, only thebroker t