Nominee Reporting

Any person who holds, directly or indirectly, an interest in a partnership as a nominee for another person must furnish a written statement to the partnership by the last day of the month following the end of the partnership’s tax year. This statement must include the name, address, and identifying number of the nominee and such other person; description of the partnership interest held as nominee for that person; and other information required by Temporary Regulations section 1.6031(c)-1T. A nominee that fails to furnish this statement must furnish to the person for whom the nominee holds the partnership interest a copy of Schedule K-1 and related information within 30 days of receiving it from the partnership.

A nominee who fails to furnish all the information required by Temporary Regulations section 1.6031(c)-1T when due, or who furnishes incorrect information, is subject to a $340 penalty for each failure. The maximum penalty is $4,098,500 ($1,366,000 for a small business) for all such failures during a calendar year. If the nominee intentionally disregards the requirement to report correct information, each $340 penalty increases to $680 or, if greater, 10% of the aggregate amount of items required to be reported, and there is no limit to the amount of the penalty.