SEC. 7. SUBSTITUTE STATEMENTS

TO FORM RECIPIENTS AND FORM RECIPIENT COPIES

If you are not using the official IRS form to furnish statements to recipients, your substitute statements must comply with the rules in this section. In general, see Regulations sections 1.6042–4, 1.6044–5, 1.6049–6, and 1.6050N–1 on the manner in which certain statements must be provided to recipients (statement mailing requirements for most Forms 1099–DIV and 1099–INT, all Forms 1099–OID and 1099–PATR, and Form 1099–MISC or 1099–S for royalties). Note: A trustee of a grantor-type trust may choose to file Forms 1099 and furnish a statement to the grantor under Regulations section 1.671–4(b)(2)(iii) and (b)(3)(ii). The statement required by those regulations is not subject to the requirements in this Section 7.

.01 SUBSTITUTE STATEMENTS TO RECIPIENTS - Forms 1099–INT (except for interest reportable under section 6041), 1099–DIV (except for section 404(k) dividends), 1099–OID, and 1099–PATR ONLY. The requirement to furnish Form recipients with an official Form 1099–INT, DIV, OID, or PATR may be met by furnishing Copy B of

contain the Office of Management and Budget (OMB) number as shown on the official IRS form. See Part D, Section 2.

the official form or by furnishing a substitute Form 1099 (form recipient statement) if it contains the same language as that of the official IRS form (such as aggregate amounts paid to the form recipient, any backup withholding, the name, address, and TIN of the person making the return, and any other information required by the official form). Information not required by the official form should not be included on the substitute form except state tax withholding information. You may enter a total of the individual accounts listed on the form only if they have been paid by the same payer. For example, if you are listing interest paid on several accounts by one financial institution on Form 1099–INT, you may also enter the total interest amount. You may also enter a date next to the corrected box if that box is checked.

The form recipient statement, i.e., Copy B of a substitute form for Forms 1099–INT, 1099–DIV, 1099–OID, or 1099–PATR, must comply with the following requirements.

(1) Box captions and numbers that

are applicable must be clearly identified, using the same wording and numbering as on the official form. However on Form 1099–INT, if box 3 is not on your substitute form, you may drop ‘‘not included in box 3’’ from the box 1 caption. (2) The form recipient statement must

contain all applicable form recipient instructions provided on the front and back of the official IRS form. Those instructions may be provided on a separate sheet of paper. (3) The form recipient statement must

contain the following statement in bold and conspicuous type, ‘‘This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.’’ (4) The box caption ‘‘Federal in-

come tax withheld’’ must be in bold face type on the form recipient statement. (5) The form recipient statement must

(6) The form recipient statement must

contain the tax year (e.g., 1997), form number (e.g., Form 1099– INT), and form name (e.g., Interest Income) of the official IRS Form 1099 for which it substitutes prominently displayed together in one area of the statement. For example, the tax year, form number, and form name could be shown in the upper right part of the statement. Each copy must be appropriately labeled (such as Copy B, For Recipient) (see Part D, Section 1.02 for applicable labels of forms). NOTE: DO NOT include the words ‘‘Substitute for’’ or ‘‘In lieu of’’ on the form recipient statement. (7) Layout and format of the form is

at the discretion of the filer. However, IRS encourages the use of statements with boxes so that the statement has the appearance of a form and can be easily distinguished from other nontax statements. (8) Because of new tax law enacted

in 1996, 1099–DIV; 1099–INT; 1099–OID; and 1099–PATR recipient statements must include the telephone number of a person to contact: The telephone num- ber must be conspicuous but may appear anywhere on the recipient statement. (9) No additional enclosures, such as

advertising, promotional material, or a quarterly or annual report, are permitted with Forms 1099– DIV, 1099–INT, 1099–OID, 1099–PATR, and forms reporting royalties only (Forms 1099–MISC or 1099–S). NOTE: The IRS intends to amend the regulations to allow the use of certain logos and identifying slogans on substitute statements to recipients that are subject to the statement mailing requirements. Until the new regulations are issued, the IRS will not assess penalties for the use of a logo (including the name of the payer in any typeface, font, or stylized fashion and/or a symbolic icon) or slogan on a statement to a recipient if the logo or slogan is used by the payer in the ordinary course of its trade or business. In addition, use of the logo or slogan must not make it less likely that a reasonable payee will recognize

July 7, 1997 12 1997-27 I.R.B.

the importance of the statement for tax reporting purposes. (10) With respect to dividend income,

on the form and must be separate from any information covering other types of payments included on the form. For example, if you are reporting interest and dividends, the Form 1099–INT information must be presented separately from the Form 1099–DIV information. (2) The tax year, form number, and

form name of the official IRS forms for which the composite form recipient statement substitutes must be prominently displayed together in one area at the beginning of each appropriate block of information. (3) Any information required by the

official IRS forms that would otherwise be repeated in each information block is only required to be listed once in the first information block on the composite form. For example, there is no requirement to report the name of the filer in each information block. This rule does not apply to any money amounts, e.g., Federal income tax withheld, or to any other information that applies to money amounts. (4) A composite statement shall be

a mutual fund family may separately state on one document ( e.g., one piece of paper) the dividend income earned by a recipient from each fund within the family of funds as required by Form 1099–DIV . However, each fund and its earnings must be separately stated. The form must contain an instruction to the recipient that each fund’s dividends and name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The form can- not contain an aggregate total of all funds. Moreover, a mutual fund family may furnish a single statement (as a single filer) for Forms 1099–INT, DIV, and OID information. Each fund and its earnings must be separately stated. The form must contain an instruction to the recipient that each fund’s earnings and name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The form cannot contain an aggregate total of all funds. .02 COMPOSITE SUBSTITUTE STATEMENTS - FORMS 1099–INT (except for interest reportable under section 6041), 1099–DIV (except for section 404(k) dividends)), 1099–OID, AND 1099–PATR ONLY. - A composite form recipient statement is permitted for reportable payments of interest, dividends, original issue discount, and/or patronage dividends ( Forms 1099–INT, DIV, OID or PATR ) when one payer is reporting more than one of these payments during a calendar year to the same form recipient. Generally, do not include any other Form 1099 information ( e.g., 1098 or 1099–A) on a composite statement with the information required on the forms listed in the preceding sentence. Exception: A filer may include Form 1099–B information on a composite form with the forms listed above. Although the composite form recipient statement may be on one sheet, the format of the composite form recipient statement must satisfy the following requirements in addition to the requirements listed in Section 7.01 above.

(1) All information pertaining to a

(1) The tax year, form number, and

particular type of payment must be located and blocked together

considered an acceptable substitute only if the type of payment and the recipient’s tax obligation with respect to the payment are no less clear than if each required statement were furnished separately on an official form. .03 SUBSTITUTE STATEMENTS TO RECIPIENTS - FORMS 1098, 1099–A, 1099–B, 1099–C, 1099–G, 1099–LTC, 1099–MISC, 1099–MSA, 1099–R, 1099–S, 5498, 5498–MSA, W–2G, AND CERTAIN FORMS 1099– INT AND 1099–DIV. Statements to form recipients of payments reportable on Forms 1098, 1099–A, 1099–B, 1099–C, 1099–G, 1099–LTC, 1099– MISC, 1099–MSA, 1099–R, 1099–S, 5498, 5498–MSA 1099–DIV only for section 404(k) dividends reportable under section 6047, and 1099–INT only for interest of $600 or more made in the course of a trade or business reportable under section 6041 can be, but are not required to be, copies of the official forms. If you do not use the official form as the form recipient statement, the substitute recipient statement must meet the following requirements:

form name must be the same as

the official form, and must be prominently displayed together in one area of the statement. For example, they may be shown in the upper right part of the statement. (2) The filer’s and the form recipi ent’s identifying information required on the official IRS form must be included. (3) Because of new tax law enacted

in 1996, the following statements must include the telephone number of a person to contact: W–2G; 1098; 1099–A; 1099–B; 1099– DIV; 1099–G (excluding state and local income tax returns); 1098– INT; 1099–MISC (excluding fishing boat proceeds); 1099–0ID; 1099–PATR; and 1099–S. The telephone number must be con- spicuous but may appear any- where on the recipient state- ment. Although not required, payers reporting on other Forms 1099 and 5498 are encouraged to furnish telephone numbers. (4) All applicable money amounts and information, including box numbers, required to be reported to the form recipient must be titled on the form recipient statement in substantially the same manner as those on the official IRS form. The box caption ‘‘Fed- eral income tax withheld’’ must be in bold face type on the form recipient statement. Exception: If you are reporting a payment as ‘‘Other income’’ in box 3 of Form 1099–MISC, you may substitute appropriate explanatory language for the box title. For example, for payments of accrued wages and leave to a beneficiary of a deceased employee, you might change the title of box 3 to ‘‘Beneficiary payments’’ or something similar. ( You cannot make this change on Copy A. ) (5) Appropriate instructions to the form recipient, similar to those on the official IRS form, must be provided to aid in the proper reporting of the items on the form recipient’s income tax return. For payments reported on Form 1099–B, the requirement to include instructions that are substantially similar to those on the official IRS form may be satisfied by providing form recipients with a single set of instructions with respect to all forms 1099–B state

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ments required to be furnished in a calendar year. NOTE: If Federal income tax withheld is shown on Form 1099–R or W–2G, Copy B (to be attached to the tax return) and Copy C (for recipient’s/winner’s records) must be furnished to the recipient. If Federal income tax withheld is not shown on Form 1099–R or W–2G, only Copy C is required to be furnished. However, instructions similar to those contained on the back of the official Copy B and Copy C of Form 1099–R must be furnished to the recipient. For convenience, you may choose to provide both Copies B and C of Form 1099–R to the recipient. (6) The quality of carbon used to

shows Federal income tax withheld in box 2, attach this copy to your return.’’ (d) Form 1099–R, Copy B —‘‘Re port this income on your Federal tax return. If this form shows Federal income tax withheld in box 4, attach this copy to your return. This information is being furnished to the Internal Revenue Service.’’ Form 1099–R, Copy C —‘‘This information is being furnished to the Internal Revenue Service.’’ (e) Form 1099–LTC, Copy B —‘‘This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this item is required to be reported and the IRS determines that it has not been reported.’’ Copy C —‘‘Copy C is provided to you for information only. Only the policyholder is required to report this information on a tax return.’’ (f) Form 1099–MSA - ‘‘This in formation is being furnished to the Internal Revenue Service.’’ (g) Form 1099–S —‘‘This is im portant tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this item is required to be reported and the IRS determines that it has not been reported.’’ (h) Form 5498 —‘‘The information

in boxes 1 through 7 is being furnished to the Internal Revenue Service.’’ ‘‘ Note: If you do not furnish another statement to the participant because no contributions were made for the year, the statement of the fair market value of the account must contain a legend designating which information is being furnished to the Internal Revenue Service.’’ (i) Form 5498–MSA —‘‘The infor mation in boxes 1 through 5 is being furnished to the Internal Revenue Service.’’ .04 COMPOSITE SUBSTITUTE STATEMENT - FORMS SPECIFIED IN 7.03 ONLY. - A composite form recipient statement for forms specified in 7.03

produce statements to recipients must meet the following standards: (a) all copies must be CLEARLY

LEGIBLE; (b) all copies must have the capa bility to be photocopied; (c) fading must not be of such a

degree as to preclude legibility and the ability to photocopy. In general, black chemical transfer inks are preferred; other colors are permitted only if the above standards are met. Hot wax and cold carbon spots are NOT permitted on any of the internal form plies. These spots are permitted on the back of a mailer top envelope ply. (7) A mutual fund family may sepa rately state on one document ( e.g., one piece of paper) the Form 1099–B information for a recipient from each fund as required by Form 1099–B. However, the gross proceeds, etc., from each transaction within a fund must be separately stated. The form must contain an instruction to the recipient that each fund’s amount and name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The form cannot contain an aggregate total of all funds. (8) For Form 1099–S, you may use a

Uniform Settlement Statement under the Real Estate Settlement Procedures Act of 1974 (RESPA) as the written statement to the transferor if it is conformed by including on the statement the legend described in (8)(g) below

and by designating which information on the Uniform Settlement Statement is being reported to IRS on Form 1099–S. (9) Form recipient statements must

contain the following legends: (a) Form 1098 —(i) ‘‘The informa tion in boxes 1, 2 and 3 is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if the IRS determines that an underpayment of tax results because you overstated a deduction for this mortgage interest or for these points or because you did not report this refund of interest on your return.’’ (ii) ‘‘The amount shown may not be fully deductible by you on your Federal income tax return. Limitations based on the cost and value of the secured property may apply. In addition, you may only deduct an amount of mortgage interest to the extent it was incurred by you, actually paid by you, and not reimbursed by another person.’’ (b) Forms 1099–A and 1099–C
‘‘This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if taxable income results from this transaction and the IRS determines that it has not been reported.’’ (c) Forms 1099–B, 1099–DIV, 1099–G, 1099–INT, 1099– MISC, 1099–OID, 1099– PATR, and W–2G, Copy B —‘‘This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported.’’ Copy B of Form W–2G must state ‘‘This information is being furnished to the Internal Revenue Service. Report this income on your Federal tax return. If this form

July 7, 1997 14 1997-27 I.R.B.

is permitted when one filer is reporting more than one of the related payments during a calendar year to the same form recipient. A composite statement is not allowable for a combination of forms listed in 7.01 and forms listed in 7.03 except that a filer may report Form 1099–B information on a composite form with the forms listed in 7.01 as described in 7.02. Although the composite form recipient statement may be on one sheet, the format of the composite form recipient statement must satisfy the requirements listed in 7.02 above in addition to the requirements specified in 7.03. A composite statement of Forms 1098 and 1099–INT (for interest reportable under section 6049) IS NOT ALLOWABLE.

PART B - SPECIFICATIONS FOR SUBSTITUTE FORMS TO BE FILED WITH IRS (EXCEPT Form W–2G)