Part 4 Substitute Statements to Form Recipients and Form Recipient Copies

Section 4.1 - Specifications

4.1.1 Introduction If you do not use the official IRS form to furnish statements to recipients, you must furnish an acceptable substitute statement. To be acceptable, your substitute statement 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 to determine how 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 sections 1.671–4(b)(2)(iii) and (b)(3)(ii). The statement required by those regulations is not subject to the requirements outlined in this section.

4.1.2 Substitute The rules in this section apply to Form 1099-INT (except for interest reportable under section 6041), 1099- Statements to DIV (except for section 404(k) dividends), 1099-OID, and 1099-PATR only. You may furnish form recipiRecipients for ents with Copy B of the official Form 1099 or a substitute Form 1099 (form recipient statement) if it contains Certain Forms the same language as the official IRS form (such as aggregate amounts paid to the form recipient, any backup 1099-INT and withholding, the name, address, and TIN of the person making the return, and any other information required 1099-DIV, and by the official form). Except for state income tax withholding information, information not required by the for Forms official form should not be included on the substitute form. 1099-OID and 1099-PATR 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.

A substitute form recipient statement 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.

Note: For 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 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 income tax withheld” must be in boldface type on the form recipient statement. 5. The form recipient statement must contain the Office of Management and Budget (OMB) number as shown on the official IRS form. See Part 5. 6. The form recipient statement must contain the tax year (e.g., 2000), form number (e.g., Form 1099-INT), and form name (e.g., Interest Income) of the official IRS Form 1099. This information must be displayed prominently 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 Section 4.4 for applicable labels and arrangement of assembly 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, the IRS encourages the use of boxes so that the statement has the appearance of a form and can be easily distinguished from other nontax statements. 8. Each recipient statement of Forms 1099-DIV, 1099-INT, 1099-OID, and 1099-PATR must include the direct access telephone number of an individual who can answer questions about the statement. Include that telephone number conspicuously anywhere on the recipient statement. 9. Until new regulations are issued, the IRS will not assess penalties for use of a logo (e.g., the name of the payer in any typeface, font, or style, and/or a symbolic icon) or slogan on a recipient statement if

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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 for a reasonable payee to recognize the importance of the statement for tax reporting purposes. 10. A mutual fund family may state separately 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 stated separately. 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 cannot contain an aggregate total of all funds. In addition, a mutual fund family may furnish a single statement (as a single filer) for Forms 1099-INT, 1099-DIV, and 1099- OID information. Each fund and its earnings must be stated separately. 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 con- tain an aggregate total of all funds.

4.1.3 Substitute Statements to form recipients for Forms 1098, 1098-E, 1098-T, 1099-A, 1099-B, 1099-C, 1099-G, 1099- Statements to LTC, 1099-MISC, 1099-MSA, 1099-R, 1099-S, 5498, 5498-MSA, W-2G, 1099-DIV (only for section Recipients for 404(k) dividends reportable under section 6047), and 1099-INT (only for interest of $600 or more made in Certain Forms the course of a trade or business reportable under section 6041) can be copies of the official forms or an 1098, 1099, acceptable substitute. To be acceptable, a substitute form recipient statement must meet the following 5498, and requirements. W-2G 1. The tax year, form number, and form name must be the same as the official form and must be displayed prominently together in one area on the statement. For example, they may be shown in the upper right part of the statement. 2. The filer’s and the form recipient’s identifying information required on the official IRS form must be included. 3. Each substitute recipient statement for Forms W-2G, 1098, 1098-E, 1098-T, 1099-A, 1099-B, 1099- DIV, 1099-G (excluding state and local income tax refunds), 1099-INT, 1099-LTC, 1099-MISC (excluding fishing boat proceeds), 1099-OID, 1099-PATR, and 1099-S must include the direct access telephone number of an individual who can answer questions about the statement. You may include the telephone number conspicuously anywhere on the recipient statement. Although not required, payers reporting on Forms 1099-C, 1099-MSA, 1099-R, 5498, and 5498-MSA 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 “Federal income tax withheld” must be in boldface 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 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. Note: You cannot make this change on Copy A. 5. You must provide appropriate instructions to the form recipient, similar to those on the official IRS form, to aid in the proper reporting on the form recipient’s income tax return. For payments reported on Form 1099-B, the requirement to include instructions substantially similar to those on the official IRS form may be satisfied by providing form recipients with a single set of instructions for all Forms 1099-B statements required to be furnished in a calendar year. Note: If Federal income tax is withheld and shown on Form 1099-R or W-2G, Copy B and Copy C must be furnished to the recipient. If Federal income tax is not withheld, only Copy C of Form 1099-R and W-2G must be furnished. However, for Form 1099-R, instructions simi- lar to those 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. If you use carbon to produce recipient statements, the quality of the carbon must meet the following standards:

• All copies must be clearly legible,

• All copies must be able to be photocopied, and

• Fading must not diminish legibility and the ability to photocopy.

In general, black chemical transfer inks are preferred, but other colors are permitted if the above standards are met. Hot wax and cold carbon spots are not permitted on any of the internal form plies. The

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back of a mailer top envelope ply may contain these spots. 7. A mutual fund family may state separately 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 stated separately. The form must contain an instruction to the recipient that each fund’s (not the mutual fund family’s) name and amount must be reported on the recipient’s tax return. The form cannot contain an aggregate total of all funds. 8. You may use a Uniform Settlement Statement (under the Real Estate Settlement Procedures Act of 1974 (RESPA)) for Form 1099-S. The Uniform Settlement Statement is acceptable as the written statement to the transferor if you include the legend for Form 1099-S in Section 4.3.2 and indicate which information on the Uniform Settlement Statement is being reported to the IRS on Form 1099-S. 9. For reporting state income tax withholding and state payments, you may add an additional box(es) to recipient copies as appropriate.

Note: You cannot make this change on Copy A. 10. On Copy C of Form 1099-LTC, you may reverse the location of the policyholder’s and the insured’s name, street address, city, state, and ZIP code for easier mailing. 11. Logos are permitted on substitute recipient statements for the forms listed in this section (Section 4.1.3).

Section 4.2 - Composite Statements

4.2.1 Composite A composite form recipient statement is permitted for reportable payments of interest, dividends, original Substitute issue discount, patronage dividends, and royalties (Forms 1099-INT (except for interest reportable under Statements for section 6041), 1099- DIV (except for section 404(k) dividends), 1099-MISC or 1099-S (for royalties only), Certain Forms 1099-OID, or 1099-PATR) when one payer is reporting more than one of these payments during a calendar 1099-INT, year to the same form recipient. Generally, do not include any other Form 1099 information (e.g., 1098 or 1099-DIV, 1099-A) on a composite statement with the information required on the forms listed in the preceding sentence 1099-MISC, and 1099-S, Exception. A filer may include Form 1099-B information on a composite form with the forms listed above. and for Forms 1099-OID and Although the composite form recipient statement may be on one sheet, the format of the composite form 1099-PATR recipient statement must satisfy the following requirements in addition to the requirements listed earlier in Section 4.1.2.

• All information pertaining to a particular type of payment must be located and blocked together on the

form and 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.

• The composite form recipient statement must prominently display the tax year, form number, and form name of the official IRS form together in one area at the beginning of each appropriate block of information.

• Any information required by the official IRS forms that would otherwise be repeated in each information block is required to be listed only 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.

• A composite statement is an acceptable substitute only if the type of payment and the recipient’s tax obligation with respect to the payment are as clear as if each required statement were furnished separately on an official form.

4.2.2 Composite A composite form recipient statement for the forms specified in Section 4.1.3 is permitted when one filer is Substitute reporting more than one type of payment during a calendar year to the same form recipient. A composite Statements to statement is not allowed for a combination of forms listed in Section 4.1.3 and forms listed in Section 4.1.2. Recipients for Forms Specified Exceptions. Form 1099-B information may be reported on a composite form with the forms specified in in Section 4.1.3 Section 4.1.2 as described in Section 4.2.1. In addition, royalties reported on Form 1099-MISC or 1099-S may be reported on a composite form only with the forms specified in Section 4.1.2.

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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 Section 4.2.1 as well as the requirements in Section 4.1.3. A composite statement of Forms 1098 and 1099-INT (for interest reportable under section 6049) is not allowed.

Section 4.3 - Required Legends

4.3.1 Required Form 1098 recipient statements (Copy B) must contain the following legends: Legends for • Form 1098 Forms 1098 1. “The information 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.”

2. “Caution: The amount shown may not be fully deductible by you. Limits based on the loan amount and the cost and value of the secured property may apply. Also, you may only deduct interest to the extent it was incurred by you, actually paid by you, and not reimbursed by another person.”

• Form 1098-E – “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 the IRS determines that an underpayment of tax results because you overstated a deduction for student loan interest.”

• Form 1098-T – “This is important tax information and is being furnished to the Internal Revenue Service.”

4.3.2 Required Forms 1099 and W-2G recipient statements must contain the following legends: Legends for • Forms 1099-A and 1099-C – Copy B Forms 1099 “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.” and W-2G

• Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-MISC, 1099-OID, 1099-PATR, and W-2G – Copy 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 this income is taxable and the IRS determines that it has not been reported.”

• 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.”

• Form 1099-MSA – Copy B “This information is being furnished to the Internal Revenue Service.”

• Form 1099-R – Copy B – “Report 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.” Copy C – “This information is being furnished to the Internal Revenue Service.”

• Form 1099-S – 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.”

• Form W-2G – Copy B “This information is being furnished to the Internal Revenue Service. Report this income on your Federal tax return. If this form shows Federal income tax withheld in box 2, attach this copy to your return.”

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4.3.3 Required Form 5498 recipient statements (Copy B) must contain the following legends: Legends for • Form 5498 – “This information is being furnished to the Internal Revenue Service.” Forms 5498 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 this legend and a designation of which information is being furnished to the Internal Revenue Service.

• Form 5498-MSA – “The information in boxes 1 through 6 is being furnished to the Internal Revenue Service.”

Section 4.4 - Miscellaneous Instructions for Copies B, C, D, 1, and 2

4.4.1 Copies Copies B, C, and in some cases, D, 1, and 2 are included in the official assembly for the convenience of the filer. You are not legally required to include all these copies with the privately printed substitute forms. Furnishing Copies B and, in some cases, C will satisfy the legal requirement to provide statements of information to form recipients.

Note: If an amount of 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 must be furnished to the recipient. Copy D (Forms 1099-R and W-2G) may be used for filer records. Only Copy A should be filed with the IRS.

4.4.2 Copy A (“For Internal Revenue Service Center”) of all forms must be on top. The rest of the assembly Arrangement must be arranged, from top to bottom, as follows. For: of Assembly • Form 1098— Copy B “For Payer”; Copy C “For Recipient.”

• Form 1098-E —Copy B “For Borrower”; Copy C “For Recipient.”

• Form 1098-T —Copy B “For Student”; Copy C “For Filer.”

• Form 1099-A —Copy B “For Borrower”; Copy C “For Lender.”

• Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-MSA, 1099-OID, and 1099-PATR —Copy B “For Recipient”; Copy C “For Payer.”

• Form 1099-C —Copy B “For Debtor”; Copy C “For Creditor.”

• Form 1099-LTC —Copy B “For Policyholder”; Copy C “For Insured”; and Copy D “For Payer.”

• Form 1099-MISC —Copy 1 “For State Tax Department”; Copy B “For Recipient”; Copy 2 “To be filed with recipient’s state income tax return, when required”; and Copy C “For Payer.”

• Form 1099-R —Copy 1 “For State, City, or Local Tax Department”; Copy B “Report this income on your Federal tax return. If this form shows Federal income tax withheld in box 4, attach this copy to your return”; Copy C “For Recipient’s Records”; Copy 2 “File this copy with your state, city, or local income tax return, when required”; Copy D “For Payer.”

• Form 1099-S —Copy B “For Transferor”; Copy C “For Filer.”

• Form 5498 —Copy B “For Participant”; Copy C “For Trustee or Issuer.”

• Form 5498-MSA —Copy B “For Participant”; Copy C “For Trustee.”

• Form W-2G —Copy 1 “For State Tax Department”; Copy B “Report this income on your Federal tax return. If this form shows Federal income tax withheld in box 2, attach this copy to your return”; Copy C “For Winner’s Records”; Copy 2 “Attach this copy to your state income tax return, if required.”; Copy D “For Payer.”

4.4.3 Perforations are required between forms on all copies except Copy A to make separating the forms easier. Perforations (Copy A of Form W-2G may be perforated.)

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