us internal revenue service: i1099--1995

8/14/2019 US Internal Revenue Service: i1099--1995

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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:Insts.begin

onpage

1098 7 minutes 8

1099-A 10 minutes 11

1099-B 15 minutes 12

1099-C 11 minutes 13

1099-DIV 14 minutes 14

1099-G 11 minutes 15

1099-INT 12 minutes 15

1099-MISC 14 minutes 17

1099-OID 10 minutes 20

1099-PATR 11 minutes 211099-R 20 minutes 22

1099-S 8 minutes 26

5498 7 minutes 29

W-2G 19 minutes 29

1096 10 minutes (see form)

5754 (see form) 31

If you have comments concerning theaccuracy of these time estimates orsuggestions for making these formssimpler, we would be happy to hear fromyou. You can write to the InternalRevenue Service, Attention: Tax FormsCommittee, PC:FP, Washington, DC20224. DO NOT send these forms to thisaddress. Instead, see Where To File onpage 5.

Items You Should Note

Changes to Where To File

Some filing sites have changed again. Youmay have to file with an Internal RevenueService Center that is different from theone you filed with for 1994. Check theaddresses listed on page 5 under WhereTo File for your proper filing location.

Form 1098Seller-Paid Points

For 1995 and later years, you must reportpoints paid by the seller on the buyersForm 1098, Mortgage Interest Statement.The title of box 2 was changed to Pointspaid on purchase of principal residence.See Points on page 10.

Filing Forms 1099-A and 1099-CCoordinated; Some Boxes

ChangedRather than filing both Forms 1099-A,Acquisition or Abandonment of SecuredProperty, and 1099-C, Cancellation ofDebt, for the same year, you may berequired to file only Form 1099-C. Box 3on Form 1099-A, previously titled Grossforeclosure proceeds, was eliminated, andthe title of box 4 was changed to Fairmarket value of property. On Form1099-C, the title of box 6 was changed toCheck for bankruptcy, and a new box 7titled Fair market value of property wasadded. See the instructions for both forms,which begin on pages 11 and 13.

Form 1099-R ChangesNew box 9b, Total employee contributions,was added to the 1995 Form 1099-R,Distributions From Pensions, Annuities,Retirement or Profit-Sharing Plans, IRAs,Insurance Contracts, etc. See the 1995Form 1099-R and the instructions for box9b on page 26.

Distribution codes A, B, and C, used inbox 7, were changed to indicate May beeligible.... See page 26.

Form 945Withholding Tax Return

Report backup withholding and withholdingfrom gambling winnings, pensions,annuities, IRAs, and military retirement on

Form 945, Annual Return of WithheldFederal Income Tax. File Form 945 for1995 by January 31, 1996. Generally, anyincome tax withheld reported on Forms1099 or W-2G must be reported on Form945. Any income tax withheld reported onForm W-2, including withholding ondistributions to plan participants fromnonqualified plans, must be reported onForm 941, Employers Quarterly FederalTax Return. For more information, includingthe deposit requirements for Form 945, seethe separate Instructions for Form 945.

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

If you are not using the official IRS form(generally Copy B) to furnish statements torecipients, be sure your substitutestatements comply with the rules in Pub.1179, Rules and Specifications for PrivatePrinting of Substitute Forms 1096, 1098,1099 Series, 5498, and W-2G. Pub. 1179,which is revised annually, is a revenueprocedure that explains the requirementsfor format and content of substitutestatements to recipients. If you are usinga substitute form to furnish informationto recipients, it must comply with therequirements in Pub. 1179.

Guide to Information Returns

See the chart on pages 32 and 33 for a

brief summary of information returnreporting rules.

Need Help?

Information Reporting Call Site.TheIRS operates a centralized call site toanswer questions about reporting oninformation returnsForms 1096, 1098,1099, 5498, W-2, W-2G, and W-3. If youhave questions related to reporting on anyof these forms, you may call 304-263-8700(not a toll-free number) Monday throughFriday from 8:30 a.m. to 4:30 p.m. easterntime.

Bulletin Board Service.The IRS alsooperates an electronic bulletin board

(IRP-BBS). The IRP-BBS offers changesand updates that affect informationreporting. By using your personal computerand modem, you can access the IRP-BBSby dialing 304-263-2749. For moreinformation, see Pub. 1220, Specificationsfor Filing Forms 1098, 1099, 5498 andW-2G Magnetically or Electronically.

Internal Revenue Bulletin.The InternalRevenue Bulletin (IRB), published weekly,contains newly issued regulations, as wellas notices, announcements, legislation,court decisions, and other items of generalinterest. You may find this publicationuseful to keep you up to date with currentdevelopments. The IRB is sold by the

Superintendent 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 202-512-1800 (not atoll-free number).

Forms and Publications.You may orderforms, instructions, and publications bycalling 1-800-TAX-FORM(1-800-829-3676).

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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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 imposebackup 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, thatthe 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 Instructions for the Requester ofForm W-9.

Real estate transactions reportable undersection 6045(e) and canceled debtsreportable 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 made

until 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, andthe 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 already

begun 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 reportablepayment 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, 1993-2C.B. 477.

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 TemporaryRegulations 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 Backup Withholding.Backupwithholding must be reported on Form945, Annual Return of Withheld FederalIncome Tax. For more information, see theInstructions for Form 945. Also reportbackup withholding on each Form W-2G,1099-B, DIV, G, INT, MISC, OID, or PATR

used to report the payment.Additional Information.For moreinformation about backup withholding, seeTemporary Regulations sections35a.9999-1, 2, and 3, and 35a.3406-1and 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 returnby the due date and you cannot showreasonable cause, you may be subject to apenalty. The penalty applies if you fail tofile timely, you fail to include all informationrequired to be shown on a return, or youinclude incorrect information on a return.The penalty also applies if you file onpaper when you were required to file on

magnetic media, you report an incorrectTIN or fail to report a TIN, or you fail to filepaper forms that 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); maximumpenalty $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 toreasonable 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 to

be 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.

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 incorrect

information, andc. You filed corrections of these

information 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 parentheses


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above, 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 information

return with no maximum penalty.

Failure To Furnish Correct PayeeStatements (Section 6722)

If you fail to provide correct payeestatements and you cannot showreasonable cause, you may be subject to apenalty. The penalty applies if you fail toprovide 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 General

Instructions.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 wasfurnished 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 maximum

penalty.

Forms 1099-R and 5498

The penalties under sections 6721 and6722 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 per

return 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 required

for filing all information returns discussedin this publication. Acceptable forms ofmagnetic media are magnetic tape, tapecartridge, 312-, 514-, and 8-inch diskette.Pub. 1220, Specifications for Filing Forms1098, 1099, 5498 and W-2G Magneticallyor Electronically, is the revenue procedurefor magnetic media and electronicreporting. Different types of payments,such as interest, dividends, and rents, maybe reported on the same tape or othersubmission.

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 paperdocument 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 file500 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 requirement

does not apply if you apply for and receivean undue hardship waiver. See How ToRequest a Waiver From Filing onMagnetic 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 75

corrections, 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 onmagnetic 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. Only

one 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 Filing

Information 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 themonth 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 center

where 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 Filing


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Requirement 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 same

information 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 amount

must 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, youmay 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 (except Form W-2G). Forms 1098,1099, and 5498 are printed two or three toan 8- by 11-inch sheet. Form 1096 isprinted one to an 8- by 11-inch sheet.

These forms must be submitted to the IRSon the 8- by 11-inch sheet. If at least oneform on the page is correctly completed,you must submit the entire page. FormsW-2G may be separated and submitted assingle forms.

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 or by calling1-800-TAX-FORM (1-800-829-3676).

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 to

report 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 by

machine, you MUST use the current yearform to report current year information.

9. Use the official forms or substituteforms that meet the specifications in the1995 Pub. 1179, Rules and Specificationsfor Private Printing of Substitute Forms1096, 1098, 1099 Series, 5498, and W-2G.If you submit substitute forms that do notmeet the current specifications and thatare not machine scannable, you may besubject to a penalty of $50 for each returnfor improper format.

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

boxes.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 behandwritten. 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 (zero) or None inmoney amount boxes when no entry is

required. Leave the boxes blank unless theinstructions specifically require that youenter a zero. For example, in some cases,you must enter zero to make corrections.See Corrected Returns later.

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 beused 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 employer

identification 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 areusing 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, if you receive a Form 1099 foramounts that actually belong to anotherperson, you are considered a nomineerecipient. You must file a Form 1099 (thesame type of Form 1099 you received) foreach of the other owners showing the

amounts allocable to each. You must alsofurnish a Form 1099 to each of the otherowners. File Form 1099 with Form 1096,Annual Summary and Transmittal of U.S.Information Returns, with the InternalRevenue Service Center for your area. Oneach Form 1099, list yourself as thepayer and the other owner as therecipient. On Form 1096, list yourself asthe filer. A husband or wife is notrequired to file a nominee return to showamounts owned by the other. Thenominee, not the original payer, isresponsible for filing the subsequent Forms1099.

Mergers.If two corporations merge and

the 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 transferor

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

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


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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, 1996. Brokers may file Forms 1096 and1099-B anytime after the reporting periodthey elect to adopt (month, quarter, oryear), but not later than February 28, 1996.File Form 1096 and Forms 5498 by May

31, 1996. You will meet the requirement tofile if the form is properly addressed,mailed, and postmarked on or before thedue date. 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 amountscontributed for the calendar year.

Extension.For paper or magneticmedia 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. For information on extensionsfor providing statements to recipients, seepage 7.

Note: If you are a magnetic mediatransmitter requesting extensions of time to

file for more than 50 payers, you mustsubmit the extension requests magneticallyor electronically. For instructions onsubmitting extension requests on magneticmedia, 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 lastyear.

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 following

Internal RevenueService Center

address

Alabama, Arizona, Florida,Georgia, Louisiana,Mississippi, New Mexico,Texas

Austin, TX 73301

Arkansas, Connecticut,Kentucky, Maine,Massachusetts, NewHampshire, New York,Ohio, Rhode Island,Vermont, West Virginia

Cincinnati, OH 45999

Illinois, Indiana, Iowa,Kansas, Michigan,Minnesota, Missouri,Nebraska, North Dakota,Oklahoma, South Dakota,Wisconsin

Kansas City, MO 64999

Delaware, District ofColumbia, Maryland, NewJersey, North Carolina,Pennsylvania, SouthCarolina, Tennessee,Virginia

Memphis, TN 37501

Alaska, California, Colorado,

Hawaii, Idaho, Montana,Nevada, 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 Form

1096 are included on Form 1096. Also seeTransmitters, paying agents, etc. later.For information about filing correctedreturns, see Corrected Returns later.

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 4804on 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, and

timely 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 due

date 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 on

tax 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

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 have


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nine digits separated by only one hyphen(00-0000000).

Show the full name and address in thesection 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 onlythe 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 EIN

unless he or she must file excise oremployment tax returns. See Pub. 583,Taxpayers Starting a Business.

The filers name and TIN should beconsistent 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, Rules and Specifications forPrivate Printing of Substitute Forms 1096,1098, 1099 Series, 5498, and W-2G, forspecific rules about providing substitutestatements to recipients. A substitute isany statement other than Copy B(generally) of the official form. You maydevelop them yourself or buy them from aprivate printer. However, the substitutesmust comply with the format and contentrequirements specified in 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 orinterest (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 forForms 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 yearendstatement 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 to

the recipient statement. This legend is notrequired on any tax form, tax statement, orpermitted letter of tax consequencesincluded 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 in

the envelope, you are not required toinclude the legend Important Tax ReturnDocument Enclosed on the envelope.

Substitute forms.You may furnish tothe 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 they comply with therules in Pub. 1179, relating to substituteForms 1099. Applicable box captions andnumbers must be clearly identified, usingthe same wording and numbering as the

official form. However, for Form 1099-INT,if your substitute does not contain box 3,Interest on U.S. Savings Bonds andTreas. obligations, you may omit notincluded in box 3 from the box 1 caption.The substitute must show the form number(e.g., Form 1099-INT), form title (e.g.,Interest Income), and tax year (e.g., 1995).

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 Form

1099-MISC for royalties, see Otherpayments below.

Certain "composite" statements arepermitted. See Pub. 1179.

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 substituteform 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 reported

to 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 tostatements 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, the form number andtitle of your substitute must be the sameas the official form. All information requiredto be reported must be numbered andtitled on your substitute in substantially thesame manner as on the official form.However, if you are reporting a payment asOther income in box 3 of Form1099-MISC, you may substitute


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appropriate 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 Form

1099-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 forroyalties), 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 financial

or 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 furnishForms 1098, 1099, and W-2G informationby January 31, 1996. However, you mayissue them earlier in some situations, asprovided 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 Form

1099-B anytime but not later than January31.

Trustees or issuers of IRAs or SEPsmust furnish participants with a statementof the value of the participants account byJanuary 31, 1996. IRA contributioninformation must be furnished to theparticipant by May 31, 1996.

For real estate transactions, you mayfurnish the statement to the transferor atclosing or by mail on or before January 31,1996.

Filers of Form 1099-G who report stateor local income tax refunds, credits, oroffsets must furnish the statements torecipients during January 1996.

You will meet the requirement to furnishthe statement if it is properly addressed,mailed, and postmarked on or before thedue date. 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, WV

25401-1359 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 Returns.If you filed a returnwith the IRS and later discover you made

an error on it, you must correct it as soonas possible. For some corrections, youmust file two returns (Form 1099, 1098,5498, or W-2G) with Form 1096 and forsome only one return with Form 1096. Seethe chart that follows for step-by-stepinstructions for correcting three commonerrors on paper forms.

To determine whether you are requiredto submit corrections on magnetic media,see Magnetic Media/ElectronicReporting earlier and Pub. 1220.

Follow the step-by-step instructionsbelow for the type of error you need tocorrect. Be sure you complete allappropriate information on the returns as

stated in those instructions. Then file CopyA of the form and Form 1096 with yourInternal Revenue Service Center. Pleaseremember not to cut or separate the formsthat are two or three to a page. Submit theentire page even if only one of the formson the page is completed. And do notstaple the forms to Form 1096. You mustuse a separate Form 1096 for each type ofreturn you are correcting, but you may useone Form 1096 for both originals andcorrections of the same type of return.

In addition, you must provide statementsto recipients showing the corrections assoon as possible.

Note: If you fail to file correct information

returns or furnish a correct payeestatement, you may be subject to apenalty. SeeFailure To File CorrectInformation Returns by the Due Date(Section 6721)on page 2 andFailure ToFurnish Correct Payee Statements(Section 6722)on page 3.

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.

CORRECTED box.Enter an X in theCORRECTED 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 previously

furnished to the recipient. When the typeof error requires two returns to make thecorrection, you will mark theCORRECTED box only on one of thereturns. Refer to the step-by-stepinstructions chart that follows to determinewhen you should mark the CORRECTEDbox.

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. Be

sure 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 IRS

can update the payees records.

Step-by-Step Instructions forFiling Corrected Returns on PaperFormsError (on OriginalReturn)

How To File the CorrectedReturn on Paper Forms

1. No payee TIN (SSNor EIN) or incorrectpayee TIN, orincorrect name andaddress. This willrequire twoseparate returns tomake thecorrection properly.Read and follow all

instructions forboth Steps 1 and2.

STEP 1: Identify incorrectreturn submitted.

Form 1098, 1099, 5498, orW-2G:

1. Prepare a newinformation return.

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

3. Enter the payer,recipient, and accountnumber informationexactly as it appearedon the originalincorrect return;HOWEVER, enter 0(zero) for all moneyamounts.

STEP 2: Report correctinformation.

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


2. Do NOT enter an Xin the CORRECTEDbox at the top of the

form. Submit the newreturn as though itwas an original.

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

B. Form 1096:

1. Prepare a newtransmittal Form 1096.

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


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Error (on OriginalReturn)

How To File the CorrectedReturn on Paper Forms

3. Provide all requestedinformation on theform as it applies tothe returns preparedin Steps 1 and 2.

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

5. Do NOT includecopies of the original

return that was filedincorrectly.

2. Incorrect moneyamount(s) orincorrect address.Follow theseinstructions if youfiled a return whenone should nothave been filed.This error requiresonly one return tomake thecorrection. (Followthe instructionsunder Error 1,instead of theseinstructions, if you

must correct anaddress AND aname or TIN.)

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


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

3. Enter the payer,recipient, and accountnumber informationexactly as it appearedon the originalincorrect return;HOWEVER, enter allcorrect moneyamounts in the

correct boxes as theyshould have appearedon the original return,and enter therecipients correctaddress.

B. Form 1096:

1. Follow the instructionsunder Error 1, Step2-B, but ignore itemB-2.

2. File Form 1096 andCopy A of the returnwith the appropriateservice center.

3. Do NOT include acopy of the originalreturn that was filedincorrectly.

3. Original return wasfiled using theWRONG type ofreturn. Forexample, a Form1099-DIV was filedwhen a Form1099-INT shouldhave been filed.This will requiretwo separatereturns to make thecorrection properly.Read and follow allinstructions forboth Steps 1 and2.

STEP 1: Identify incorrectreturn submitted.

Form 1098, 1099, 5498, orW-2G:

Follow the instructionsunder Error 1, Step 1,using the same type ofform that was usedinitially.

STEP 2: Report correctinformation on the correcttype of return.

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

Follow the instructionsunder Error 1, Step 2A,using the proper type of

form.B. Form 1096:

Follow the instructionsunder Error 1, Step 2B,except enter the wordsFiled To CorrectDocument Type in thebottom margin of Form1096.

J. Void Returns.An X in the VOIDbox will not correct a previously filedreturn. See part I above for instructions formaking corrections.

VOID box.If a completed or partiallycompleted Form 1098, 1099, or 5498 isincorrect and you want to void it beforesubmission to the IRS, enter an X in theVOID box at the top of the form. Forexample, if you make an error while typingor printing a form, you should void it. Thereturn will then be disregarded duringprocessing by the IRS. Go to the next formon the page, or to another page, and enterthe correct information; but do not markthe CORRECTED box. Please remembernot to cut or separate the forms that are

two or three to a page. Submit the entirepage even if only one of the forms on thepage is a good return.

K. Other Information Returns.Theincome 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 reportingdistributions 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.

L. Payments to Corporations andPartnerships.Reporting generally is notrequired for payments to corporationsexcept 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.

M. 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. But

distributions should be reported on Form1099-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 1098

Use Form 1098, Mortgage InterestStatement, to report mortgage interest(including points, defined later) of $600 ormore received by you during the year inthe course of your trade or business froman individual, including a sole proprietor.The $600 threshold applies separately toeach mortgage; thus, file a separate Form1098 for each mortgage. You may, at youroption, file Form 1098 to report mortgage

interest of less than $600, but you aresubject to the rules in these instructions.

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


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real property, it is not reasonable toclassify those obligations as other thanmortgages 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 theright 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 or

business. For example, you hold themortgage on your former personalresidence. The buyer makes mortgagepayments to you. You are not required tofile Form 1098.

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.

For information about who must file toreport points, see Points later. Forinformation about who must file to reportreimbursements of overpaid interest, seeReimbursement of Overpaid Interest

later.Cooperative housing corporation.A

cooperative housing corporation is aninterest 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. (See the Noteunder Box 1.)

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

collected the interest in box 4. The personfor whom you collected the interest neednot 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 onForm 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 connected

with the conduct of a trade or business inthe United States.

Designation agreement.An interestrecipient, including a recipient of points,can designate a qualified person to fileForm 1098, to provide a statement to thepayer of record, and to provide the Rule of78s notice. A qualified person is either(1) a trade or business in which the interestrecipient is under common control asspecified in Regulations section 1.414(c)-2or (2) a designee, named by the lender ofrecord or by a qualified person, who eitherwas involved in the original loantransaction or is a subsequent purchaserof the loan. A lender of record is the

person who, at the time the loan is made,is named as the lender on the loandocuments and whose right to receivepayment from the payer of record issecured by the payer of records principalresidence. Even if the lender of recordintends to sell or otherwise transfer theloan to a third party after the close of thetransaction, such intention does notchange who is the lender of record.

The agreement must be in writing,identify the mortgage(s) and calendar yearsfor which the qualified person is to report,and be signed by the designator and the

designee. A designee may report points onForm 1098 (as having been paid directly bythe payer of record) only if the designationagreement contains the designatorsrepresentation that it did not lend suchamount to the payer of record as part ofthe overall transaction. The agreementneed not be filed with the IRS, but thedesignator must keep a copy of it for 4years after the close of the year in whichthe loan is made.

A designated qualified person is subjectto any applicable penalties as if it were the

interest recipient. Thus, a designator isrelieved from liability for any applicablepenalties.

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 reportreimbursements 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 report

the reimbursement. However, you mayreport any reimbursement of overpaidinterest that you are not otherwise requiredto report, but you are subject to the rulesin these instructions.

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 thetotal 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 year

by 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 previousmortgage 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 in1995, $4,500 should appear in box 1 asinterest paid by the borrower. The $500reimbursement must not appear in box 3.

Example.In 1993, you received $5,000of mortgage interest f rom thepayer/borrower and reported that amounton Form 1098 for 1993. In 1995, youdetermined that interest due on themortgage for 1993 was $4,500, and thepayer/borrower had overpaid $500. Yourefunded the $500 overpayment to the


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payer/borrower in 1995. If you received$600 or more of interest on the mortgagefrom the payer/borrower in 1995, you mustreport the $500 refund in box 3 of the1995 Form 1098. No change to the 1993Form 1098 is required. If, instead ofrefunding the $500 overpayment, youcredited the payer/borrowers 1995mortgage interest payments due, $500 isstill shown in box 3, and the interestreceived from the payer/borrower in 1995shown 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 ofthe security for the mortgage is realproperty located in the United States.

Payer of Record.The payer of record is

the 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 subsequentpurchasers 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 allinterest 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 mortgage

interest 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 NationalHousing 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 tells

you 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 recordany interest paid by the seller. See Pointslater for information about reportingseller-paid points in box 2.

Rule of 78s Method of Accounting.If

you 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 mustalso 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 the payer ofrecords principal residence on Form 1098.You must report points if the points, plusother interest on the mortgage, are $600 or

more. For example, if a borrower payspoints of $300 and other mortgage interestof $300, the lender has received $600 ofmortgage interest and must file Form 1098.

Who must report points.The lender ofrecord or a qualified person must file Form1098 to report all points paid by the payerof record in connection with the purchaseof the principal residence. If a designationagreement is in effect for a mortgage, onlythe person designated in the agreementmust file Form 1098 to report all points onthat mortgage. See Designationagreement earlier.

Amounts received directly or indirectlyby a mortgage broker are treated as points

to the same extent they would be treatedas points if paid to and retained by thelender of record. The lender of record mustreport those points paid to a mortgagebroker.

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.

Reportable points.Report on Form1098 points that meet all the followingconditions:

1. They are clearly designated on theUniform Settlement Statement (FormHUD-1) as points; for example, loanorigination fee (including amounts for VAand FHA loans), loan discount, discountpoints, or points.

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

3. They are charged under anestablished business practice of chargingpoints in the area where the loan wasissued and do not exceed the amountgenerally charged in that area.

4. They are paid for the acquisition ofthe payer of records principalresidence, and the loan is secured by thatresidence. You may rely on a signedwritten statement from the payer of recordthat states whether the proceeds of theloan are for the purchase of the payer ofrecords principal residence.

5. They are paid directly by the payerof record.

Points are paid directly if:

(a) The payer of record provides fundsthat were not borrowed from the lender ofrecord for this purpose as part of theoverall transaction. The funds may include

down payments, escrow deposits, earnestmoney applied at closing, and other fundsactually paid over by the payer of record ator before closing. OR

(b) The seller pays points on behalf ofthe payer of record. Points paid by theseller to the interest recipient on behalf ofthe payer of record are treated as paid tothe payer of record and then paid directlyby the payer of record to the interestrecipient.

Report points paid under (a) and (b) aboveon the payer of records Form 1098 inbox 2.

Do not report on Form 1098 points paid(1) for loans to improve a principal

residence, (2) for loans to purchase orimprove a residence that is not the payerof records principal residence, such as asecond home, vacation, investment, ortrade or business property, (3) for a homeequity or line of credit loan, even if securedby the principal residence, (4) for arefinancing (but see Construction loansbelow), including a loan to refinance a debtowed by the borrower under a landcontract, a contract for deed, or similarforms of seller financing, (5) in lieu of itemsordinarily stated separately on the FormHUD-1, such as appraisal fees, inspectionfees, title fees, attorney fees, and propertytaxes, and (6) to acquire a principal

residence to the extent the points areallocable to an amount of principal inexcess of $1 million.

Construction loans.Points paid on aloan to construct a residence (constructionloan) or to refinance a loan incurred toconstruct a residence are reportable onForm 1098 if they:

1. Are clearly designated on the loandocuments as points incurred inconnection with the loan, such as loanorigination fees, loan discount, discountpoints, or points,


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2. Are computed as a percentage of thestated principal loan amount,

3. Conform to an established businesspractice of charging points in the areawhere the loan is issued and do notexceed the amount generally charged inthe area,

4. Are paid in connection with a loanincurred by the payer of record toconstruct (or refinance construction of) aresidence that is to be used, whencompleted, as the principal residence ofthe payer of record,

5. Are paid directly by the payer ofrecord, and

6. Are not allocable to an amount ofprincipal in excess of $1 million.

Amounts paid to refinance a loan toconstruct a residence are not points to theextent they are allocable to debt thatexceeds the debt incurred to construct theresidence.

Prepaid Interest.Report prepaid interest(other than points) only in the year in whichit properly accrues. For example, interestreceived on December 20, 1995, thataccrues by December 31 but is not dueuntil February 1, 1996, is reportable on the

1995 Form 1098.Exception.Interest received during the

current 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 forthe 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 for

the 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. Interest

includes prepayment penalties and latecharges unless the late charges are for aspecific mortgage service.

Note: A cooperative housing corporationthat receives any cash part of a patronagedividend from the National ConsumerCooperative Bank must reduce the interestto be reported on eachtenant-stockholders Form 1098 by aproportionate amount of the cash paymentin the year the cooperative receives thecash payment. See Rev. Proc. 94-40,1994-1 C.B. 711.

Box 2.Enter points paid on the purchaseof the payer of records principalresidence. For an explanation of reportablepoints, see Points earlier.

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

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 orAbandonment 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 to

this reporting requirement.Coordination With Form 1099-C.If, inthe same calendar year, a debt is canceledin connection with the acquisition orabandonment of secured property and youwould be required to file both Form 1099-Aand Form 1099-C, Cancellation of Debt,you are required to file Form 1099-C only.You will meet your Form 1099-A filingrequirement by making appropriate entriesin boxes 5 and 7 on Form 1099-C. Youmay file both Forms 1099-A and 1099-C,but make no Form 1099-A entries in boxes5 and 7 on Form 1099-C.

Property.Property means real property(such as a personal residence), intangible

property, 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 has

furnished 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-Aon 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 propertyhas been abandoned. If you expect tocommence a foreclosure, execution, or

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


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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 datethe borrowers right of redemption expires.Please use the following format to indicatethe date: MMDDYY. For example, forJanuary 7, 1995, enter 010795.

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