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Reportable Payments and Transactions Not Subject to Backup Withholding (Portfolio 644)

Tax Management Portfolio, Reportable Payments and Transactions Not Subject to Backup Withholding, No. 644, discusses payments and transactions reportable on Forms 1098 and 1099 that are not subject to backup withholding under §3406

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DESCRIPTION

Tax Management Portfolio, Reportable Payments and Transactions Not Subject to Backup Withholding, No. 644, discusses payments and transactions reportable on Forms 1098 and 1099 that are not subject to backup withholding under §3406. This group of forms includes those that are used to report a variety of transactions associated with the lending of money, as well as other transactions that may be significant for tax purposes. The Portfolio also covers reporting requirements applicable to large cash transactions of $10,000 or more. Guidelines for filing information returns electronically are discussed in detail.


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AUTHORS

CAROL KASSEM

Carol Kassem worked professionally for 28 years in the financial services industry. Her lengthy career in banking encompassed responsibility for information reporting as well as corporate income tax and other accounting functions. Until 2005, she was a Vice President in the Information Reporting group of JPMorgan Chase Bank, NA. From 1999 until the merger of JPMorgan Chase with Bank One in 2004, she was Information Reporting Manager for Bank One Corporation and its affiliates. In this role, she was responsible for providing technical support and guidance relevant to information reporting for the general bank and other affiliated companies. This role also oversaw the development and implementation of policies and procedures instrumental to complying with appropriate Internal Revenue Service reporting requirements.


Prior to joining Bank One, she held tax positions with a predecessor bank that spanned a 20-year period. During that time, she provided support and supervision for the preparation and filing of federal and state tax returns as well as oversight for the information reporting process and other tax related functions.


In 2002, she was appointed to the Internal Revenue Service Information Reporting Program Advisory Committee (IRPAC) for a three-year tenure sponsored by the American Bankers Association. She also served as a member of the New York Clearing House Tax Withholding and Information Reporting Committee representing Bank One.


She attended Virginia Tech and received a B.S. Degree in Accounting from Louisiana State University in 1978. Since leaving the banking industry in 2005, she has been a consultant and frequent speaker at conferences relative to information reporting. She and her husband now reside in Asheville, NC.


TABLE OF CONTENTS

Portfolio 644-1st: Reportable Payments and Transactions Not Subject to Backup Withholding

Portfolio Description

Authors

Technical Advisors

Description

Detailed Analysis

I. Overview

II. Mortgage Interest Payments

A. In General

B. Who Must Report

1. Engaged in a Trade or Business

2. Government Unit

3. Cooperative Housing Corporation

4. Collection Agent

5. Designation Agreement

C. Payor of Record

D. Payments Subject to Reporting

1. In General

2. Qualified Mortgage Defined

3. Transitional Rules

4. Points Treated as Interest

a. In General

b. Amounts Treated as Points

c. Construction Loans

d. Amounts Paid to Mortgage Brokers

E. Interest Received

F. Calendar Year Defined

G. Interest Not Deemed to be Received on a Mortgage

H. Reimbursement of Overpaid Interest

I. Reportable Mortgage Insurance Premiums

J. Rules Applicable to Nonresident Aliens

1. Reporting by a Foreign Person

2. Nonresident Alien Payor of Record

K. Form 1098

1. Information Included on Return

2. Requirement to Furnish Information Statement

3. Optional Reporting

4. Notice Requirement for Use of Rule of 78s Method

5. Designation Agreements

6. Requirements to Request and Obtain a TIN

7. Penalties

L. Mortgage Assistance Payments

1. In General

2. Information Reporting Obligation

3. Form 1098-MA

a. Information Included on Return

b. Requirement to File Information Returns with IRS

c. Requirement to Furnish Information Statement

d. Penalties

III. Student Loans

A. In General

B. Who Must Report

C. Payer Subject to Reporting

D. Payments Subject to Reporting

E. Form 1098-E

1. Information Included on Return

2. Requirements to Furnish an Information Statement

3. Transitional Rule for Reporting Loan Origination Fees and Capitalized Interest

a. Loans Made Before September 1, 2004

b. Loans Made on or After September 1, 2004

4. Qualified Education Loan Certification

a. In General

b. Form W-9S

c. Electronic Submission of Form W-9S

5. Reporting by Foreign Persons

6. Penalties

IV. Qualified Tuition and Related Expenses

A. In General

B. Who Must Report

1. Eligible Education Institutions

2. Insurers

3. Third Parties

C. Payments Subject to Reporting

1. In General

2. Enrollment Determination

3. Reporting Elections

a. Payments Received

b. Amounts Billed

D. Exceptions to Reporting Requirement

E. Form 1098-T

1. Information Included on Return

2. Reporting Examples

a. Institutions that Elect to Report Payments Received for Qualified Tuition and Related Expenses

b. Institutions that Elect to Report Amounts Billed for Qualified Tuition and Related Expenses

3. Requirement to Furnish Information Statement

4. Requirements to Request and Obtain a TIN

5. Penalties

V. Acquisition or Abandonment of Secured Property

A. In General

B. Who Must Report

1. In General

2. Multiple Owners of a Single Loan

3. Governmental Unit

4. Subsequent Holder

5. Multiple Lenders

C. Property Subject to Reporting

D. Exceptions from Reporting

E. Acquisition of an Interest

F. Indirect Acquisition

G. Abandonments

H. Form 1099-A

1. Information Included on Return

2. Additional Reporting Requirements

a. In General

b. Other Reporting Requirements

3. Requirements to Furnish an Information Statement

4. Requirements to Request and Obtain a TIN

5. Penalties

VI. Cancellation of Debt

A. In General

B. Who Must Report

1. Applicable Entity Defined

2. Significant Trade or Business of Lending Money

3. Safe Harbors

4. Acquisition of Indebtedness from a Person Other Than the Debtor

5. Predecessor Organizations

6. Examples

C. Indebtedness Subject to Reporting

D. Identifiable Events that Trigger Reporting

E. Expiration of Non-Payment Testing Period

F. Exceptions From Reporting Requirement

1. Certain Bankruptcy Discharges

2. Interest

3. Non-Principal Amounts in Lending Transactions

4. Indebtedness of Foreign Debtors Held by Foreign Branches of U.S. Financial Institutions

5. Acquisition of Indebtedness by Related Party

6. Release of a Debtor

7. Guarantors and Sureties

8. Multiple Reporting

G. Form 1099-C

1. Information Included on Return

2. Additional Requirements

a. No Aggregation

b. Multiple Creditors

c. Multiple Debtors

d. Coordination with Reporting Under § 6050J

3. Requirements to Furnish an Information Statement

4. Requirements to Request and Obtain a TIN

5. Records Retention

6. Penalties

VII. Proceeds from Real Estate Transactions

A. In General

B. Who Must Report

1. Settlement Statements

2. No Closing Statements or Multiple Closing Statements

3. Absence of a Person Responsible for Closing the Transaction

4. Designation Agreements

5. Employees, Agents, and Partners

C. Transactions Subject to Reporting

1. Reportable Real Estate Defined

2. Sale or Exchange of Real Estate

3. Involuntary Conversions

4. Timber Royalties

D. Exceptions to Reporting Requirement

1. Sale or Exchange of Personal Residence

2. Exempt Transferors

3. A Transaction Not a Sale or Exchange

4. A Transfer in Full or Partial Satisfaction of a Debt Secured by the Property

5. A De Minimis Transfer Less than $600

6. Other Transactions Exempt from Reporting

E. Transferors

1. Foreign Transferors

2. Multiple Transferors

3. Spousal Transferors

4. Partnerships

F. Gross Proceeds Subject to Reporting

1. In General

2. Treatment of Sales Commissions and Similar Expenses

3. Special Rules for Contingent Payments

4. Multiple Asset Transactions

G. Form 1099-S

1. Information Included on Return

2. Requirement to Furnish Information Statement

3. Requirements to Solicit and Obtain a TIN

4. Penalties

5. Separate Charges

VIII. Contributions of Motor Vehicles, Boats, and Airplanes

A. In General

B. Who Must Report

C. Transactions Subject to Reporting

D. Contemporaneous Written Acknowledgment

E. Form 1098-C

1. Information Included on Return

2. Contributions with Claimed Values Not More than $500

3. Filing Due Dates

4. Electronic Donor Statements

5. Requirements to Request and Obtain a TIN

6. Section 6720 Penalties

7. Other Penalties

8. Form 8282

IX. Long-Term Care and Accelerated Death Benefits

A. In General

B. Who Must Report

C. Transactions Subject to Reporting

D. Form 1099-LTC

1. In General

2. Information Included on Return

3. Recipient Statements

X. Bond Tax Credits

A. In General

B. Tax Credit Bonds Subject to Reporting

1. Qualified Forestry Conservation Bonds

2. New Clean Renewable Energy Bonds

3. Qualified Energy Conservation Bonds

4. Qualified Zone Academy Bonds

5. Qualified School Construction Bonds

6. Clean Renewable Energy Bonds

7. Midwestern Tax Credit Bonds

8. Build America Bonds

C. Amount of the Credit

D. Rules Relating to Expenditures

E. Reimbursements

F. Exceptions from Reporting

G. Form 1097-BTC

XI. Other Forms 1099

A. Health Coverage Tax Credit Advance Payments

B. Exercise of an Incentive Stock Option Under Section 422(b)

1. In General

2. Form 3921

C. Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c)

1. In General

2. Form 3922

XII. Cash Payments Over $10,000 Received in a Trade or Business

A. In General

B. Cash

1. Cash Defined

2. Exceptions from Reporting

a. Certain Loans

b. Certain Installment Sales

c. Certain Down Payment Plans

d. Travel and Entertainment

C. Receipt of Cash

1. Recipient

2. Cash Received for the Account of Another

3. Multiple Payments

a. Payments Received in a Trade or Business

b. Payments Received for Bail

D. Transactions

1. Transaction Defined

2. Related Transactions

3. Designated Reporting Transaction

a. Retail Sale

b. Consumer Durable

c. Collectibles

d. Travel or Entertainment Activity

E. Who Must Report

1. Person Engaged in a Trade or Business

2. Clerks of Federal or State Courts if More than $10,000 Cash Received as Bail

F. Exceptions to Requirement to Report

G. Form 8300

1. Information Included on Returns and Statements

a. Payments Received in a Trade or Business

b. Payments Received for Bail

2. Records Retention

3. Voluntary Use of Form 8300

4. Requirement to Request and Obtain a TIN

5. Penalties

XIII. Guidelines for Filing Information Returns with the IRS Electronically

A. In General

B. Information Returns Branch Assistance

C. Filing Requirements

D. Exception to Requirement to File Electronically

E. Vendor Listing

F. Form 4419, Application for Filing Information Returns Electronically (FIRE)

G. Electronic Filing Specifications

1. In General

2. Accessing the FIRE System

3. File Format

4. Test Files

5. Electronic Submissions

H. Retention Requirements and Due Dates

I. Corrected Returns

J. Extensions

1. Filing Form 8809

2. Specifications for Filing Extensions of Time Electronically

3. Extension of Time for Recipient Copies of Information Returns

K. Combined Federal/State Filing Program

L. Penalties


WORKING PAPERS

Working Papers

Table of Worksheets

Worksheet 1 Guide to Most Common Information Returns

Worksheet 2 Excerpt from Revenue Procedure 2011-40 — Due Dates for Information Returns

Worksheet 3 Excerpt from Revenue Procedure 2011-40 — Filing Corrections Electronically

Worksheet 4 Excerpt from Revenue Procedure 2011-40 — State Abbreviations

Bibliography

Periodicals

2010

2011