Extension of time to file information returns.   Under Temporary Regulations section 1.6081-8T, effective for returns due after June 11, 2003, the requirements to request a 30-day extension of time to file information returns have changed. See Extension under Part B on page GEN-7.

Regular gambling withholding.   The regular gambling withholding rate will be 25% (33.33% for certain noncash payments) for reportable payments.

Backup withholding.   The backup withholding rate will be 28% for reportable payments.

Form 1099-B.   JGTRRA reduced capital gains rates on distributions effective for transactions after May 5, 2003. Brokers and others report the profit or (loss) on regulated futures or foreign currency contracts in new boxes 6b and 9b of Form 1099-B. Form 1099-B has been reformatted to two forms per page to allow for the additional reporting.

  Revenue Procedure 2002-50, 2002-29 I.R.B. 173, provides an exception from reporting by brokers on Form 1099-B for the sale of certain stock that was obtained from the exercise of a stock option and sold by the broker on the same day.

Form 1099-DIV.    Because JGTRRA reduced the capital gains rates to 15% or 5% for certain individuals, the 2003 Form 1099-DIV, Dividends and Distributions, has been revised. Form 1099-DIV was reformatted to two forms per page to allow reporting of qualified dividends and capital gain distributions at the new rates. The new boxes and their titles are as follows:

Form 1099-MISC.   For 2003, the exemption from reporting substitute payments in lieu of dividends or interest of at least $10 that are received by a broker for an individual has been eliminated.

Forms 1098-E and 1098-T.   The following changes have been made.

Form 1099-C.   The instructions for who must file Form 1099-C were changed to add the rules described in proposed regulations under section 6050P issued in June 2002. You may, but are not required to, follow the proposed regulations when preparing Form 1099-C for 2003. No penalties will be imposed on any organization until these regulations become final.

New Form 1099-CAP, Changes in Corporate Control and Capital Structure.   Temporary Regulations section 1.6043-4T(b) requires a corporation to file Form 1099-CAP if control of the corporation was acquired or it underwent a substantial change in capital structure. In addition, Regulations section 1.6045-3T requires brokers, who as record holder of stock receive Form 1099-CAP from a corporation reporting under Regulations section 1.6043-4T, to file Form 1099-CAP with the IRS and actual owners.

New Form 1099-H, Health Insurance Advance Payments.   

  At the time these instructions went to print, Form 1099-H had not been released for print.

  The Trade Act of 2002 created a new refundable credit to pay 65% of the eligible health insurance costs of eligible recipients of trade adjustment assistance (TAA), alternative TAA, and Pension Benefit Guaranty Corporation (PBGC) pensions.

  The Trade Act of 2002 also provides that, beginning August 1, 2003, eligible TAAs, alternative TAAs, and PBGC pension recipients may receive advance payment of health insurance premiums. Advance payments will be made directly to the recipients' health insurance providers under a program established by the Department of the Treasury. These advance payments will reduce the amount of the credit determined on Form 8885, Health Insurance Credit for Eligible Recipients. Form 1099-H is filed to report these advance payments to the IRS and eligible recipients.

Form 1099-Q.   Form 1099-Q has been re-titled “Payments From Qualified Education Programs (Under Sections 529 and 530).” Any distribution or rollover made from a Coverdell ESA will be reported on Form 1099-Q, not Form 1099-R.

Form 5498.    Box 11 is used to designate the year in which a required minimum distribution (RMD) is to be made. On the 2003 Form 5498, check the box if the participant must take an RMD in 2004. On Form 5498, or in a separate statement, report the required information.

  The Arabian Peninsula has been added to the list of designated combat zones under the special reporting rules for the U.S. Armed Forces.

New Form 5498-ESA, Coverdell ESA Contribution Information.   Report Coverdell ESA contributions on new Form 5498-ESA, not Form 5498. You must furnish Copy B (Form 5498-ESA) to the beneficiary for any calendar year by April 30 of the following year. File Copy A with the IRS by May 31 of the following year.

Form 1099-R.   The following changes have been made:

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

In addition to these general instructions, which contain general information concerning Forms 1099, 1098, 5498, and W-2G, we provide specific form instructions as separate products. Get the instructions you need for completing a specific form from the following list of separate instructions:

If you prefer to have all the specific and general instructions in one booklet, the 2003 Instructions for Forms 1099, 1098, 5498, and W-2G is also available. See How To Get Forms and Publications on page GEN-3.

If you backup withhold on a payment, you must file the appropriate Form 1099 or Form W-2G with the IRS and furnish a statement to the recipient to report the amount of the payment and the amount withheld. This applies even though the amount of the payment may be below the normal threshold for filing Form 1099 or Form W-2G. See Backup Withholding on page GEN-3.

Report backup withholding, voluntary withholding on certain government payments, and withholding from gambling winnings, pensions, annuities, IRAs, military retirement, and Indian gaming profits on Form 945, Annual Return of Withheld Federal Income Tax. Generally, file Form 945 for 2003 by January 31, 2004. Any income tax withholding reported on Form W-2, Wage and Tax Statement, including withholding on distributions to plan participants from nonqualified plans, must be reported on Form 941, Employer's Quarterly Federal Tax Return. For more information, including the deposit requirements for Form 945, see the separate Instructions for Form 945 and Circular E, Employer's Tax Guide (Pub. 15).

You must send Copies A of all paper Forms 1099, 1098, 5498, and W-2G to the IRS with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Instructions for completing Form 1096 are contained on Form 1096. Also see part D on page GEN-8.

If you are using a substitute form to furnish statements to recipients (generally Copy B), be sure your substitute statements comply with the rules in Pub. 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and W-2G (and 1042-S). Pub. 1179, which is revised annually, explains the requirements for format and content of substitute statements to recipients. If you are using a substitute form to furnish information to recipients, it must comply with the requirements in Pub. 1179.

See the chart on pages GEN-16 and GEN-17 for a brief summary of information return reporting rules.

TIN Matching allows a payer or authorized agent who is required to file Forms 1099-B, DIV, INT, MISC, OID, and/or PATR, which report income subject to backup withholding, to match TIN and name combinations with IRS records before submitting the forms to the IRS. TIN Matching is one of the e-services products that will be offered beginning in 2003, and will be accessible through the IRS website, www.irs.gov. It is anticipated payers who validate the TIN and name combinations before filing information returns will receive fewer backup withholding (CP2100) “B” notices and penalty notices.

If you have questions about reporting on Forms 1096, 1098, 1099, 5498, W-2, W-2G, and W-3, you may call a toll-free number, 1-866-455-7438. You may still use the original telephone number, 304-263-8700 (not toll free). For TTY/TDD equipment, call 304-267-3367 (not toll free). The call site can also be reached by email at [email protected]. The hours of operation for the call site are Monday through Friday from 8:30 a.m. to 4:30 p.m., Eastern time.

For other tax information related to business returns or accounts, call 1-800-829-4933; for TTY/TDD equipment, call 1-800-829-4059.

The Internal Revenue Bulletin (IRB), published weekly, contains newly issued regulations, notices, announcements, legislation, court decisions, and other items of general interest. You may find this publication useful to keep you up to date with current developments. See How To Get Forms and Publications below.

If you have attempted to deal with an IRS problem unsuccessfully, you should contact the Taxpayer Advocate. The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels.

While Taxpayer Advocates cannot change the tax law or make a technical decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

Your assigned personal advocate will listen to your point of view and will work with you to address your concerns. You can expect the advocate to provide:

When contacting the Taxpayer Advocate, you should provide the following information:

You may contact a Taxpayer Advocate by calling a toll-free number, 1-877-777-4778. Persons who have access to TTY/TDD equipment may call 1-800-829-4059 and ask for Taxpayer Advocate assistance. If you prefer, you may call, write, or fax the Taxpayer Advocate office in your area. See Pub. 1546, The Taxpayer Advocate Service of the IRS, for a list of addresses and fax numbers.

Because the IRS processes paper forms by machine (optical character recognition equipment), you cannot file with the IRS Form 1096 or Copy A of Forms 1098, 1099, or 5498 that you print from the IRS website or the CD-ROM.

When to apply backup withholding.   Generally, the period for which the 28% should be withheld is as follows:

  

  The 60-day exemption from backup withholding applies only to interest and dividend payments and certain payments made with respect to readily tradable instruments. Therefore, any other payment, such as nonemployee compensation, is subject to backup withholding even if the payee has applied for and is awaiting a TIN. For information about whether backup withholding applies during the 60-day period, see Regulations section 31.3406(g)-3.

Reporting backup withholding.   Report backup withholding on Form 945. For more information, see the Instructions for Form 945. Also, report backup withholding and the amount of the payment on Forms W-2G, 1099-B, CAP, DIV, G, INT, MISC, OID, or PATR even if the amount of the payment is less than the amount for which an information return is normally required.

Additional information.   For more information about backup withholding, see Pub. 1679, A Guide to Backup Withholding for Missing and Incorrect Name/TIN(s), and Pub. 1281, Backup Withholding on Missing and Incorrect Name/TIN(s) (Including Instructions for Reading Tape Cartridges).

If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file on magnetic media, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable.

The amount of the penalty is based on when you file the correct information return. The penalty is:

If you do not file corrections and you do not meet any of the exceptions to the penalty described below, the penalty is $50 per information return.

If you fail to provide correct payee statements and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to provide the statement by January 31 (see part H on page GEN-9), you fail to include all information required to be shown on the statement, or you include incorrect information on the statement. “Payee statement” has the same meaning as “statement to recipient” as used in part H on page GEN-9.

The penalty is $50 per statement, no matter when the correct statement is furnished, with a maximum of $100,000 per year. The penalty is not reduced for furnishing a correct statement by August 1.

The penalties under sections 6721 and 6722 do not apply to:

The penalty for failure to timely file Forms 1099-MSA, 5498-MSA, 5498, 5498-ESA, or 1099-Q is $50 per return with no maximum, unless the failure is due to reasonable cause. See section 6693.

If you willfully file a fraudulent information return for payments you claim you made to another person, that person may be able to sue you for damages. You may have to pay $5,000 or more.

Due dates.   File Forms 1098, 1099, or W-2G on magnetic media by March 1, 2004. If you file electronically, you may file by March 31, 2004. File Form 5498, 5498-ESA, or 5498-MSA by June 1, 2004. See part H on page GEN-9 about providing Forms 1098, 1099, 5498, and W-2G or statements to recipients.

Extension of time to file.   For information about requesting an extension of time to file, see Extension on page GEN-7.

  

  If you file on magnetic media or electronically, do not file the same returns on paper.

Who must file on magnetic media.   If you are required to file 250 or more information returns, you must file on magnetic media. The 250-or-more requirement applies separately to each type of form. For example, if you must file 500 Forms 1098 and 100 Forms 1099-A, you must file Forms 1098 on magnetic media, but you are not required to file Forms 1099-A on magnetic media.

  The magnetic media filing requirement does not apply if you apply for and receive a hardship waiver. See How to request a waiver from filing on magnetic media on page GEN-6.

  

  The IRS encourages you to file on magnetic media or electronically even though you are filing fewer than 250 returns.

Filing requirement applies separately to originals and corrections.   The magnetic media filing requirements apply separately to original returns and corrected returns. Originals and corrections are not aggregated to determine whether you are required to file on magnetic media. For example, if you file 400 Forms 1098 on magnetic media and you are making 75 corrections, your corrections can be filed on paper because the number of corrections for Form 1098 is less than the 250 filing requirement. However, if you were filing 250 or more Form 1098 corrections, they would have to be filed on magnetic media.

How to get approval to file on magnetic media.   File Form 4419, Application for Filing Information Returns Electronically/Magnetically, at least 30 days before the due date of the returns. File only one Form 4419 for all types of returns that will be filed on magnetic media. Once you have received approval, you need not reapply each year. The IRS will provide a written reply to the applicant and further instructions at the time of approval, usually within 30 days. A magnetic media reporting package, which includes all the necessary transmittals and instructions, will be mailed to all approved filers.

How to request a waiver from filing on magnetic media.   To receive a waiver from the required filing of information returns on magnetic media, submit Form 8508, Request for Waiver From Filing Information Returns Magnetically, at least 45 days before the due date of the returns. You cannot apply for a waiver for more than 1 tax year at a time. If you need a waiver for more than 1 tax year, you must reapply at the appropriate time each year.

  If a waiver for original returns is approved, any corrections for the same types of returns will be covered under the waiver. However, if you submit original returns on magnetic media but you want to submit your corrections on paper, a waiver must be approved for the corrections if you must file 250 or more corrections.

  If you receive an approved waiver, do not send a copy of it to the service center where you file your paper returns. Keep the waiver for your records only.

Penalty.   If you are required to file on magnetic media but fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $50 per return for failure to file on magnetic media unless you establish reasonable cause. However, you can file up to 250 returns on paper; those returns will not be subject to a penalty for failure to file on magnetic media.

  The penalty applies separately to original returns and corrected returns. See Filing requirement applies separately to originals and corrections on page GEN-5.

Common errors.   Be sure to check your returns to prevent the following common errors:

Required format.   Because paper forms are read by machine (optical character recognition equipment), all Forms 1096 and Copies A of Forms 1098, 1099, and 5498 must be prepared in accordance with the following instructions. If these instructions are not followed, you may be subject to a penalty of $50 for each incorrectly filed document.

Suggested format.   Below are suggestions that will allow the IRS to process the submitted forms in the most economical manner: