Section 1.199A-3(b)(1)(iv) of the February 2019 Final Regulations provides that previously disallowed losses or deductions (including under sections 465, 469, 704(d), and 1366(d)) allowed in the taxable year are generally taken into account for purposes of computing QBI, except to the extent the losses or deductions were disallowed, suspended, limited, or carried over from taxable years ending before January 1, 2018. These losses are used, for purposes of section 199A, in order from the oldest to the most recent on a first-in, first-out (FIFO) basis. The February 2019 Proposed Regulations expanded this rule to provide that previously disallowed losses or deductions are treated as losses from a separate trade or business in the year they are taken into account in determining taxable income. Further, the attributes of the previously disallowed losses or deductions, including whether they are attributable to a trade or business and whether they would otherwise be included in QBI, are determined in the year the loss or deduction is incurred.

The Treasury Department and the IRS are aware that taxpayers and practitioners have questioned whether the exclusion of section 461(l) from the list of loss disallowance and suspension provisions in §1.199A-3(b)(1)(iv) means that losses disallowed under section 461(l) are not considered QBI in the year the losses are taken into account in determining taxable income. Generally, for taxable years beginning after December 31, 2020, and before January 1, 2026, section 461(l) disallows an excess business loss for taxpayers other than C corporations. See section 2304(a) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Pub. L. 116-136, 134 Stat. 281 (2020). Any disallowed excess business loss is treated as a net operating loss carryover for the taxable year for purposes of determining any net operating loss carryover under section 172(b) in subsequent taxable years. See section 172(b) as amended by section 2304(b) of the CARES Act.

The list of loss disallowance and suspension provisions in §1.199A-3(b)(1)(iv) is not exhaustive. If a loss or deduction that would otherwise be included in QBI under the rules of §1.199A-3 is disallowed or suspended under any provision of the Code, such loss or deduction is generally taken into account for purposes of computing QBI in the year it is taken into account in determining taxable income. These final regulations clarify this point by amending §1.199A-3(b)(1)(iv)(A) to specifically reference excess business losses disallowed by section 461(l) and treated as a net operating loss carryover for the taxable year for purposes of determining any net operating loss carryover under section 172(b) in subsequent taxable years.

The Treasury Department and the IRS are also aware that taxpayers and practitioners have questioned how the phase-in rules apply when a taxpayer has a suspended or disallowed loss or deduction from a Specified Service Trade or Business (SSTB). Whether an individual has taxable income at or below the threshold amount, within the phase-in range, or in excess of the phase-in range, the determination of whether a suspended or disallowed loss or deduction attributable to an SSTB is from a qualified trade or business is made in the year the loss or deduction is incurred. If the individual’s taxable income is at or below the threshold amount in the year the loss or deduction is incurred, and such loss would otherwise be QBI, the entire disallowed loss or deduction is treated as QBI from a separate trade or business in the subsequent taxable year in which the loss is allowed. If the individual’s taxable income is within the phase-in range, then only the applicable percentage of the disallowed loss or deduction is taken into account in the subsequent taxable year. If the individual’s taxable income exceeds the phase-in range, none of the disallowed loss or deduction will be taken into account in the subsequent taxable year. These final regulations clarify this treatment and provide an example of a taxpayer with taxable income in the phase-in range and a suspended loss from an SSTB.

The Treasury Department and the IRS received one comment requesting further clarification of the FIFO ordering rule. The commenter questioned whether the FIFO ordering rule should continue to apply for losses incurred in taxable years beginning on or after January 1, 2018. The commenter also asked for clarification regarding whether the rule applied on an annual basis such that each year is tracked separately and FIFO is applied for losses that are incurred each year or whether FIFO applies such that there is a single bucket of losses no matter the year incurred. The commenter recommended additional supporting worksheets or other forms to assist in the calculation, particularly if every year must be tracked individually.

The Treasury Department and the IRS have determined that in order to properly calculate the deduction, it is necessary for the FIFO rule to apply for losses incurred in taxable years beginning on or after January 1, 2018, and that the rule must be applied on an annual basis by category (i.e., sections 465, 469, etc.). Accordingly, these final regulations retain the FIFO rule as proposed. The Treasury Department and the IRS continue to consider whether new worksheets or forms are necessary to assist in the calculation.

The February 2019 Proposed Regulations also provide that if a loss or deduction is partially disallowed, QBI in the year of disallowance must be reduced proportionately. These final regulations retain this rule, but with slight modifications, and provide examples.

If a RIC has certain items of income or gain, subchapter M of chapter 1 of the Code provides rules under which a RIC may pay dividends that a shareholder in the RIC may treat in the same manner (or a similar manner) as the shareholder would treat the underlying item of income or gain if the shareholder realized it directly. Like the preamble to the February 2019 Proposed Regulations, this preamble refers to this treatment as “conduit treatment.” The February 2019 Proposed Regulations include rules providing conduit treatment for qualified REIT dividends earned by a RIC. The Treasury Department and the IRS received one comment requesting that the proposed rules providing this treatment be finalized. These final regulations adopt those proposed rules.

The February 2019 Proposed Regulations do not provide conduit treatment for qualified PTP income earned by a RIC. Instead, the preamble to the February 2019 Proposed Regulations requested comments on issues relating to whether and how to provide conduit treatment for qualified PTP income, including the treatment of items attributable to an SSTB of a PTP allocated to a RIC and the treatment of losses of a PTP allocated to a RIC. The Treasury Department and the IRS received several comments addressing conduit treatment for qualified PTP income earned by a RIC. Two commenters recommended that conduit treatment be extended to qualified PTP income earned by RICs, excluding any items attributable to SSTBs. Both commenters suggested that any losses allocated to RICs from PTPs could be carried forward by the RIC for purposes of section 199A. Another commenter suggested methods by which RICs could track, and pay dividends attributable to, an SSTB of a PTP.

Another commenter suggested that RICs, particularly business development companies that conduct lending activities, be allowed to pay “QBI dividends” to their shareholders in cases where the RIC had income from an activity that would generate QBI if conducted by a partnership or an S corporation.

The Treasury Department and the IRS continue to consider those comments and evaluate whether it is appropriate and practicable to provide conduit treatment for qualified PTP income or other income of a RIC to further the purposes of section 199A(b)(1)(B).

Section 1.199A-6 provides guidance that certain specified entities (including trusts and estates) might need to compute the section 199A deduction of the entity and/or passthrough information to each of its owners or beneficiaries, so they may compute their section 199A deduction. Section 1.199A-6(d) contains special rules for applying section 199A to trusts and decedents’ estates.

Under §1.199A-6(d)(3)(ii), the QBI, W–2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income of a trust or estate are allocated to each beneficiary and to the trust or estate based on the relative proportion of the trust’s or estate’s distributable net income (DNI) for the taxable year that is distributed or required to be distributed to the beneficiary or is retained by the trust or estate. Proposed §1.199A-6(d)(3)(iii) further provides that a trust described in section 663(c) with substantially separate and independent shares for multiple beneficiaries will be treated as a single trust for purposes of determining whether the taxable income of the trust exceeds the threshold amount.

The Treasury Department and the IRS received comments requesting guidance on the interaction between section 199A and the separate share rule in section 663(c). In particular, the commenters requested guidance on the allocation of QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income of a trust or estate to beneficiaries and the trust or estate based on DNI. The commenters noted differences in the allocation of overall DNI to beneficiaries of a trust or estate under sections 643(a) and 663(c) and asked about the allocation of these items in circumstances involving tax-exempt income and charitable deductions, as well as situations in which no DNI is allocated to a beneficiary. The commenters asserted that under §1.663(c)-2(b)(5), deductions, including the section 199A deduction, attributable solely to one share are not available to any other separate share of the trust or estate. The commenters recommended that the allocation of QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income of a trust or estate should be based on the portion of such items that are attributable to the income of each separate share. In addition, the commenters recommended that §1.663(c)-2(b) be amended to clarify how gross income not included in accounting income is allocated among separate shares.

After considering the comments and studying the separate share rule in more depth, the Treasury Department and the IRS have clarified the separate share rule in these final regulations to provide that, in the case of a trust or estate described in section 663(c) with substantially separate and independent shares for multiple beneficiaries, the trust or estate will be treated as a single trust or estate not only for purposes of determining whether the taxable income of the trust or estate exceeds the threshold amount but also in determining taxable income, net capital gain, net QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income for each trade or business of the trust or estate, and computing the W-2 wage and UBIA of qualified property limitations. Further clarification of the separate share rule under section 663 is beyond the scope of these final regulations, but the Treasury Department and the IRS intend to continue to study the issues raised by the commenters. Accordingly, these final regulations provide that the allocation of these items to the separate shares of a trust or estate described in section 663(c) will be governed by the rules under section 663(e) and such guidance as may be published in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(b)).

Section 1.199A-6(d)(3)(v) of the February 2019 Proposed Regulations provides rules under which the taxable recipient of a unitrust or annuity amount from a charitable remainder trust described in section 664 can take into account QBI, qualified REIT dividends, or qualified PTP income for purpose of determining the recipient’s section 199A deduction. The Treasury Department and the IRS received no comments on these rules and these final regulations adopt these rules as proposed.

Executive Orders 13771, 13563, and 12866 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits of reducing costs, of harmonizing rules, and of promoting flexibility.

These final regulations have been designated by the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (April 11, 2018) between the Treasury Department and OMB regarding review of tax regulations. OIRA has designated these final regulations as economically significant under section 1(c) of the Memorandum of Agreement. Accordingly, OIRA has reviewed these final regulations. For purposes of Executive Order 13771 this rule is regulatory.

A. Background and Need for Final Regulations

Section 199A of the TCJA provides taxpayers other than corporations a deduction of up to 20 percent of QBI from domestic businesses plus up to 20 percent of their combined qualified REIT dividends and qualified publicly traded partnership income. Because the section 199A deduction had not previously been available, regulations are necessary to provide taxpayers with computational and definitional guidance regarding the application of section 199A.

The Treasury Department and the IRS previously issued the February 2019 Final Regulations regarding various items related to the calculation of the section 199A deduction. However, the February 2019 Final Regulations did not address treatment of REIT dividends received by RICs. Because RICs are taxed as C corporations, dividends paid by RICs are generally ineligible for the section 199A deduction under the statute, which excludes C corporation income from the definition of QBI. However, the statute also directs the Secretary to prescribe such regulations as are necessary to carry out the purposes of section 199A, including regulations for its application in the case of tiered entities. These final regulations establish rules under which RIC dividends associated with qualified REIT dividends may be eligible for a section 199A deduction.

In addition, these final regulations establish rules for the treatment of previously suspended losses in calculation of QBI and rules for applying section 199A to trusts and decedents’ estates.

B. Economic Analysis

1. Baseline

The analysis in this section compares these final regulations (these regulations) to a no-action baseline reflecting anticipated Federal income tax-related behavior in the absence of these regulations.

2. Summary of Economic Effects

To assess the economic effects of these regulations, the Treasury Department and the IRS considered the economic effects of (i) rules for the treatment of previously suspended losses in calculation of QBI; (ii) rules providing conduit treatment for qualified REIT dividends earned by a RIC; and (iii) rules for applying section 199A to trusts and decedents’ estates.

Regarding items (i) and (iii): These regulations provide certainty and clarity to taxpayers regarding terms and calculations necessary for taxpayers to determine their section 199A deduction. In the absence of this clarity, the likelihood would be exacerbated that different taxpayers would hold different interpretations of the tax treatment of previously suspended losses or the application of section 199A to trusts and decedents’ estates. These regulations help taxpayers to hold more similar interpretations of the tax treatment of these items. In general, overall economic performance is enhanced when individuals and businesses face more uniform signals about tax treatment. Certainty and clarity over tax treatment also reduce compliance costs for taxpayers.

The Treasury Department and the IRS do not project meaningful changes in economic activity as a result of these provisions, relative to the no-action baseline.

Regarding item (ii): These regulations provide that an individual who is a shareholder of a RIC that has an ownership interest in a REIT may, for section 199A purposes, treat certain dividends received from a RIC in the same way the shareholder would treat dividends received directly from the REIT. Specifically, under these regulations RIC shareholders are generally eligible for the section 199A deduction on their section 199A dividends. In the absence of these regulations, dividends received from a RIC that has an ownership interest in a REIT would not qualify for the section 199A deduction while dividends received directly from that REIT would generally qualify for the deduction. Thus, in the absence of these regulations, direct ownership of REITs is tax-advantaged relative to indirect ownership of REITs through RICs even though the underlying economic activity is similar.

As a general principle, overall economic performance is improved to the extent that the tax consequences of investment through a financial intermediary (such as a RIC) are equivalent to the tax consequences of direct investment. In the absence of these regulations, a tax incentive would arise for individuals to invest directly in REITs rather than through RIC intermediaries. This would distort investment allocation relative to a tax-neutral treatment of financial intermediaries, leading investors to make decisions based on differential tax treatment rather than purely based on the value of investments. In particular, it would likely cause investors to hold less diversified portfolios.¹ The Treasury Department and the IRS therefore project that, under these regulations, individual investors seeking to invest in real estate would in general hold more diversified portfolios relative to the no-action baseline.

Another economic loss that would likely arise in the absence of these regulations is due to the costs of acquiring information. RICs, including mutual funds and exchange-traded funds, simplify decision-making for investors by finding, indexing, and vetting REITs. This is an efficient market organization due to economies of scale in gathering relevant information. In the absence of these regulations, individual investors face substantial incentives to invest directly in REITs due to asymmetric tax treatment, and face larger time costs to evaluate REIT investment options than RICs. The same level of investment can be achieved with substantially less resource use if research costs are incurred by RICs rather than individual investors, and therefore this rule will lead to more efficient resource use in making aggregate investment decisions.

On the basis of these effects, the Treasury Department and the IRS also project that these regulations will lead investors, on average, to hold more real estate in their portfolios (relative to the no-action baseline) and thus hold a smaller share of investment in other industries.

The Treasury Department and the IRS project that the economic effects of these regulations will exceed $100 million per year relative to the no-action baseline. The compliance costs alone are estimated to be approximately $149 million (excluding any compliance cost savings), as described in the Paperwork Reduction Act section of these analyses. These compliance costs arise because the regulations require a RIC to compute and report section 199A dividends to its shareholders in order for them to benefit from the section 199A deduction on qualified REIT dividends earned by the RIC. In some sense, these costs are optional since RICs that do not pay section 199A dividends, either because they do not receive qualified REIT dividends or because they choose not to take on the additional record-keeping, avoid these compliance costs entirely. Nonetheless, we expect that many RICs will choose to incur the compliance costs to facilitate their shareholders’ section 199A deductions.

Though many RICs keep detailed records of their investment portfolios, these regulations nonetheless create non-trivial administrative costs for any RICs that wish to provide section 199A dividends to their shareholders. However, this increase in compliance costs may be accompanied by a decrease in compliance costs for REITs who would otherwise see an influx of individual investors holding direct interest in REITs. The Treasury Department and the IRS have not estimated this compliance cost savings.

Beyond any potential compliance cost reduction, several other economic benefits result from these regulations, including those flowing from enhanced financial diversification and reduced information-gathering costs. While we have not attempted to quantify the economic benefits of these effects, we project that they are likely to be substantial as well. We estimate that up to $6.0 billion in REIT dividends accrued to individual taxpayers through RICs in taxable year 2018. Of this, $5.6 billion went to taxpayers with positive taxable income, who thus could potentially use section 199A deductions. This corresponds to aggregate potential deductions of up to $1.1 billion (20 percent of $5.6 billion). Under an assumption that the effective tax rate for these investors was 30 percent, then under the no-action baseline taxpayers would theoretically be willing to incur up to $336 million in economic costs in order to receive the section 199A deduction on their income derived from REITs that currently flows through RICs. Thus, relative to the no-action baseline, these regulations provide up to $336 million in annual benefits by allowing investors to avoid these costs.

Another way of gauging the potential economic benefits from these regulations is to consider them relative to the investment returns currently flowing to REIT investors through RICs. If RIC intermediaries provide economic benefits (relative to direct ownership of REITs) equal to five percent of investment returns, then the benefits of these regulations relative to the no-action baseline would be up to $280 million (five percent of $5.6 billion), assuming the same levels of economic activity as in taxable year 2018.

The Treasury Department and the IRS project that more taxpayers will claim the section 199A deduction under these regulations, reducing government revenue relative to the no-action baseline. On its own, this reduction in revenue itself would affect the United States economy. Either the deficit would increase or other taxes would need to be raised. This effect should be weighed against the enhanced efficiency arising from the regulations. We have not attempted to quantify these effects. Similarly, we have not attempted to quantify the efficiency effects of the shift in investment away from other industries and toward real estate that may result from these regulations, relative to the no-action baseline.

3. Number of affected taxpayers.

The Treasury Department and the IRS estimate that the rules regarding RICs as financial intermediaries for REIT investors will affect up to 2,500 RICs and up to 4.8 million individual tax units. These estimates are derived from the universe of taxable year 2018 administrative tax records. For taxable year 2018, taxpayers were able to rely on the February 2019 Proposed Regulations, which meant that RICs could provide conduit treatment for REIT dividends for section 199A purposes (as in these regulations). Accordingly, 2,500 entities that did not file Form 1120-REIT issued at least one Form 1099-DIV with section 199A dividends. For comparison, approximately 1,400 REITs issued at least one Form 1099-DIV with section 199A dividends. Approximately 5.2 million tax units received at least one Form 1099-DIV with section 199A dividends from the 2,500 non-REIT entities. Among these tax units, roughly 4.8 million had positive taxable income and therefore could have potentially benefited from the section 199A deduction.²

The collection of information contained in these regulations will be reviewed by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545–0110. The collection of information required by this regulation is in §1.199A-3. The collection of information in §1.199A-3 is required for RICs that choose to report information regarding qualified REIT dividends to their shareholders. It is necessary to report the information to the IRS and relevant taxpayers to ensure that taxpayers properly report in accordance with the rules of these regulations the correct amount of deduction under section 199A. The collection of information in §1.199A-3 is satisfied by providing information about section 199A dividends as Form 1099-DIV (OMB control number 1545-0110) and its instructions may prescribe.

For purposes of the PRA, the reporting burden associated with §1.199A-3 will be reflected in the next revision to Form 1099-DIV. The burden associated with the information collection in the regulation represents 1.567 million hours and $149 million (2018 dollars) annually to comply with the information collection requirement in the regulation. These estimates capture both changes made by the TCJA and those that arise out of these regulations. The burden hours estimate was derived from IRS’s legacy burden model and is discussed in further detail on Form 1099-DIV. The hourly rate is derived from the IRS’s office of Research, Applied Analytics, and Statistics Business Taxpayer Burden model that relates time and out-of-pocket costs of business tax preparation, derived from survey data, to assets and receipts of affected taxpayers along with other relevant variables, and converted by the Treasury Department to $2017. The Treasury Department and the IRS request comment on all aspects of information collection burdens related to these regulations. Proposed revisions (if any) to these forms that reflect the information collections contained in these regulations will be made available for public comment at www.irs.gov/draftforms and will not be finalized until after the forms have been approved by OMB under the PRA.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number.

In accordance with the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that this final rule will not have a significant economic impact on a substantial number of small entities.

The final rule is not likely to affect a substantial number of small entities. Section 1.199A-3 applies to RICs that pay section 199A dividends. Congress created RICs to give small investors access to the professional management and asset diversification that are available only with very large investment portfolios. To insure appropriate non-tax regulation of these substantial investment portfolios, subchapter M of chapter 1 of the Code requires that such RICs must be eligible for registration, and must actually be registered with the Securities and Exchange Commission under the Investment Company Act of 1940. There are some small businesses that are publicly traded, but most publicly traded businesses are not small entities as defined by the Regulatory Flexibility Act. Thus, the Treasury Department and IRS expect that most RICs are not small entities for purposes of the Regulatory Flexibility Act. Accordingly, the Treasury Department and the IRS have determined that this Treasury decision will not affect a substantial number of small entities. Finally, no comments regarding the economic impact of these regulations on small entities were received.

Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking preceding these regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business and no comments were received.

The purpose of this revenue procedure is to set forth the 2020 requirements for:

This revenue procedure contains specifications for these information returns:

F or purposes of this revenue procedure, a substitute form or statement is one that is not published by the IRS. For a substitute form or statement to be acceptable to the IRS, it must conform to the official form or the specifications outlined in this revenue procedure. Do not submit any substitute forms or statements listed above to the IRS for approval. Privately published forms may not state, “This is an IRS approved form.”

Filers making payments to certain recipients during a calendar year are required by the Internal Revenue Code (the Code) to file information returns with the IRS for these payments. These filers must also provide this information to their recipients. In some cases, this also applies to payments received. See Part 4 for specifications that apply to recipient statements (generally Copy B).

In general, section 6011 of the Code contains requirements for filers of information returns. A filer must file information returns electronically or on paper. A filer who is required to file 250 or more information returns of any one type during a calendar year must file those returns electronically.

Caution. Financial institutions that are required to report payments made under chapter 3 or 4 must file Forms 1042-S electronically, regardless of the number of forms to file.

Note. If you file electronically, do not file the same returns on paper.

Although not required, small volume filers (fewer than 250 returns during a calendar year) may file the forms electronically. See the requirements for filing information returns (and providing a copy to a payee) in the 2020 General Instructions for Certain Information Returns and the 2020 Instructions for Form 1042-S. In addition, see the current revision of Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, for electronic filing through the IRS FIRE system.

The IRS prints and provides the forms on which various payments must be reported. See Section 5.3, later, for ordering forms and instructions. Alternately, filers may prepare substitute copies of these IRS forms and use such forms to report payments to the IRS.

Note. Further information impacting Publication 1179, such as issues arising after its final release, will be posted on IRS.gov at IRS.gov/pub1179.

The following changes have been made to this year’s revenue procedure. For further information about each form listed below, see the separate reporting instructions.

Redesigned Form 1099-MISC. Due to the creation of Form 1099-NEC, we have revised Form 1099-MISC and rearranged box numbers for reporting certain income. For the latest filing information, see IRS.gov/Form1099-MISC.

New Form 1099-NEC. Beginning with tax year 2020, use Form 1099-NEC to report nonemployee compensation. See part C in the 2020 General Instructions for Certain Information Returns at IRS.gov/forms-pubs/about-form-1099, and Form 8809 at IRS.gov/forms-pubs/about-form-8809 for information on extensions of time to file. See part M in the 2020 General Instructions for Certain Information Returns for information on extensions of time to furnish recipient statements.

To ease statement furnishing requirements, Copies B, C, 1, and 2 have been made fillable online in a PDF format available at IRS.gov/Form1099MISC and IRS.gov/Form1099NEC. You can complete these copies online for furnishing statements to recipients and for retaining in your own files.

Form 1099-PATR. Numbered reporting box changes. New boxes were added and existing boxes were renumbered, retitled, and/or repurposed to allow for reporting information to patrons needed for section 199A. See the revised instructions for boxes 2, 5, 6, 7, 8, and 9.

Box 13 title and content change. Box 13 has been renamed and the instructions have been updated accordingly. Box 13. Specified Cooperatives. For more information, see IRS.gov/Form1099-PATR .

Continuous use. Form 1097-BTC, Form 1098-C, Form 1098-F, Form 1098-MA, Form 1098-Q, Form 1099-CAP, Form 1099-LS, Form 1099-LTC, Form 1099-OID, Form 1099-Q, Form 1099-SA, and Form 1099-SB and their instructions have been converted from annual updates to continuous use. These forms and their instructions will be updated as required. For more information, see the Guide to Information Returns, in the 2020 General Instructions for Certain Information Returns at IRS.gov/forms-pubs/about-form-1099.

Exhibits. All of the exhibits in this publication were updated to include all of the 2020 revisions of those forms that have been revised.

Editorial changes. We made editorial changes throughout, including updated references. Redundancies were eliminated as much as possible.

Section 1.2 – Definitions

Form recipient means the person to whom you are required by law to furnish a copy of the official form or information statement. The form recipient may be referred to by different names on various Forms 1099 and related forms (“beneficiary,” “borrower,” “debtor,” “donor,” “employee,” “filer,” “homeowner,” “insured,” “participant,” “payee,” “payer,” “payer/borrower,” “payment recipient,” “policyholder,” “seller,” “shareholder,” “student,” “transferor,” or, in the case of Form W-2G, the “winner”). See Section 1.3.4.

Fi ler means the person or organization required by law to file with the IRS a form listed in Section 1.1.2 with the IRS. A filer may be a payer, creditor, payment settlement entity, recipient of mortgage or student loan interest payments, educational institution, broker, barter exchange, person reporting real estate transactions; a trustee or issuer of any educational or ABLE Act savings account, individual retirement arrangement, or medical savings account; a lender who acquires an interest in secured property or who has reason to know that the property has been abandoned; a corporation reporting a change in control and capital structure or transfer of stock to an employee; certain donees of motor vehicles, boats, and airplanes; or an acquirer or issuer of a life insurance contract.

Substitute form means a paper substitute of Copy A of an official form listed in Section 1.1.2 that completely conforms to the provisions in this revenue procedure.

Substitute form recipient statement means a paper or electronic statement of the information reported on a form listed in Section 1.1.2. For the remainder of this revenue procedure, we will refer to this as a recipient statement. This statement must be furnished to a person (form recipient), as defined under the applicable provisions of the Code and the applicable regulations.

Composite substitute statement means one in which two or more required statements (for example, Forms 1099-INT and 1099-DIV) are furnished to the recipient on one document. However, each statement must be designated separately and must contain all the requisite Form 1099 information except as provided under Section 4.2. A composite statement may not be filed with the IRS.

Paper substitutes for Form 1096 and Copy A of Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S that completely conform to the specifications listed in this revenue procedure may be privately printed and filed as returns with the IRS. The reference to the Department of the Treasury– Internal Revenue Service should be included on all such forms.

If you are uncertain of any specification and want it clarified, you may submit a letter citing the specification, stating your understanding and interpretation of the specification, and enclosing an example of the form (if appropriate) to:

Internal Revenue Service Attn: Substitute Forms Program SE:W:CAR:MP:P:TP 1111 Constitution Ave. NW Room 6554 Washington, DC 20224

Note. Allow at least 30 days for the IRS to respond.

You may also contact the Substitute Forms Program via e-mail at substituteforms@irs.gov. Please enter “Substitute Forms” on the Subject Line.

Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S are subject to annual review and possible change. Therefore, filers are cautioned against overstocking supplies of privately printed substitutes.

So me Forms 1097-BTC, 1098, 1099, 3921, 3922, 5498, W-2G, and 1042-S that include logos, slogans, and advertisements may not be recognized as important tax documents. A payee may not recognize the importance of the payee copy for tax reporting purposes due to the use of logos, slogans, and advertisements.

Accordingly, the IRS has determined that logos, slogans, and advertising are not allowed on the payee copies of the above forms, on Copy A filed with the IRS, or on Form 1096, with the following exceptions:

The IRS e-file logo on the IRS official payee copies may be included, but it is not required, on any of the substitute form copies.

The information return and payee copies must clearly identify the payer’s name associated with its employer identification number.

Logos and slogans may be used on permissible enclosures, such as a check or account statement, other than information returns and payee copies.

If you have comments about the restrictions on including logos, slogans, and advertising on information returns and payee copies, send your comments to:

Internal Revenue Service Attn: Substitute Forms Program SE:W:CAR:MP:P:TP 1111 Constitution Ave. NW Room 6554 Washington, DC 20224

or email them to substituteforms@irs.gov.

Proposed substitutes of Copy A must be exact replicas of the official IRS form with respect to layout and content. Proposed substitutes for Copy A that do not conform to the specifications in this revenue procedure are not acceptable.

Further, if you file such forms with the IRS, you may be subject to a penalty for failure to file a correct information return under section 6721 of the Code. The amount of the penalty is based on when you file the correct information return.

Penalties. The amounts of the penalty for returns required to be filed in 2020 is shown in Penalties in the 2020 General Instructions for Certain Information Returns. You can access the penalties section at IRS.gov/instructions/ i1099gi#idm140065029227536.

Copy B and Copy C of the following forms must contain the information in Part 4 to be considered a “statement” or “official form” under the applicable provisions of the Code. The format of this information is at the discretion of the filer with the exception of the location of the tax year, form number, form name, and the information for composite Form 1099 statements as outlined under Section 4.2.

Copy B, of the forms below, is for the following recipients.

Note. On Copy C, Form 1099-LTC, you may reverse the locations of the policyholder’s and the insured’s name, street address, city, state, and ZIP code for easier mailing.

Due to the very low volume of paper Forms 1097-BTC, 1098-C, 1098–F, 1098-MA, 1099-A, 1099-CAP, 1099-LTC, 1099-NEC, 1099-Q, 1099-QA, 1099-SA, 3922, 5498-ESA, 5498-QA, and 5498-SA received and processed by the IRS each year, these forms have been converted to fillable online PDFs.

Note. The instructions for substitute Forms 1042-S, also a fillable online format, are found separately in Part 5.

These forms in their fillable format can be found at IRS.gov/formspubs.

All the instructions regarding the substitute forms found in Part 1, and Sections 2.1.2, 2.1.7, 2.1.9, and 2.1.10, and the remainder of this publication, unless specified differently immediately below, remain in effect if you are going to produce the online fillable forms as paper or online substitute forms.

Note. If you want to print the forms as they formerly appeared to save paper, with the exception of Forms 1097-BTC (printed 2-to-a-page) and 1098-C (single form page), they are all printed 3-to-a-page. Follow the 3-to-a-page measurements in Section 6. Form 1098-C can be found at IRS.gov/Form1098C. Print the form to actual size, no scaling.

Form identifying numbers (for example, 9191 for Form 1099-DIV) must be printed in nonreflective black carbon-based ink in print positions 15 through 19 using an optical character recognition (OCR) A font. The checkboxes to the right of the form identifying numbers must be 10-point boxes. The “VOID” checkbox is in print position 25 (1.9 inches from left vertical line of the form). The “CORRECTED” checkbox is in print position 33 (2.7 inches from left vertical line of the form). Measurements are generally from the left edge of the paper, not including the perforated strip.

The substitute form Copy A must be an exact replica of the official IRS form with respect to layout and content. To determine the correct form measurements, see Exhibits A through CC at the end of this publication.

Hot wax and cold carbon spots are not permitted on any of the internal form plies. These spots are permitted on the back of a mailer top envelope ply.

Use of chemical transfer paper for Copy A is acceptable.

The Government Printing Office (GPO) symbol must be deleted.

Color and paper quality for Copy A (cut sheets and continuous pinfeed forms) as specified by JCP Code 0-25, dated November 29, 1978, must be white 100% bleached chemical wood, OCR bond produced in accordance with the following specifications.

Note. Reclaimed fiber in any percentage is permitted provided the requirements of this standard are met.

Chemical transfer paper is permitted for Copy A only if the following standards are met.

All copies must be clearly legible. Fading must be minimized to assure legibility.

All print on Copy A of Forms 1097-BTC, 1098, 1098-C, 1098-E, 1098-MA, 1098-Q, 1098-T, 1099-A, 1099-B, 1099-C, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099–LS, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-S, 1099–SB, 3921, 3922, 5498, and the print on Form 1096 above the statement, “Return this entire page to the Internal Revenue Service. Photocopies are not acceptable.” must be in Flint J-6983 red OCR dropout ink or an exact match. However, the four-digit form identifying number must be in nonreflective carbon-based black ink in OCR A font.

The shaded areas of any substitute form should generally correspond to the format of the official form.

The printing for the Form 1096 jurat statement and the text that follows may be in any shade or tone of black ink. Black ink should only appear on the lower part of the reverse side of Form 1096, where it will not bleed through and interfere with scanning.

Note. The instructions on the front and back of Form 1096, which include filing addresses, must be printed.

Separation between fields must be 0.1 inch.

Other printing requirements are discussed in Sections 2.1.5 through 2.1.9.

You must initiate, or have, a quality control program to assure OCR ink density. Readings will be made when printed on approved 20 lb. white OCR bond with a reflectance of not less than 80% (0.80). Black ink must not have a reflectance greater than 15% (0.15). These readings are based on requirements of the “BancTec IntelliScan XDS” Optical Scanner using Flint J-6983 red OCR dropout ink or an exact match.

The following testers and ranges are acceptable:

Important information: The forms produced under these specifications must be guaranteed to function properly when processed through High Speed Scan-Optics 9000 mm scanners. Forms require precision spacing, printing, and trimming.

Density readings on the solid J-6983 (red) must be between the ranges of 0.95 to 0.90. The optimal scanning range is 0.93. Density readings on the solid black must be between the ranges of 112 to 108. The optimal scanning range is 110.

Note. The readings are taken using an Ex-Rite 500 series densitometer, in Status T with Absolute or – paper setting under an Illuminate 5000 Kelvin Watt Light. You must maintain print contrast specification of ink and densitometer reflectivity reading throughout the entire production run.

Commissioner of Internal Revenue Attn: SE:W:CAR:MP:P:TP Business Publishing – Tax Products 1111 Constitution Ave. NW Room 6554 Washington, DC 20224

Type must be substantially identical in size and shape to the official form. All rules are either 1/2-point or 3/4-point. Rules must be identical to those on the official IRS form.

Note. The form identifying number must be nonreflective carbon-based black ink in OCR A font.

Generally, three Copies A of Forms 1098, 1099, 3921, and 3922 are contained on a single page (3-to-a-page), 8 inches wide (without any snap-stubs and/or pinfeed holes) by 11 inches deep.

Exceptions. Forms 1097-BTC, 1098, 1098-Q, 1099-B, 1099-DIV, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, 1099-OID, 1099-R, and 5498 contain two copies on a single page (2-to-a-page). Forms 1098-C and 1042-S are single-page documents.

There is a 0.33 inch top margin from the top of the corrected box, and a 0.2 to 0.25 inch right margin, with a +/- 1/20 (0.05) inch tolerance for the right margin. If the right and top margins are properly aligned, the left margin for all forms will be correct. All margins must be free of print. See Exhibits A through CC in Part 6 for correct form measurements.

These measurements are constant for certain Forms 1098, 1099, and 5498. These measurements are shown only once in this publication, on Form 1097-BTC (Exhibit B) 2-to-a-page and on Form 1098-E (Exhibit E) 3-to-a-page. Exceptions to these measurements, and form-specific measurements are shown on the rest of the exhibits.

The depth of the individual trim size of each 3-to-a-page form must be 3 2/3 inches, the same depth as the official form, unless otherwise indicated.

The depth of the individual trim size of each 2-to-a-page form is 5 1/2 inches.

Copy A (3-to-a-page and 2-to-a-page) of privately printed continuous substitute forms must be perforated at each 11 inches page depth. No perforations are allowed between forms on the Copy A page.

Exception. Copy A of Form W-2G may be perforated.

The words “Do Not Cut or Separate Forms on This Page” must be printed in red dropout ink (as required by form specifications) between the 3-to-a-page or 2-to-a-page. This statement should not be included after the last form on the page.

Separations are required between all the other individual copies (Copies B and C, and Copies 1 and 2 of Forms 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, 1099-OID, 1099-R, and Copy D for Forms 1099–LS, 1099-LTC, 1099-R, and 1042-S) in the set. Any recipient copies printed on a single sheet of paper must be easily separated. The best method of separation is to provide perforations between the individual copies. Each copy should be easily distinguished, whatever method of separation is used.

Note. Perforation does not apply to printouts of copies that are furnished electronically to recipients (as described in Regulations section 31.6051-1(j)). However, these recipients should be cautioned to carefully separate any copies. See Section 4.6.1, later, for information on electronically furnishing statements to recipients.

You must include the OMB Number on Copies A and Form 1096 in the same location as on the official form.

The following Privacy Act and Paperwork Reduction Act Notice phrases must be printed on Copy A of the forms as follows. It must also be printed on the Copy C, D, or E of the form retained by the filer.

A postal indicia may be used if it meets the following criteria.

The printer’s symbol (GPO) must not be printed on substitute Copy A. Instead, the employer identification number (EIN) or the vendor code of the form’s printer must be entered in place of the Catalog Number (Cat. No.). The 4-digit vendor code, preceded by four zeros and a slash, for example, 0000/9876, must appear in 12-point Arial font, or a close approximation, on Copy A only of Forms 1096, 1098-BTC, 1098, 1099, 3921, 3922, 5498, and W-2G. The vendor code is used to identify the forms producer. Vendor codes can be obtained free of charge from the National Association of Computerized Tax Processors (NACTP) via email at president@nactp.org. The use of a vendor code is recommended.

Note. Vendor codes from the NACTP are required by those companies producing the 1099 family of forms (Forms 1096, 1097-BTC, 1098, 1099, 3921, 3922, 5498, and W-2G) as part of a product for resale to be used by multiple issuers. Issuers developing 1099 family forms to be used only for their individual company do not require a vendor code.

The Cat. No. shown on the forms is used for IRS distribution purposes and should not be printed on any substitute forms.

The form must not contain the statement “IRS approved” or any similar statement.

The form recipient’s name, street address, city, state, ZIP code, and telephone number (if required) should be typed or machine printed in black ink in the same format as shown on the official IRS form. The city, state, and ZIP code must be on the same line.

The following rules apply to the form recipient’s name(s).

Because certain states require that trust accounts be provided in a different format, filers should generally provide information returns reflecting payments to trust accounts with the:

Although handwritten forms will be accepted, the IRS prefers that filers type or machine print data entries. Also, filers should insert data as directed by shading, or in the middle of blocks, well separated from other printing and guidelines, and take measures to guarantee clear, dark black, sharp images. Photocopies are not acceptable.

Truncating payee identification number on payee statements. Where permitted, filers may truncate a payee’s identification number (social security number (SSN), individual taxpayer identification number (ITIN), adoption taxpayer identification number (ATIN), or employer identification number (EIN)) on the payee statement (including substitute and composite substitute statements) furnished to the payee in paper form or electronically. Generally, the payee statement is that copy of an information return designated “Copy B” on the form. To truncate where allowed, replace the first 5 digits of the 9-digit number with asterisks (*) or Xs (for example, an SSN xxx-xx-xxxx would appear on the paper payee statement as ***-**-xxxx or XXX-XX-xxxx). See Treasury Decision 9675, 2014-31 I.R.B. 242, available at IRS.gov/irb/2014-31_IRB#TD-9675.

Caution. Recipient TINs must not be truncated on Copy A filed with the IRS.

Use the account number box on all Forms 1098, 1099, 3921, 3922, 5498, and W-2G for an account number designation when required by the official IRS form. The account number is required if you have multiple accounts for a recipient for whom you are filing more than one information return of the same type. Additionally, the IRS encourages you to include the recipients’ account numbers on paper forms if your system of records uses the account number rather than the name or TIN for identification purposes. Also, the IRS will include the account number in future notices to you about backup withholding. If you are using window envelopes to mail statements to recipients and using reduced rate mail, be sure the account number does not appear in the window. The Postal Service may not accept these for reduced rate mail.

Exception. Form 1098-T can have third-party provider information.

Exception. Use decimal points to indicate dollars and cents (for example, 2000.00 is acceptable).

Mail completed paper forms to the IRS service center shown in the Instructions for Form 1096 and in the 2020 General Instructions for Certain Information Returns. Specific information needed to complete the forms mentioned in this revenue procedure are given in the specific form instructions. A chart showing which form must be filed to report a particular payment is included in the 2020 General Instructions for Certain Information Returns.

The following specifications give the format requirements for substitute Form W-2G (Copy A only), which is filed with the IRS.

A filer may use a substitute Form W-2G to file with the IRS (referred to as “substitute Copy A”). The substitute form must be an exact replica of the official form with respect to layout and content.

You must follow these specifications when printing substitute Copy A of the Form W-2G.

Caution. The payee’s TIN (SSN, ITIN, ATIN, or EIN) must not be truncated on Copy A of Form W2-G.

If you do not use the official IRS form to furnish statements to recipients, you must furnish an acceptable substitute statement. Information presented in substitute statements should be in a point size large enough to be easily read by recipients. To be acceptable, your substitute statement must comply with the rules in this Part. If you are furnishing a substitute form, see Regulations sections 1.6042-4, 1.6044-5, 1.6049-6, and 1.6050N-1 to determine how the following statements must be provided to recipients for most Forms 1099-DIV and 1099-INT, all Forms 1099-OID and 1099-PATR, and Form 1099-MISC, or 1099-S for royalties. Generally, information returns may be furnished electronically with the consent of the recipient. See Section 4.6.1.

Note. A trustee of a grantor-type trust may choose to file Forms 1099 and furnish a statement to the grantor under Regulations sections 1.671-4(b)(2)(iii) and (b)(3)(ii). The statement required by those regulations is not subject to the requirements outlined in this section.

1099-PATR

The rules in this section apply to Form 1099-B, 1099-DIV (except for section 404(k) dividends), 1099-INT (except for interest reportable under section 6041), 1099-OID, and 1099-PATR only. You may furnish form recipients with Copy B of the official Form 1099 or a substitute Form 1099 (recipient statement) if it contains the same information as the official IRS form (such as aggregate amounts paid to the form recipient, any backup withholding, the name, address, and TIN of the person making the return, and any other information required by the official form). Information not required by the official form should not be included on the substitute form except for state income tax withholding information. But see section 4.3 regarding additional information that may be included on substitute and composite Forms 1099-B, such as basis for noncovered securities.

Note. Many of the information returns now include boxes for providing state withholding information as part of the official form, with additional copies for convenience. Payers may, however, provide the state withholding information separately (such as on a separate page or section) in order to assist the payee with completing a state income tax return that requires the attachment of any information return that includes state withholding amounts and payer numbers.

Exception for supplementary information. The substitute form may include supplementary information that will assist the payee with completing his or her tax return. Such information could include expense and cost basis factors related to the reporting for widely held fixed investment trusts (WHFITs), as required under Regulations section 1.671-5. The substitute statement should disclose to the payee that such supplementary information is not furnished to the IRS. See Section 4.3 for additional requirements when providing supplemental information with the Form 1099-B that is not furnished to the IRS.

Form 1099-B. For transactions reportable on Form 8949, brokers that use substitute statements should segregate dispositions of noncovered securities from covered securities, and further segregate long-term and short-term dispositions of covered securities. They may also segregate long-term from short-term dispositions of noncovered securities, to the extent that date acquired is known. For 2020 dispositions, the substitute Forms 1099-B may have up to five separate sections, each with a heading identifying which securities are included in the list, and each separately totaled. Each section, after totaling or within the heading for the section, should indicate how to report the transactions on Form 8949, as indicated.

1. Short-term transactions for which basis is reported to the IRS—Report on Form 8949, Part I, with Box A checked.

2. Short-term transactions for which basis is not reported to the IRS—Report on Form 8949, Part I, with Box B checked.

3. Long-term transactions for which basis is reported to the IRS—Report on Form 8949, Part II, with Box D checked.

4. Long-term transactions for which basis is not reported to the IRS—Report on Form 8949, Part II, with Box E checked.

5. Transactions for which basis is not reported to the IRS and for which short-term or long-term determination is unknown (to Broker). You must determine short-term or long-term based on your records and report on Form 8949, Part I, with Box B checked, or on Form 8949, Part II, with Box E checked, as appropriate.

For each section, each transaction may include information not reported to the IRS, such as basis, date acquired, and gain or loss. Therefore, for short-term dispositions where basis was not reported to the IRS, basis and date acquired may be shown just as it would be shown for short-term dispositions where basis was reported to the IRS.

For 2020 dispositions, each of the applicable sections must have Sales Price and Cost or Other Basis (if known) separately totaled. Net gain or loss, if included for any of the sections, may also be totaled.

Brokers may also use substitute Form 1099-B for transactions that are not directly reported on Form 8949. Examples include transactions involving regulated futures contracts, foreign currency contracts, and section 1256 option contracts. Any additional sections created for this purpose should be segregated from those transactions directly reportable on Form 8949.

The substitute form requirements in the following paragraphs also apply to Form 1099-B.

Forms 1099-INT, DIV, OID, and PATR. A substitute recipient statement for Form 1099-INT, 1099-DIV, 1099-OID, or 1099-PATR must comply with the following requirements.

A mutual fund family may furnish one statement (for example, one piece of paper) on which it reports the dividend income earned by a recipient from multiple funds within the family of mutual funds, as required by Form 1099-DIV. However, each fund and its earnings must be stated separately. The statement must contain an instruction to the recipient that each fund’s dividends and name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The statement cannot contain an aggregate total of all funds. In addition, a mutual fund family may furnish a single statement (as a single filer) for Forms 1099-INT, 1099-DIV, and 1099-OID information (see Section 4.2.1, later). Each fund and its earnings must be stated separately. The statement must contain an instruction to the recipient that each fund’s earnings and name, not the name of the mutual fund family, must be reported on the recipient’s tax return. The statement cannot contain an aggregate total of all funds.

You may enter a total of the individual accounts listed on the statement only if they have been paid by the same payer. For example, if you are listing interest paid on several accounts by one financial institution on Form 1099-INT, you may also enter the total interest amount. You may also enter a date next to the corrected box if that box is checked.

and W-2G

Statements to form recipients for Forms 1097-BTC, 1098, 1098-C, 1098-E, 1098-F, 1098-MA, 1098-Q, 1098-T, 1099-A, 1099-C, 1099-CAP, 1099-G, 1099-K, 1099-LS, 1099-LTC, 1099-MISC, 1099-NEC, 1099-Q, 1099-QA, 1099-R, 1099-S, 1099-SA, 1099-SB, 3921, 3922, 5498, 5498-ESA, 5498-QA, 5498-SA, W-2G, 1099-DIV (only for section 404(k) dividends reportable under section 6047), and 1099-INT (only for interest of $600 or more made in the course of a trade or business reportable under section 6041) can be copies of the official forms or an acceptable substitute.

Caution. The IRS does not require a donee to use Form 1098-C as the written acknowledgment for contributions of motor vehicles, boats, and airplanes. However, if you choose to use copies of Form 1098-C or an acceptable substitute as the written acknowledgment, then you must follow the requirements of this section.

To be acceptable, a substitute recipient statement must meet the following requirements.

Exception. If you are reporting a payment as “Other income” in box 3 of Form 1099-MISC, you may substitute appropriate language for the box title. For example, for payments of accrued wages and leave to a beneficiary of a deceased employee, you might change the title of box 3 to “Beneficiary payments” or something similar.

Note. You cannot make this change on Copy A.

1. All copies must be clearly legible.

2. All copies must be able to be photocopied.

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

Copies B, C, D, 1, and 2, as applicable, to be furnished to recipients and kept in the filers’ records, have been made online fillable at IRS.gov/forms-instructions for many forms referenced in these instructions. See the separate instructions for Forms 1098, 1098-E & T, 1098-F, 1098-Q, 1099-A & C, 1099-B, 1099-DIV, 1099-G, 1099-INT & OID, 1099-K, 1099-LS, 1099-MISC, 1099-NEC, 1099-PATR, 1099-R & 5498, 1099-S, 1099-SB, and 3921.

1099-OID, 1099-PATR, and 1099- S

A composite recipient statement is permitted for reportable payments consisting of the proceeds of brokerage and barter transactions, dividends, interest, original issue discount, patronage dividends, and royalties. The following forms may be included on a composite substitute statement, when one payer is reporting more than one of these payments during a calendar year to the same form recipient.

Generally, do not include any other Form 1099 information (for example, 1099-A or 1099-C) on a composite statement with the information required on the forms listed in the preceding sentence.

Although the composite recipient statement may be on one sheet, the format of the composite recipient statement must satisfy the following requirements in addition to the requirements listed earlier in Sections 4.1.2, 4.3, and 4.4, as applicable.

A composite recipient statement for the forms specified in Section 4.1.2 or 4.1.3 is permitted when one filer is reporting more than one type of payment during a calendar year to the same form recipient. A composite statement is not allowed for a combination of forms listed in Sections 4.1.2 and 4.1.3.

Exceptions:

Although the composite recipient statement may be on one sheet, the format of the composite recipient statement must satisfy the requirements listed in Section 4.2.1 as well as the requirements in Section 4.1.3. A composite statement of Forms 1098 and 1099-INT (for interest reportable under section 6049) is not allowed.

Information

A filer may include Form 1099-B information on a composite form with the forms listed in Section 4.1.2. Therefore, supporting, explanatory, or comparable relevant information for covered and noncovered lots on the 1099-B portion of the composite statement can be included. This information includes display on the payee statement of data elements such as basis for noncovered lots, explanatory remarks on permissible basis adjustments for covered lots, descriptions of the type of transaction (merger, buy to close, redemption, etc.), identification of contingent payment debt obligations, and lot relief methods.

If you wish to provide additional information to the investor on the same substitute recipient Form 1099-B, the form must follow the rules set forth in this Section 4.3 and should clearly delineate how the information is presented. Any information presented should make reference to its corresponding number on the official form, as appropriate. You should clearly categorize each type of information you are reporting.

An additional separate legend is required that explains exactly which pieces of information are and which are not reported to the IRS, to the extent, if any, the information is not already identified as not being reported to the IRS, as described in Section 4.1.2. It should clearly explain how the information is presented. You may present this legend in a way that is consistent with your design as long as it clearly indicates which information is being provided to the IRS. Additionally, a reminder to taxpayers that they are ultimately responsible for the accuracy of their tax returns is also required.

Form 1098 recipient statements (Copy B) must contain the following legends:

Required Legends for Forms 1097-BTC, 3921, 3922, and 5498

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

Note. If an amount of federal income tax withheld is shown on Form 1099-R or W-2G, Copy B (to be attached to the tax return) and Copy C must be furnished to the recipient. Copy D (Forms 1099-R and W-2G) may be used for payer records. Only Copy A should be filed with the IRS.

Copy A (“For Internal Revenue Service Center”) of all forms must be on top. The rest of the assembly must be arranged, from top to bottom, as follows.

Instructions for perforation of forms can be found in Section 2.1.8, earlier.

If you are required to furnish a written statement (Copy B or an acceptable substitute) to a recipient, then you may furnish the statement electronically instead of on paper. This includes furnishing the statement to recipients of Forms 1098, 1098-E, 1098-F, 1098-MA, 1098-Q, 1098-T, 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-LS, 1099-LTC, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-QA, 1099-R, 1099-S, 1099-SA, 1099-SB, 1042-S, 3921, 3922, 5498, 5498-ESA, 5498-QA, and 5498-SA. It also includes Form W-2G (except for horse and dog racing, jai alai, sweepstakes, wagering pools, and lotteries).

Note. Until further guidance is issued, you cannot furnish Form 1098-C electronically. Perforation (see Section 2.1.9, earlier) does not apply to printouts of copies of forms that are furnished electronically to recipients. However, recipients should be cautioned to carefully separate the copies.

If you meet the requirements listed in Sections 4.6.2 and 4.6.3, you are treated as furnishing the statement timely.

The recipient must consent in the affirmative to receiving the statement electronically and not have withdrawn the consent before the statement is furnished. The consent by the recipient must be made electronically in a way that shows that he or she can access the statement in the electronic format in which it will be furnished. You must notify the recipient of any hardware or software changes prior to furnishing the statement. A new consent to receive the statement electronically is required after the new hardware or software is put into service. Prior to furnishing the statements electronically, you must provide the recipient a statement with the following statements prominently displayed.

Additionally, you must:

For more information, see Regulations section 31.6051-1(j).

For electronic furnishing of:

Paper substitutes of Copies A, B, C, and D must be identical to the Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, and may be privately printed without prior approval from the Internal Revenue Service.

Caution. On the bottom of Copy B, left align the following text: (keep for your records) and right align the following text: Form 1042-S (2020).

Note. Copies A, B, C, and D of Form 1042-S may not contain multiple income types for the same recipient, that is, multiple rows of the top boxes 1–11 of the form. Only Copy E, retained by the withholding agent, can contain multiple income types.

Form 1042-S is subject to annual review and possible change. Withholding agents and form suppliers are cautioned against overstocking supplies of the privately printed substitutes.

Copies of the official form for the reporting year may be obtained from most IRS offices. The IRS provides only cut sheets of these forms. Continuous fan-fold/pin-fed forms are not provided.

Instructions For Withholding Agents

The Paperwork Reduction Act (the Act) of 1995 (P. L. 104-13) requires that:

1. Why the IRS needs the information,

2. How it will be used, and

3. Whether or not the information is required to be furnished to the IRS.

This information must be provided to any users of official or substitute IRS forms or instructions.

The OMB requirements for substitute IRS forms are:

For any copy other than Copy A, the OMB number must use one of the following formats.

1. OMB No. 1545-xxxx (preferred), or

2. OMB # 1545-xxxx (acceptable).

Caution. These requirements do not apply to substitute Forms 1042-S. See Section 5.1.4, earlier.

All substitute forms must state the Privacy Act and Paperwork Reduction Act Notice as listed in Section 2.1.10, earlier.

If no instructions are provided to users of your forms, you must furnish them with the exact text of the Privacy Act and Paperwork Reduction Act Notice.

Revenue Procedure 2019-24, 2019-29, I.R.B. 353, dated July 15, 2019, is superseded by this revenue procedure.

Exhibits A through CC illustrate some of the specifications that were discussed earlier in this revenue procedure. The dimensions apply to the actual size forms, but the exhibits have been reduced in size.

Generally, the illustrated dimensions apply to all like forms. For example, Exhibit E shows 11.00 inches from the top edge to the bottom edge of Form 1098-E and .85 inches between the bottom rule of the top form and the top rule of the second form on the page. These dimensions apply to all forms that are printed 3-to-a-page.

Exhibit B contains the general measurements for forms printed 2-to-a-page. All 2-to-a-page forms, except Form 1099-B, are 4.5 inches in height within the border lines. Form 1099-B is 4.67 inches in height within the border lines.

Exhibit E contains the general measurements for forms printed 3-to-a-page. All 3-to-a-page forms are 2.83 inches in height within the border lines.

The printed area of all forms is 7.3 inches wide.

All of the exhibits in this publication were updated to include all of the 2020 revisions for those forms that have been revised.

Keep in mind the following guidelines when printing substitute forms.

The following exhibits provide specifications for the forms listed in Section 1.1.2. Exhibits A, B, and E contain the general measurements for all of the forms. The remaining exhibits represent the images and may contain unique measurements as required by the form.