The IRS has released their tax information reporting form changes for 2010. There are significant changes for some of the forms. Tax Year 2010 is also the year when the new forms 3921 and 3922 will be required to be reported by all applicable businesses (Note: the 1099-K is also new for Tax Year 2010, but only impacts firms that process credit card transactions on behalf of merchants). In addition to these new forms and existing form layout changes, the IRS has made a couple of sweeping changes across most forms: truncation of SSN, ITIN and ATIN on paper statements to payees for Forms 1098, 1099 and the 5498 series; and no longer allowing logos, slogans and advertising on information returns for Tax Year 2010. This is for forms 1096, or Copy A of Forms 1098, 1099, 5498, W-2G, 1042-S or any Recipient statements. Further information on logos and advertising can be obtained from the IRS Publication 1179, “General rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498 and W-2G (and 1042-S)”.

We will provide a brief summary of the new forms 3921 and 3922, TIN Masking and the elimination of logos/slogans/advertising on forms in this post. Tomorrow’s post will cover changes to existing forms and instructions.

NOTE: Specific form instructions should be referred to for a detailed explanation of each change.

Forms 3921 and 3922 – 2010 will be the first reporting year for these forms, the IRS has not published the final forms yet but look for them later in the summer.

• Form 3921: Exercise of a Qualified Incentive Stock Option Under Section 442(b) is to be used to report transfer of an employer’s stock to an employee pursuant to the exercise of an incentive stock option.
• Form 3922: Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c) is to be used to report transfer of stock acquired via an employee stock purchase plan. Both forms have a due date of February 28 (March 31^st if filed electronically) to IRS and January 31^st to Recipient.

What to do: Section 6039 of the Internal Revenue Code requires a corporation to provide a written information statement to an employee and to file a return with the IRS when the corporation has either transferred stock to such employee in connection with the employee’s exercise of an ISO (Incentive Stock Option), OR recorded the transfer of stock acquired by such employee under an employee stock purchase plan (ESPP). When the final guidance on the forms and instructions have been released by the IRS (as of this posting, the IRS has not released final versions of these forms or their instructions), business should work with their internal IT teams to make sure proper data is being collected and work with your Tax Reporting soluiton to form structure and reporting requirements are met.

TIN masking/truncation – Notice 2009-93 now allows some types of payee identification numbers (SSN, ITIN, ATIN) on payee statements to be truncated for filers of information returns in the Form 1098 series, Form 1099 series and Form 5498 on paper payee statements for tax years 2009 and 2010. For more information on the specific rules around truncating TINs, check out our earlier blog post .

What to do: Make sure your current 1099 reporting solution can accomodate the current rules and that you are collecting the TIN type for all payees as EIN payees are excluded by the regulation.

Logos, slogans and advertising information – these marks are no longer allowed on on certain information returns starting in Tax Year 2010. Forms impacted include: Form 1096, amd Copy A of Forms 1098, 1099, 5498, W-2G, 1042-S or any recipient statements. While logos, slogans, and advertising have been allowed on these forms in the past, the rules allowing their inclusion have expired as of Tax Year 2010. See page 7 of IRS Publication 1179 for further background and direction.

What to do: Businesses should be aware that that logos, slogans and advertising are not allowed by IRS rules, but many in industry are speculating that the IRS will not be enforcing these rules given the long standing nature of logos, slogans, and adverting on forms. Businesses will have to make a decision on their own as to whether they want to continue to apply these identifying marks to their information returns to recipients. Strictly speaking you must remove the logos, slogans and advertising from your forms.