As mentioned in our blog post yesterday, the IRS has released their tax information reporting form changes for 2010. There are significant changes for some of the forms.   While yesterday’s post covered new forms 3921 and 3922, TIN masking and the elimination of logos, slogans and advertising, today’s post covers in more specificity all changes to existing forms.

NOTE: Specific form instructions should be referred to for a detailed explanation of each change.  If you are currently using a Convey solution, the changes noted below will be accomodated within your solution for purposes of the creation of forms and instructions.

Form 1098 - Mortgage Interest Statement: The instructions under Box 4 have changed on this form.  For Tax Year 2010, the $600 reporting threshold is determined on a mortgage by mortgage basis. Lenders do not need to aggregate mortgage insurance premiums received on all of the mortgages of an individual to determine whether the $600 threshold is met. Lenders do not need to report mortgage insurance premiums of less than $600 received on a mortgage, even though they may receive a total of $600 or more of mortgage premiums on all of the mortgages for an individual in a calendar  year. The due date for this form is February 28 (March 31^st if filed electronically) to IRS and January 31^st to Payer/Borrower.

What to do: This instructional change is significant.  Your back-office systems and/or Tax Reporting solution needs to be modified to apply these reporting rules to premiums received to determine reportable amounts.

Form 1098-B – Proceeds From Broker and Barter Exchange Transactions: On Copy B, the following instructions for Box 12 regarding the Recipient have been added: “Box 12. If checked, you cannot take a loss on your tax return based on gross proceeds from an acquisition of control or substantial change in capital structure reported in box 2. Do not report this loss on Schedule D (Form 1040). The broker should advise you of any losses on a separate statement.” The due date for this form is February 28 (March 31^st if filed electronically) to IRS and February 15 to Recipient (the due date is March 15 for reporting by trustees and middlemen of Widely Held Fixed Investment Trusts – WHFITs).

What to do: Addition of instructions may affect form layout and printing; make sure you Print provider is informed of this change.

Form 1098-C – Contributions of Motor Vehicles, Boats, and Airplanes: On Copy B, in the “Instructions for Donor” an extra phrase has been added instructing the taxpayer to attach Copy B to Form 8453 “U.S. Individual Income Tax Transmittal for an IRS e-file Return”, if e-filing. The due date for this form is February 28 (March 31^st if filed electronically) to IRS; To Donor – 30 days from date of sale or contribution.

What to do: Recipients (clients) should be informed of this instructional change to help them file correctly when and if, e-filing.

Form 1099-G – Certain Government Payments: Boxes 10a, 10b and 11 are three new boxes added to allow reporting of state income tax withheld. As a result, reporting instructions for each of the new boxes have been added for those states requiring state income tax withholding on unemployment compensation. The due date for this form is February 28 (March 31^st if filed electronically) to IRS; January 31^st to Recipient.

What to do: This is a major change involving form layout, instructions and reporting requirements. Your Tax Reporting solution should be modified and Print provider notified of this change as printing and state filing requirements are affected.

Form 1099-H – Health Coverage Tax Credit (HCTC) Advance Payments: The Box 2 caption has changed to “No. of mos. For which HCTC payments received”. In 2009, Box 2 had the caption: “No. of mos. HCTC advance payments received”. Also, the description of Box 1 (in the 1099-H Instructions) has changed to reflect that HTC advance payments cannot exceed 80% of total health insurance premiums. The due date for this form is February 28 (March 31^st if filed electronically) to IRS; January 31^st to Recipient.

What to do: The slight change in the Box 2 title has not changed the meaning and so the box still functions in the same manner as last year. However there is a change in the total amount received in insurance premiums not exceeding 80% of the total health insurance premium for the individual. The figure last year was 65%. This instructional change affects the reporting requirement on this form and should be noted and accomodated within your reporting system.

Form 1099-INT – Interest Income: For Box 1, the instructions for Recipient now include reporting of credits from qualified school construction bonds and Build America bonds. And a Box 10 has been added to report the Committee on Uniformed Security Identification Procedures (CUSIP) number for each tax-exempt bond for which interest was reported in Box 8. The due date for this form is February 28 (March 31^st if filed electronically) to IRS; February 15  to Recipient (the due date is March 15 for reporting by trustees and middlemen of Widely Held Fixed Investment Trusts – WHFITs).

Instructions for 1099-INT and 1099-OID: A “What’s New” text has been added under Interest to holders of tax credit bonds, explaining that credit allowed to holders of Build America bonds and Qualified school construction bonds is treated as interest. Also a “What’s New” section has been added along with instructions for reporting CUSIP number of tax-exempt bond for which tax-exempt interest is reported in Box 8.

What to do: The addition of a new box 10 relating to the contents of Box 8 and instructional changes affect form layout and functionality. Make sure the Tax Reporting solution and Print provider are informed as this affects printing and reporting requirements.

Form 1099-R – Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

There are a number of changes in this form:

• A new code W has been added to the list of codes for Box 7 in the instructions for the Recipient. Code W is to be used to report charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements.
• Code E title changed to Distributions under Employee Plans Compliance Resolution System (EPCRS) in the instructions for Recipient.
• For Code 6 in the instructions for Recipient, Qualified long-term care insurance contracts were added to the list of Section 1035 exchanges.
• Box 1: The following has been added in the instructions for Recipient, “the reporting of charges or payments made against the cash value of an annuity contract or the cash surrender value of a life insurance contract for purchasing qualified long-term care insurance”.
• Due date: February 28 (March 31^st if filed electronically) to IRS; January 31^st to Recipient.

What to do: The addition of a new code W and other instructional changes affect how this form can be used and both source systems and Tax Reporting systems should modified to accomodate these changes. The addition and change in some instructions may affect printing so Print Providers should be informed of this.

Form 5498 – IRA Contribution Information:

There are a number of changes in this form:

• The check box in Box 11 has been moved to the right for the convenience of issuers of the form.
• Box 11, the description in the Instructions for the Participant has reverted to the same wording as found in previous versions of the form.
• Boxes 15a and 15b of Form 5498 have been shaded out as no further catch-up contributions to IRAs due to certain employer bankruptcies are permitted in place of the higher contribution limit for individuals 50 and above.
• As a result, references to catch-up contributions in Special reporting for 2009, and the reporting instructions for Boxes 15a and 15b have been removed due to expiration of this provision. The references to the additional contribution rules for 2004 and 2005 under Special reporting for U.S. Armed Forces in designated combat zones have also been removed due to expiration of this provision on May 28, 2009. The due date: May 31 to IRS; (To Participant) For FMV/RMD Jan 31^st; For Contributions, May 31^st.

What to do: The shift in position of the check box to the right in Box 11, and the shading of boxes 15a and 15b as they’re no longer being utilized will clearly affect printing, form layout and how the form can be used. Tax Reporting solution and Print providers should be informed of these changes. 

Instructions for Forms 1099-R and 5498: New additions to the instructions for Form 1099-R state – “Generally, report distributions from traditional, SEP, and SIMPLE IRAs in boxes 1 and 2a, check the Taxable amount not determined box in box 2b.” It should be noted that in 2009 the above instructions stated, “Generally, box 2a should be left blank when reporting distributions from traditional or SEP IRA’s. Box 2b, Taxable amount not determined, should be checked”.

What to do: This is an important change in instructions affecting 2010 reporting requirements. Your Tax Reporting solution should be modified to accomodate this new reporting requirement.