NOTES ON RECENT NEWS AND TAX GUIDANCE
New de minimis threshold for filing corrected Forms 1099
In new IRS Notice 2017-9 the IRS has established its administrative plans for implementing the
changes made by the PATH Act regarding the de minimis error safe harbor from information reporting
penalties under IRC sections 6721 and 6722 as well as any payee election (also provided for in the
new law) to override the payer’s safe harbor. The IRS has plans to ultimately issue regulations, and
to the extent the regulations incorporate the rules contained in this notice, the regulations will be
effective for returns required to be filed, and payee statements required to be furnished, after
December 31, 2016.
Under the safe harbor, an error on an information return or payee statement is not required to
be corrected, and no penalty is imposed, if the error relates to an incorrect dollar amount and the error
differs from the correct amount by no more than $100 ($25 in the case of an error with respect to an
amount of tax withheld). However, new IRC sec. 6722(c)(3)(B) provides that the safe harbor does not
apply to any payee statement if the payee makes an election that the safe harbor not apply; the
election to be made at such time and in such manner as the Secretary may prescribe. Section 6721(c)
(3)(B) provides that the safe harbor does not apply with respect to any incorrect dollar amount to the
extent that such an error on an information return relates to an amount with respect to which a payee
election is made under section 6722(c)(3)(B). Accordingly, if an election is in effect, a payer may be
subject to penalties for an incorrect dollar amount appearing on an information return or payee
statement even if the incorrect amount is a de minimis error.
Notice 2017-9 addresses the method for a payee to make such an election and also clarifies that
the de minimis error safe harbor does not apply in the case of an intentional error or if a payer fails
altogether to file an information return or furnish a payee statement.
New Final and Temporary Regulations under I.R.C. chapters 3 and 4
TD 9808 provides new regulations under chapter 3 for certain payments of U.S.-source income to
foreign individuals and entities and includes changes to many of the foreign provisions found in 1099
information reporting sections of the Code, including to regulations under IRC §6041, §6042, §6045,
§6049, and §6050N. Related REG-134247–16 contains proposed regulations by cross-reference to
temporary regulations in TD 9808.
TD 9809 provides new regulations under chapter 4 for FATCA compliance.
REG-103477-14 proposes new regulations for verification actions required of FFIs and certain NFFEs.
ITINs. Notice 2016-48 provides guidance for the new ITIN process dictated by the PATH Act,
including no incorrect-TIN penalty if an expired ITIN used on an information return.
Significant changes in the use and issuance of ITINs were enacted by Congress in the December 2015
PATH Act, including the expiration of ITINs. Some ITINs expire December 31, 2016. An ITIN (Individual
Taxpayer Identification Number) is a nine-digit number assigned by the IRS to an individual who is
required to have a U.S. tax identification number for U.S. tax purposes but does not have and does not
qualify to be issued a social security number.
No incorrect-TIN penalties for expired ITINs: Filers of information returns (including the 1099 and
1098 series and Form 1042-S) who file and furnish information returns with an expired payee ITIN will
not be subject to information return penalties under IRC sections 6721 or 6722 solely because the ITIN
is expired. ITINs may continue to be used for information return purposes regardless of whether they
have expired for individual income tax return filing purposes. This is a relief to members of the
information reporting community who were wondering how they could be expected to track and code
for ITIN expiration. And, an individual whose expired ITIN is used only on information returns filed and
furnished by third parties is not required to renew the ITIN unless the person is also required to file a
U.S. tax return.
COKALA Tax Information
Reporting Solutions, LLC
|COKALA Tax Information Reporting Solutions, LLC - telephone 734.629.5155
PO Box 2224, Ann Arbor MI 48105-2224 - fax 734.428.0702