Saturday April 20, 2024

8.1.3 IRS Tax Forms

IRS Tax Forms

Form 1099-R:  Form 1099-R reports the taxability of gift annuity payments to an annuitant or annuitants.

Filling Out Form 1099-R:  To correctly fill out Form 1099-R, provide the total amount distributed to the annuitant during the year in Box 1, titled "Gross Distribution."

Filing Form 1099-R:  As mentioned above, Copy A of all 1099-R forms must be filed with the IRS, along with Form 1096.

1099-R / 1096 Activities in Crescendo Administration Software:  The Crescendo Administration software allows organizations to easily organize and simplify administration of gift annuities.

Form 8949:  Form 8949 is used by taxpayers to report sales and exchanges of capital assets.

Filling Out Form 8949:  A basic recommendation on how to complete Form 8949 in certain circumstances can be found below.

Form 1099-R
Form 1099-R reports the taxability of gift annuity payments to an annuitant or annuitants. Charities must provide all active annuitants with their Form 1099-R by January 31st of each year. If filing paper forms, charities must submit Copy A of Form 1099-R to the IRS by February 28th. If filing electronically, charities must submit Copy A of Form 1099-R to the IRS by March 31st. If any of the dates listed above falls on a Saturday, Sunday or legal holiday, the forms may be submitted to the IRS on the next regular business day. Charities that fail to file a Form 1099-R for each annuitant may be subject to a fine of $30-$100 per information return depending on the length of time between the deadline and the date the return is filed

Filling Out Form 1099-R
To correctly fill out Form 1099-R, provide the total amount distributed to the annuitant during the year in Box 1, titled "Gross Distribution." This includes the ordinary income, the capital gain and the tax-free amounts. In Box 2a, titled "Taxable Amount," provide the sum of the ordinary income and capital gain distributed. The charity must advise the donor if any amount in Box 2a is taxable as a collectible or as Sec. 1250 gain. Collectibles are taxed at a rate of 28%. Sec. 1250 property is taxed at a rate of 25%. In Box 3, titled "Capital gain (included in box 2a)," provide only the capital gain amount. This box separates the capital gain from the ordinary income. In Box 5, titled "Employee contributions or insurance premiums," provide the tax-free amount of the gift annuity payments. Finally in Box 7, titled "Distribution code(s)," enter the letter "F."

On the left hand side of the form provide the charity's name and mailing address under, "Payer's name, street address, city, state and ZIP code." Provide the charity's tax ID number under, "Payer's Federal identification number." List the annuitant's Social Security number under, "Recipient's identification number." Give the annuitant's name and address in the box titled "Recipient's name."

If the charity has withheld any federal taxes, the amount of the withholding is reported in Box 4, titled, "Federal income tax withheld." Withholding by a charity for a U.S. Citizen or resident is not common.

Filing Form 1099-R
As mentioned above, Copy A of all 1099-R forms must be filed with the IRS, along with Form 1096. Form 1096 is an informational form providing the IRS with a summary of information from all 1099-R forms filed by the charity.

Forms filed with the IRS cannot be printed from the forms that are available on the IRS web site. These forms must be purchased from an outside vendor or supplied by the IRS. These forms are machine read and, thus, must be printed on special paper and with special ink. The 1099-R and 1096 forms provided on the IRS site are merely informational. A penalty of $30-$100 per return may be imposed by the IRS for forms that cannot be scanned.

To obtain the appropriate forms, go to www.irs.gov and click on "Forms and Publications" or call the IRS at 1-800-TAX-FORM (1-800-829-3676). Unfortunately, the forms provided by the IRS are not suitable for laser printers. If a charity prints its forms from a laser printer, it must order the forms from a tax forms supplier. Suppliers can be found through a web search for "1099-R forms."

Electronic Filing

An organization must file electronically if they are filing 250 or more 1099-R forms for any one payer. First time filers are required to submit Form 4419, Application for Filing Information Returns Electronically.

All transmitters who file information returns electronically are required to request authorization to file electronically. Previously, transmitters used Form 4419. Form 4419 was phased out effective August 1, 2022. Users should transition to the new Information Return Application for Transmitter Control Code (IR-TCC) to update information or submit a new application. For more information, view the instructions on the IRS website.

Sample End of year checklist

The following checklist is a sample of the steps a charity should take each year in order to comply with the filing requirements.
  • ORDER TAX FORMS
    If you are filing paper forms you must order the following:
    - Form 1099-R Copy A for the IRS (# of forms = # of annuitants + extras)
    - Form 1096 Summary for the IRS (1 copy per organization + extras)
    - Envelopes for sending copies to the annuitants
    Optional: Order 1099-R Copy B and C to send to each annuitant or print these copies directly from Crescendo Admin on plain white paper (preferably perforated through the middle).


  • PROCESS ALL PAYMENTS FOR Filing Year
    Print or record all payments (checks and EFT payments) due between January 1 and December 31 of the filing year. If any checks were returned or any electronic payments were not processed, you may need to correct, void or delete an entry in the payment register so that the tax information is calculated correctly.


  • CHECK ADDRESS & PAYMENT INFORMATION FOR YOUR ANNUITANTS
    Preview the 1099-R report listing all annuitants who received payments during the filing year. We recommend that you print this report and review the names, addresses, social security numbers and tax information of your annuitants.


  • CREATE NEW 1099-R, 1096 FORMS
    On your Admin main menu, go to "Activities" and "Create New 1099-R, 1096 Forms." The following screen allows the user to choose between printing paper forms (both 1099-R and 1096) or saving the 1099-R file for magnetic/electronic filing.


  • MAIL ANNUITANT COPIES BY THE END OF JANUARY
    Mail Copy B and Copy C to each annuitant! You may wish to include a personal letter from the charity, as well as some instructions on how to use the information provided on the 1099-R form to fill out the 1040 income tax return due in April. (Sample letter is included.)
    If such a letter is included, remember to inform the annuitant that this information is provided to assist in their tax preparation; however, it is not tax or legal advice.


  • SUBMIT PAPER FORMS TO THE IRS BY THE END OF FEBRUARY
    Typically, the end of February is the deadline for filing of paper forms with the IRS. However, if February 28th falls on a weekend, the deadline is pushed till the next business day. If you are filing paper forms, mail the red Copy A of all 1099-R forms as well as one red copy of the 1096 form per organization to the IRS.
    Note that as of 2009 the IRS no longer accepts magnetic media of any sort.


  • FOR ELECTRONIC FILING THE DUE DATE IS MARCH 31
    For those filing electronically, the procedure is slightly different. The FIRE system is on the Internet and requires a user login at http://fire.irs.gov. Refer to IRS Publication 1220 for detailed instructions on how to file electronically and apply for the first time. The initial application must be submitted a minimum of 45 days prior to the filing deadline.

1099-R / 1096 Activities in Crescendo Administration Software


The Crescendo Administration software allows organizations to easily organize and simplify administration of gift annuities. Its fully integrated tracking system produces checks to annuitants, year-end 1099Rs, numerous detailed reports and much more. The following information is designed to assist Admin users in utilizing some features of the software to produce and replicate Forms 1099-R and 1096.

ACCESS OLD 1099-R, 1096 FORMS

The user may retrieve copies of previous 1099-R and 1096 Forms that are stored in the database. Select the "Access Old 1099-R, 1096 Forms" menu option, enter the desired year and select the desired charity. You will have the choice of re-creating multiple copies of paper forms or even re-creating the IRS tax file required for electronic filing of 1099 information.

CREATE NEW 1099-R, 1096 FORMS

Crescendo Administration allows the user to print as many copies of the forms as needed and/or prepare the files for electronic filing. If your organization files paper forms, you will have to purchase at least "Copy A" of the IRS Form 1099-R as well as the 1096 Form. These can be obtained from the IRS directly or from another provider of government forms, sometimes even your local office supply store. Additional copies of the 1099-R (Copy B, C, D, 1 and 2) and 1096 can be created by your Admin software by printing the selections on plain paper.

The Crescendo Administration software allows the user to prepare the required 1099-R and 1096 forms for both paper filing as well as the data file for electronic filing. The 1099-R forms are used to report the distributions from pensions, annuities (including charitable gift annuities), profit-sharing and retirement plans, IRAs, insurance contracts, etc. The 1096 form is used as a cover page for the set of 1099 forms that are sent to the IRS and it shows the contact information for the payer, the type of form being submitted, the total number of forms as well as the total income and total withholding reported on those forms. The gift annuity administrator (typically the charity) is responsible for creating and submitting the 1099-R forms and the 1096 form for the IRS as well as providing 1099-R copies to the income recipients. The IRS provides general and specific instructions for the 1099 information returns, available on their web site www.irs.gov.

PRINT INDIVIDUAL 1099-R, 1096 FORM

Crescendo Administration allows the user to print a 1099-R for an individual anytime during the course of the year. This feature may be useful when an annuitant passes away and the user is required to provide a 1099-R form to be filed with the annuitant's final tax return. The software will prompt the use to enter the Social Security number of the annuitant and the taxation year. The software will calculate the proper taxation, based on the payment history for that year recorded in the database.

MERGE 1099-R LETTER TO ANNUITANTS

The Administration software allows the user to generate a mail-merged letter to all annuitants describing and explaining the 1099-R form that was generated for their gift annuity year-end tax reporting. The software will prompt the user to select the taxation year and the charity. The Crescendo word processor opens up to display the 1099-R letter template with mail merge fields highlighted in blue. You may edit the template, add or remove mail merge fields from the list provided. Save you changes for future use by selecting "File/Save Template" from the menu. To merge the annuitant's information click on the "Merged Document >>" command button at the bottom of your screen. It will then incorporate the specific information regarding each person's gift annuities into a separate letter. You may print these letters directly from the Crescendo word processor by selecting "File/Print" from the menu.

Form 8949

Form 8949 is used by taxpayers to report sales and exchanges of capital assets. This form should be used by donors to report capital gains related to the establishment of or payments under a charitable gift annuity. Form 8949 will be used by the donor (or tax preparer) in the preparation of the donor's individual income tax return.

If the donor is the annuitant, or the donor and his/her spouse are annuitants, then the donor (and/or spouse) would use Form 8949 each year to report any capital gains associated with the annuity payouts. Form 8949 can also be used in instances where a donor has funded a charitable gift annuity for another person other than the donor or a spouse.

Filling Out Form 8949

A basic recommendation on how to complete Form 8949 in certain circumstances can be found below. However, there are situations that may require additional steps. A taxpayer should consult with his/her tax preparer before filing a Form 8949 based on these instructions.

Current Annuity: Donor (and/or Spouse) as Annuitants

If the annuity is a charitable gift annuity (1) funded by the donor with long-term capital gain property and (2) the donor is the sole annuitant or the donor and the donor's spouse are the annuitants, then the annuitant's tax preparer should complete Form 8949 by:
  1. Checking box F on Part II of the 8949;
  2. Entering "Form 1099-R" in column (a);
  3. Entering the amount stated in box 3 of the 1099-R in column (d), Part II of the 8949; and
  4. Completing column (h) of the 8949.
Current Annuity: For Another Person (Other than Donor and Spouse)

The Deduction Worksheet in the Crescendo software can assist a donor (or donor's tax preparer) in the preparation of Form 8949 in cases involving a One-Life or Two-Life current annuity funded by a donor for another person (other than donor and donor's spouse) with long-term capital gains property. In such cases, the donor's tax preparer should complete Form 8949 by:
  1. Checking box F on Part II of the 8949;
  2. Completing column (a);
  3. Entering the amount found on Line E of the Deduction Worksheet (from the Crescendo software) to report the Present Value of the Annuity in Column (d) of the 8949;
  4. Entering the amount found on Line N of the Deduction Worksheet to report the Basis Allocated to the Annuity in Column (e) of the 8949; and
  5. Entering the amount from Line O of the Deduction Worksheet to identify the Gain Allocated to the Annuity in column (h) of the 8949.

Related Topics on IRS Tax Forms

3.3.4  Gift Annuity Documents:    An annuity contract is an agreement between the charity and the donor. There is no required federal form. However, as a result of federal and state regulatory requirements, there are several provisions that should be included in all gift annuity documents.

3.3.5  Securities Charitable Gift Annuity Disclosure:    As a result of litigation in the mid-1990s, two important pieces of federal legislation were passed with respect to gift annuities. The Charitable Gift Annuity Antitrust Relief Act of 1995 and the Charitable Donation and Antitrust Immunity Act of 1997 enabled charities to offer the same rates as other charities that do gift annuities.

3.3.6  State Regulation:    While regulation of the issuance of charitable gift annuities varies greatly by state, there are four basic types in this area that vary in the degree of regulation: registration states, notification states, conditional exemption states and silent states.

8.1.2  State Registration Compliance:    Complying with Gift Annuity Regulations: Once a gift annuity program is selected, compliance with the applicable state legal requirements for issuing gift annuities is necessary.

      Quiz-Basic



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