Latest developments in information reporting.

• Author: Elly, Mark H.
• Position: Rules for payments made on behalf of persons other than the payor, payments made to joint payees

In October 2000, Treasury issued its long-awaited proposed "middleman" regulations (REG-24624996) under Sec. 6041, addressing information reporting requirements for certain payments made on behalf of persons other than the payor, and payments made to joint payees.

Payments on Behalf of Others

Under Prop. Regs. Sec. 1.6041-1(e)(1), a person who makes a reportable payment on behalf of another person, and either performs a management or oversight function in connection with the payment or has a significant economic interest in the payment, must report under Sec. 6041. The regulations define a "management or oversight function" as an activity that is more than merely administrative or ministerial. A "significant economic interest" in a payment is deemed to be an economic interest that would be compromised if the payment were not made. Thus, a person who exercises discretion or supervision in connection with a reportable payment is performing a management or oversight function and must issue a Form 1099 for that payment. Likewise, a bank has a significant economic interest in a reportable payment to a contractor performing repairs when damage occurs to property secured by a mortgage held by the bank, and therefore the bank must issue a Form 1099-MISC for the payment.

Joint Payments

The proposed regulations state that a payment made jointly to two or more payees may be fixed and determinable income, and thus reportable to one payee, even though it is not reportable to the other payee. As a result, when a health insurance company makes a payment jointly to a doctor and the patient for services rendered, it must issue an information return to the doctor for whom the income is fixed and determinable, even though the payment is not reportable to the patient.

Reporting Gross, Not Net

The proposed regulations reemphasize the position taken in several existing revenue rulings that amounts to be reported as paid to a payee are the gross amount of the payment before fees, commissions, expenses or other amounts owed by the payee to another person that have been deducted from the payment.

The proposed regulations are to be applicable for payments made on or after the beginning of the first calendar year that begins after final regulations are published.

New Form W-9, Request for Taxpayer Identification Number

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