Prop. regs. on sec. 6045(f) attorney reporting.

• Author: Pflieger, Deborah J.
• Position: IRS regulations; IRC section 6045(f

Prop. Regs. Sec. 1.6045-5 was issued on May 21, 1999, addressing the controversial reporting requirements for gross proceeds paid to attorneys in connection with legal services. The regulations are extremely broad and require an extensive amount of reporting under the provision. The proposed effective date would make the regulations applicable to payments made after 1999.

Background

Sec. 6045(f) was added to the Code by Section 1021 of the Taxpayer Relief Act of 1997 (TRA '97) and requires the information reporting of gross proceeds paid in the course of a trade or business to attorneys in connection with legal services. No information is required under Sec. 6045(f) for the portion of a payment required to be reported under the vendor reporting provisions contained in Sec. 6041(a) or the wage reporting provisions of Sec. 6051. The TRA '97 also provided that the general exception for reporting of payments to corporations would no longer apply to corporations providing legal services.

Proposed Regulations

The proposed regulations contain a number of important provisions:

* Prop. Regs. Sec. 1.6045-5(a) clarifies that there is no threshold amount below which reporting is not required, as compared to the $600 de minimis threshold applicable to payments for attorneys' services.

* Gross proceeds paid to corporations engaged in providing "legal services" are reportable under Sec. 6045(f).

* The term "legal services" is defined in Prop. Regs. Sec. 1.6045-5(d) to include any services performed by or under the supervision of an attorney. Therefore, Sec. 6045 arguably applies to attorney/ accountants. The preamble to the regulations states that, while some commentators requested a narrow definition of the term that would exclude any services that did not require that the provider be an attorney (e.g., property or financial management services), these commentators also stated that the attorney would most likely be collecting a fee for rendering those services. As such, the IRS and Treasury chose to propose a broad definition of legal services that includes any services performed by or under the supervision of an attorney.

* Prop. Regs. Sec. 1.6045-5(a)(1)(iii) provides that payors required to report under Sec. 6045(f) are not relieved of other reporting obligations that may arise under other pre-existing or concurrently existing reporting requirements. In fact, the regulations specifically provide in Example 1 that, if a payor makes a joint payment to...