New 2019 IRS Form 1098-F and Instructions


IRS Issues Required Form for Government Agencies to Report Fines and Penalties

The instructions to the newly released 2019 IRS Form 1098-F are used to comply with a section of the Tax Cuts and Jobs Act (TCJA) that requires government and nongovernment entities to report amounts they receive from taxpayers for fines, penalties, etc.

For amounts generally paid or incurred on or after December 22, 2017, the TCJA states that no deduction is allowed for any otherwise deductible amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or specified nongovernmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law. An exception applies to payments that the taxpayer establishes are either restitution (including remediation of property) or amounts required to come into compliance with any law that was violated or involved in the investigation or inquiry.

Government agencies (or entities treated as such) must report to the IRS and to the taxpayer the amount of each settlement agreement or order entered into where the aggregate amount required to be paid or incurred to or at the direction of the government is at least $600 (or such other amount as may be specified by the IRS). The report must separately identify any amounts that are for restitution or remediation of property, or correction of noncompliance. The report must be made at the time the agreement is entered into. In March 2018, the IRS issued Notice 2018-23, which provides that reporting is not required under Internal Revenue Code (IRC) Section 6050X until the date specified in the proposed regulations that the IRS intends to issue. The specified date will not be earlier than January 1, 2019, and will not be earlier than the proposed regulations’ publication date. The IRS has not yet issued the proposed regulations.

The 2019 IRS Form 1098-F, and the instructions to that form, are to be used to implement IRC Section 6050X. Like most forms in the 1098 series and the 1099 series, there are three copies of the forms: one copy for the IRS, one for the taxpayer, and one for the governmental entity that received the money.

The 2019 IRS Form 1098-F asks for identifying information about the taxpayer. It also asks for a lot of information about the fine, including the total amount required to be paid as a result of the court order or agreement, the amount identified in the court order or agreement as being required to be paid to come into compliance with any law, whether multiple payments have been or will be made to satisfy the total amount required to be stated, and whether the taxpayer has already paid the total amount required to be paid.

Both the copy of the form to be provided to the IRS in the copy for the taxpayer must be filed by January 31, 2020.

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