program presented april 10, 2012 · april 10, 2012, from _ o’clock to _ o’clock and i...

4/4/2012

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IRS 1099 Reporting of

PROGRAM PRESENTED APR I L 10 , 2012

Settlements and Payments to Attorneys

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Marianne Couch, JD Cokala Tax Information Reporting Solutions, LLC PO Box 2224 Ann Arbor, MI 48106 Phone 734-629-5155 [email protected] Marianne Couch, JD, a Principal in the Cokala tax group since its founding early in 2007, is an experienced and well-known advisor on U.S. federal and state tax information reporting compliance. She is a frequent lecturer at major tax conferences and the author of The Master Guide to Form 1099 Compliance and numerous published articles. She is a founding partner of Cokala. Previously, she was for many years the Research Director of the tax reporting specialty firm Balance Consulting, and chaired special training and advisory services provided to large organizations and academic and nonprofit institutions. She also formerly served as the executive director of the National Association of Form 1099 Filers, Inc. Marianne was an appointee for three years to the IRS Information Reporting Program Advisory Committee (IRPAC), where she was Chair of the IRPAC Subcommittee on Small Business and Self-Employed (SBSE) tax issues. In this capacity, she testified annually before the IRS Commissioner on issues of concern to the information reporting community. Marianne has previously worked as a litigator for a large Michigan law firm, where she represented individuals and large clients in many types of civil actions, and formerly served as a Research Attorney for the Michigan Court of Appeals. She received her JD, cum laude, from the Michigan State University School of Law, and is a member of the State Bar of Michigan.

Cokala Tax Information Reporting Solutions, LLC PO Box 2224 – Ann Arbor, MI 48106 – tel. 734.629.5155 – www.cokala.com

Form 1099 Tax Reporting Compliance:IRS 1099 Reporting of Settlements and Payments to Attorneys

PROGRAM EVALUATIONPlease complete this brief evaluation , sign below, and fax it to Cokala at 734-428-0702, or scan and save it as a PFD file and email to [email protected]. Your comments are an important part of our process of improving our train-ing programs, and we thank you for taking the time to provide your comments. To receive CPE credits, sign and date the certification below. Your credit certificate will be mailed to you.

Please circle the number that best indicates your evaluation, with 5 representing the highest evaluation, and 1 representing the lowest.1. Were the stated learning objectives met? 5 (highest) 4 3 2 1 (lowest) Comments:

2. Were the program materials relevant and sufficient to contribute to achieving the learning objectives? 5 (highest) 4 3 2 1 (lowest) Comments:

3. To the best of your knowledge, were the program materials accurate? 5 (highest) 4 3 2 1 (lowest) Comments:

4. Was the time allocated to the learning activity appropriate? 5 (highest) 4 3 2 1 (lowest) Comments:

5. Was instructor Marianne Couch an effective instructor? 5 (highest) 4 3 2 1 (lowest) Comments:

6. Was the web and audio technical service satisfactory? 5 (highest) 4 3 2 1 (lowest) Comments: 7. Were facilities and/or technological equipment appropriate? 5 (highest) 4 3 2 1 (lowest) Comments: 8. Were the handout materials (the PDF you received in advance) satisfactory? 5 (highest) 4 3 2 1 (lowest) Comments:

9. If applicable, were prerequisites appropriate? NA 5 (highest) 4 3 2 1 (lowest) Comments:

10. Do you have followup questions we should contact you about?

Thank you!COKALA Tax Information Reporting Solutions

Tel. 734.629.5155 • www.cokala.com

I certify that I attended the “IRS 1099 Reporting of Settlements and Payments to Attorneys” program by webcast on April 10, 2012, from _____ o’clock to _____ o’clock and I wish to receive the total recommended number of CPE credit hours for this continuing education program. Signature: __________________________________________________

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IRS 1099 Reporting of IRS 1099 Reporting of Settlements Settlements and and Payments to AttorneysPayments to Attorneys

Marianne Couch J DMarianne Couch J DMarianne Couch, J.D.Marianne Couch, [email protected]@cokala.com

AgendaAgenda Information Information reportsreports Legal damagesLegal damages Gross proceeds reportingGross proceeds reporting Multiple 1099sMultiple 1099s

2©2007-2012 COKALA Tax Information Reporting Solutions, LLC.

The dangerThe danger Getting the information you needGetting the information you need ExceptionsExceptions

Important NoteImportant Note

This discussion assumes that both the This discussion assumes that both the claimant and the attorney/law firm are U.S. claimant and the attorney/law firm are U.S. persons.persons.

The rules discussed herein do not apply to The rules discussed herein do not apply to The rules discussed herein do not apply to The rules discussed herein do not apply to non U.S. persons.non U.S. persons.


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Information ReportsInformation Reports

Forms 1099Forms 1099 Form 1042Form 1042--SS Form WForm W--2, etc.2, etc.


Information ReportsInformation Reports

Filed by thirdFiled by third--parties (you) reporting parties (you) reporting payments made to recipients/service payments made to recipients/service providers.providers.


In general, IRS uses information on reports In general, IRS uses information on reports to match against income reported on to match against income reported on taxpayer's return.taxpayer's return.

DollarDollar--forfor--dollar match often not possible.dollar match often not possible. Forms 1099 INT, DIV, OIDForms 1099 INT, DIV, OID

Reportable v TaxableReportable v Taxable Usually, payments are reportable because Usually, payments are reportable because

they are taxable, but not always.they are taxable, but not always. Sometimes, payments are taxable, but not Sometimes, payments are taxable, but not

reportable.reportable.


For example, taxable scholarship payments For example, taxable scholarship payments made to U.S. Individuals.made to U.S. Individuals.

Sometimes, payments are reportable, but Sometimes, payments are reportable, but possibly not taxable.possibly not taxable. For example, gross proceeds paid to attorneys, For example, gross proceeds paid to attorneys,

reported in box 14 of the Form 1099reported in box 14 of the Form 1099--MISC.MISC.

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Legal Damages Paid to Legal Damages Paid to ClaimantsClaimants

Reportable if taxableReportable if taxable Not taxable:Not taxable:

Personal physical injury or sicknessPersonal physical injury or sickness Medical expense Medical expense reimbursementreimbursement

Possibly taxable, but not reportable:Possibly taxable, but not reportable:


y py p NonNon--fixed and determinable amounts of income (i.e., property fixed and determinable amounts of income (i.e., property

damages)damages) Taxable payments reported Taxable payments reported to claimants in to claimants in box 3 of the box 3 of the

Form 1099Form 1099--MISC.MISC. Taxable Taxable back payback pay == Form WForm W--22

Punitive DamagesPunitive Damages

Punitive damages are always reportable (box 3 Punitive damages are always reportable (box 3 of the MISC), even if the underlying claim is of the MISC), even if the underlying claim is based on physical injury.based on physical injury.


Emotional Damages/Pain and Emotional Damages/Pain and SufferingSuffering

Payments to compensate for emotional Payments to compensate for emotional damages/pain and suffering are taxable and damages/pain and suffering are taxable and reportable to the claimant, reportable to the claimant, unless they arise unless they arise from an underlying claim alleging personal from an underlying claim alleging personal


from an underlying claim alleging personal from an underlying claim alleging personal physical injury.physical injury.

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Legal Damages PaymentsLegal Damages Payments Payments to compensate a person for an “injury.”Payments to compensate a person for an “injury.”

Injury can, but does not have to be, physicalInjury can, but does not have to be, physical

Defamation Defamation –– nonphysicalnonphysical Wrongful Termination Wrongful Termination –– nonphysicalnonphysical Discrimination Discrimination –– nonphysicalnonphysical

W f l d h W f l d h h i lh i l


Wrongful death Wrongful death –– physicalphysical Breach of contract (not involving a physical injury) Breach of contract (not involving a physical injury) ––

nonphysicalnonphysical Lost profits Lost profits –– non physical, and considered determinable (so non physical, and considered determinable (so

reportable)reportable) Physical injury, etc.Physical injury, etc. Claim just needs to be Claim just needs to be made made

No court action or legal suit required.No court action or legal suit required.

Beneficial OwnerBeneficial Owner Payment of legal damages to settle a claim Payment of legal damages to settle a claim

brought by Sam Smith.brought by Sam Smith. Check is made payable to Sam Smith’s attorney, Check is made payable to Sam Smith’s attorney,

but Sam is the beneficial owner of the income.but Sam is the beneficial owner of the income. He has assigned payment to someone elseHe has assigned payment to someone else


He has assigned payment to someone else.He has assigned payment to someone else. Because Sam remains the beneficial owner, he Because Sam remains the beneficial owner, he

receives a 1099, if one is receives a 1099, if one is required (i.e., if the required (i.e., if the damages payment constitutes taxable income to damages payment constitutes taxable income to him.him.

Because of the attorney gross proceeds reporting Because of the attorney gross proceeds reporting requirement, Sam’s attorney requirement, Sam’s attorney also gets also gets a 1099.a 1099.

Attorney Gross ProceedsAttorney Gross Proceeds

Reported in box 14 of the Form 1099Reported in box 14 of the Form 1099--MISCMISC $600 aggregate $600 aggregate thresholdthreshold Box 7 v Box Box 7 v Box 14 (no corporate exemption for 14 (no corporate exemption for

ith t f t)ith t f t)


either type of payment)either type of payment) If attorney/law firm performed services for your If attorney/law firm performed services for your

organization, report these payments in box 7organization, report these payments in box 7 If attorney/law firm performed services for If attorney/law firm performed services for

someone else, report these payments in box 14someone else, report these payments in box 14

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Box 3 and Box 14Box 3 and Box 14 If attorney's/law firm's name is on the check, If attorney's/law firm's name is on the check,

report the total amount of the check in box 14.report the total amount of the check in box 14. If the legal damages payment to the claimant is If the legal damages payment to the claimant is

taxable, you must also report this amount to taxable, you must also report this amount to the claimant in box 3 the claimant in box 3 –– even if the claimant's even if the claimant's


name is not on the check.name is not on the check. This means you may be issuing two (or more) This means you may be issuing two (or more)

Forms 1099Forms 1099--MISC for a single check.MISC for a single check. For example, one to the attorney, reporting the For example, one to the attorney, reporting the

amount in box 14, and one to the claimant, amount in box 14, and one to the claimant, reporting the amount in box 3.reporting the amount in box 3.

Legal Damages Reporting and Legal Damages Reporting and Attorney PaymentsAttorney Payments

Can become very complicated.Can become very complicated. Several 1099s (and maybe a WSeveral 1099s (and maybe a W--2) may need to be issued 2) may need to be issued

for a single check.for a single check.

Need certain information to report appropriately.Need certain information to report appropriately.


These payments are subject to the TIN and backup These payments are subject to the TIN and backup withholding requirements.withholding requirements.

If payments are for large dollar amounts, tax If payments are for large dollar amounts, tax withholding liability will also be large and, if the withholding liability will also be large and, if the appropriate information is not obtained, appropriate information is not obtained, payer payer can can be held liable for large sums of tax, interest, and be held liable for large sums of tax, interest, and penalties.penalties.

Reporting to the ClaimantReporting to the Claimant

If taxable to claimant, If taxable to claimant, payer payer must obtain claimant’s must obtain claimant’s TIN prior to TIN prior to payment; payment; otherwise, it must withhold 28% from the payment.otherwise, it must withhold 28% from the payment. If you don’t know if the payment is taxable, assume that it is, obtain the If you don’t know if the payment is taxable, assume that it is, obtain the

TIN and plan to report.TIN and plan to report. This requirement exists This requirement exists even if the claimant’s name is not on the even if the claimant’s name is not on the

checkcheck (e g check is made payable to claimant’s attorney or law (e g check is made payable to claimant’s attorney or law


checkcheck (e.g., check is made payable to claimant s attorney or law (e.g., check is made payable to claimant s attorney or law firm or trust account, etc.)firm or trust account, etc.)

For tax purposes, the claimant is the beneficial owner of the For tax purposes, the claimant is the beneficial owner of the income, and will receive a 1099 reporting the paymentincome, and will receive a 1099 reporting the payment..

Note: you may not be permitted to contact the claimant directly, Note: you may not be permitted to contact the claimant directly, and may have to work through counsel to obtain the information and may have to work through counsel to obtain the information necessary to fulfill your organization’s reporting obligations.necessary to fulfill your organization’s reporting obligations.

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Reporting to the AttorneyReporting to the Attorney The IRS has an additional reporting requirement for The IRS has an additional reporting requirement for

attorneys/law firms.attorneys/law firms. Even if the payment is reportable to the attorney’s client, the Even if the payment is reportable to the attorney’s client, the

payment may also be reportable to the payment may also be reportable to the attorney/law firm.attorney/law firm. If the If the attorney’s or law firm’s attorney’s or law firm’s name is on the check (including name is on the check (including

the the attorney’s or firm’s attorney’s or firm’s trust account for the client), then it is trust account for the client), then it is


yy ))reportable.reportable.

This requirement may mean two 1099s for a single check.This requirement may mean two 1099s for a single check. Remember, if taxable, is reportable to the claimant even if the Remember, if taxable, is reportable to the claimant even if the

claimant’s name isn’t on the check.claimant’s name isn’t on the check.

If it’s reportable twice, it’s also subject to withholding twice.If it’s reportable twice, it’s also subject to withholding twice. So you need the TIN of the attorney/law firm, So you need the TIN of the attorney/law firm, too, prior to too, prior to

making the payment.making the payment.

Reporting to the AttorneyReporting to the Attorney

Checks made payable “in care of” the Checks made payable “in care of” the attorney are NOT reportable to the attorney.attorney are NOT reportable to the attorney.

The amount may still be reportable to the The amount may still be reportable to the claimant/attorney’s client if the damages claimant/attorney’s client if the damages


claimant/attorney s client if the damages claimant/attorney s client if the damages payment constitutes taxable income.payment constitutes taxable income.

Example Example Check for $100,000 issued to Attorney A as a result Check for $100,000 issued to Attorney A as a result

of the physical injury claim brought by Claimant C of the physical injury claim brought by Claimant C (non(non--employee).employee).

Physical injury is not taxable, so no reporting to C.Physical injury is not taxable, so no reporting to C. Attorney A’s name is on check, so must report Attorney A’s name is on check, so must report


y , py , p$100,000 to Attorney A in box 14.$100,000 to Attorney A in box 14.

Must obtain Attorney A’s TIN, or withhold Must obtain Attorney A’s TIN, or withhold $28,000.$28,000. If check is made payable to attorneyIf check is made payable to attorney, individually , individually need need

attorney’s SSNattorney’s SSN.. Should rarely occur.Should rarely occur.

If check is made payable to the law firm, need If check is made payable to the law firm, need law law firm’s EIN.firm’s EIN.

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Example Example Check for $100,000 issued to Attorney A as a result of Check for $100,000 issued to Attorney A as a result of

the discrimination claim brought by Claimant C (nonthe discrimination claim brought by Claimant C (non--employee).employee).

Discrimination damages are taxable, so must report Discrimination damages are taxable, so must report $100,000 to C in box 3 even though C’s name is not on $100,000 to C in box 3 even though C’s name is not on


the check.the check. Get C’s SSN or withhold $28,000Get C’s SSN or withhold $28,000

Attorney A’s name is on check, so must report $100,000 Attorney A’s name is on check, so must report $100,000 to Attorney A on separate 1099 in box 14.to Attorney A on separate 1099 in box 14.

Must obtain Attorney A’s TIN, or withhold $28,000.Must obtain Attorney A’s TIN, or withhold $28,000. If check is made payable to attorney, need attorney’s SSN.If check is made payable to attorney, need attorney’s SSN. If check is made payable to the law firm, need If check is made payable to the law firm, need law law firm’s EIN.firm’s EIN.

Example Example Two checks:Two checks:

One to former employee for $60,000 to settle wrongful One to former employee for $60,000 to settle wrongful discharge claim.discharge claim.

One to employee’s attorney for $40,000.One to employee’s attorney for $40,000. $100,000 is taxable to employee and must be reported.$100,000 is taxable to employee and must be reported.

WW--2 or 1099?2 or 1099? Depends on how the payment was characterized in the settlement Depends on how the payment was characterized in the settlement

agreement.agreement. If any amount is taxable If any amount is taxable back pay back pay that amount is treated as a that amount is treated as a


If any amount is taxable If any amount is taxable back pay, back pay, that amount is treated as a that amount is treated as a wage payment reported on the Wwage payment reported on the W--2 and subject to wage 2 and subject to wage withholding.withholding.

Otherwise, report entire $100,000 to employee on the 1099 (box Otherwise, report entire $100,000 to employee on the 1099 (box 3),and3),and Need TIN, or withhold $28,000Need TIN, or withhold $28,000

$40,000 to the attorney on the 1099 (box 14).$40,000 to the attorney on the 1099 (box 14). Need TIN or withhold $11,200.Need TIN or withhold $11,200.

This might look like $140,000 to us, but it’s not how the This might look like $140,000 to us, but it’s not how the IRS sees it.IRS sees it.

Former EmployeesFormer Employees

If any part of the damages payment is If any part of the damages payment is identified as identified as taxable taxable back pay, back pay, severance, or any severance, or any other kind of wage paymentother kind of wage payment, it is subject to , it is subject to wage withholding and is reported on the wage withholding and is reported on the


Form WForm W--2.2. If amounts are specifically identified in this If amounts are specifically identified in this

way, the defendant/employer is responsible way, the defendant/employer is responsible for correctly reporting and withholding tax for correctly reporting and withholding tax from them.from them.

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Back Pay v Lost WagesBack Pay v Lost Wages

Back pay is a definitively determined amount.Back pay is a definitively determined amount. Usually arises in wrongful termination or Usually arises in wrongful termination or

discrimination claims.discrimination claims. “This is what I was paid, this is what I should have been “This is what I was paid, this is what I should have been


p ,p ,paid, pay me the difference.”paid, pay me the difference.”

Lost wages is a more amorphous term.Lost wages is a more amorphous term. Claimant argues it’s what he Claimant argues it’s what he could havecould have earned had earned had

defendant not injured him/acted wrongfully.defendant not injured him/acted wrongfully. It’s treated as an “opportunity cost,” (because of It’s treated as an “opportunity cost,” (because of

opportunity allegedly lost).opportunity allegedly lost).

ExampleExample

Claimant sues employer for unlawful gender Claimant sues employer for unlawful gender discrimination.discrimination.

Supervisor A, a man, was paid $100,000.00.Supervisor A, a man, was paid $100,000.00. Claimant, a woman, with the same amount of Claimant, a woman, with the same amount of


Claimant, a woman, with the same amount of Claimant, a woman, with the same amount of education and experience, was paid $75,000.education and experience, was paid $75,000.

Court awards $25,000 in back pay.Court awards $25,000 in back pay. This amount is wages.This amount is wages. An employer will always be involved as a An employer will always be involved as a

party in a suit that involves back pay.party in a suit that involves back pay.

ExampleExample Claimant is a law student in her last year of law school and at Claimant is a law student in her last year of law school and at

the top of her class when she sustains an injury due to the the top of her class when she sustains an injury due to the negligent conduct of another.negligent conduct of another.

This injury prevents her from pursuing a legal career.This injury prevents her from pursuing a legal career. She argues that, over the course of her lifetime, she would She argues that, over the course of her lifetime, she would

have been able to earn X number of dollars as an attorneyhave been able to earn X number of dollars as an attorney


have been able to earn X number of dollars as an attorney.have been able to earn X number of dollars as an attorney. This amount is really lost income, but is often referred to as This amount is really lost income, but is often referred to as

lost wages.lost wages. No employer is a party to the suit.No employer is a party to the suit. These amounts are not treated as wages, but reported as These amounts are not treated as wages, but reported as

ordinary income (box 3 of the 1099MISC), unless the claim is ordinary income (box 3 of the 1099MISC), unless the claim is based on a physical injury.based on a physical injury.

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Multiple PayeesMultiple Payees If one check with multiple payees:If one check with multiple payees:

If more than one attorney is listed, report to the If more than one attorney is listed, report to the attorney whose name appears on the check and to attorney whose name appears on the check and to whom the check was delivered.whom the check was delivered.

If the check was delivered to an attorney whose name If the check was delivered to an attorney whose name li d h fi li d h fi li d li d


was not listed as a payee, report to the firstwas not listed as a payee, report to the first--listed listed attorney (or, really, whichever attorney for whom you attorney (or, really, whichever attorney for whom you have tax information).have tax information).

If more than one claimant is listed as a payee, and the If more than one claimant is listed as a payee, and the payment is reportable, report entire amount to firstpayment is reportable, report entire amount to first--listed payee (or, really, whichever claimant for whom listed payee (or, really, whichever claimant for whom you have tax information).you have tax information). This payee receives the 1099 as a nominee/middleman recipient.This payee receives the 1099 as a nominee/middleman recipient.

InterestInterest Also watch for interest charges.Also watch for interest charges. Interest is never reported on the Form 1099Interest is never reported on the Form 1099--

MISC.MISC. You must “parse” the interest out of any You must “parse” the interest out of any

payment.payment.p yp y Interest, if for $600 or more, is reported on Interest, if for $600 or more, is reported on

Form 1099Form 1099--INT, even if underlying principal INT, even if underlying principal is not.is not. E.g., claim is for physical injury, so principal E.g., claim is for physical injury, so principal

amount of compensation is not reportable to amount of compensation is not reportable to claimant, but interest is.claimant, but interest is.


Punitive DamagesPunitive Damages

Punitive damages are always taxable and Punitive damages are always taxable and reportable to the claimant, even if the reportable to the claimant, even if the principal amount paid to satisfy he principal amount paid to satisfy he underlying claim (e g , claim is for personal underlying claim (e g , claim is for personal underlying claim (e.g., claim is for personal underlying claim (e.g., claim is for personal physical injury) is not.physical injury) is not.


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The DangerThe Danger Because multiple 1099s, and possibly a WBecause multiple 1099s, and possibly a W--2, may 2, may

need to be issued, multiple withholding obligations need to be issued, multiple withholding obligations may arise on the payment.may arise on the payment. Example: $100,000 reported to claimant and attorney. Example: $100,000 reported to claimant and attorney.

If no TIN for claimant, withhold $28,000; if no TIN for If no TIN for claimant, withhold $28,000; if no TIN for attorney, withhold another $28,000 (on the $100,000 attorney, withhold another $28,000 (on the $100,000


payment).payment).

If not handled appropriately, If not handled appropriately, payer payer becomes liable becomes liable for the $56,000 in taxes, plus interest, plus penalties for the $56,000 in taxes, plus interest, plus penalties (likely to amount to about $112,000 when done (likely to amount to about $112,000 when done ––rule of thumb: double amount of withholding to rule of thumb: double amount of withholding to estimate total payment, including interest and estimate total payment, including interest and penalties, due to IRS).penalties, due to IRS).

How to Get InfoHow to Get Info Use backup withholding requirement as your leverage.Use backup withholding requirement as your leverage. Someone in your organization or under contract to you Someone in your organization or under contract to you

(i.e., your organization’s law firm) knows how the (i.e., your organization’s law firm) knows how the settlement is identified.settlement is identified.

No confidentiality agreements need be broken, as all you No confidentiality agreements need be broken, as all you need is basic information on the type of damages:need is basic information on the type of damages:


Physical injury, medical expense reimbursement, Physical injury, medical expense reimbursement, property damages.property damages.

If the claim has proceeded to a court filing, unless If the claim has proceeded to a court filing, unless otherwise directed by the court, filed complaints are otherwise directed by the court, filed complaints are matters of public record.matters of public record. Complaints Complaints include significant details about the claim.include significant details about the claim.

How to Get Info.How to Get Info. If push comes to shove:If push comes to shove:

If you have to backup withhold 28% against the gross proceeds If you have to backup withhold 28% against the gross proceeds payment to the attorney, that amount of tax withholding will payment to the attorney, that amount of tax withholding will be credited to the attorney on the 1099 (box 4).be credited to the attorney on the 1099 (box 4).

However, the amount of withheld tax credited to the attorney However, the amount of withheld tax credited to the attorney is actually the attorney’s client’s money.is actually the attorney’s client’s money.

It’ ll th li t’ It’ ll th li t’ /h i j t ti f i th bli ti t /h i j t ti f i th bli ti t


It’s all the client’s money It’s all the client’s money –– s/he is just satisfying the obligation to pay s/he is just satisfying the obligation to pay the attorney for his or her services out of the proceeds of the the attorney for his or her services out of the proceeds of the claim/litigation.claim/litigation.

Ethics rules absolutely prohibit the commingling of a client’s Ethics rules absolutely prohibit the commingling of a client’s and attorney’s funds.and attorney’s funds.

Mention “commingling of funds,” and “state bar” to the Mention “commingling of funds,” and “state bar” to the attorney if s/he is being intractable about giving you the attorney if s/he is being intractable about giving you the information you need to report appropriately.information you need to report appropriately.

MMay ay need to get your company’s counsel involved at this point.need to get your company’s counsel involved at this point.

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Additional PointsAdditional Points Attorneys acting as closing agents in real estate Attorneys acting as closing agents in real estate

transactions are not subject to box 14 gross transactions are not subject to box 14 gross proceeds reporting requirement.proceeds reporting requirement.

Attorneys appointed by the federal bankruptcy Attorneys appointed by the federal bankruptcy court acting as trustees are not subject to box 14 court acting as trustees are not subject to box 14

d i id i i


gross proceeds reporting requirement.gross proceeds reporting requirement. Attorneys named as payees on checks for amounts Attorneys named as payees on checks for amounts

garnisheed from an employee’s wages ARE garnisheed from an employee’s wages ARE subject to box 14 reporting requirement.subject to box 14 reporting requirement. Get the TIN or backup withhold (e.g., use this Get the TIN or backup withhold (e.g., use this

requirement as leverage to get the information you requirement as leverage to get the information you needneed))

Additional PointsAdditional Points

Remember that if any of the damages payment Remember that if any of the damages payment constitutes taxable back pay, this amount must be constitutes taxable back pay, this amount must be reported on a Form Wreported on a Form W--2, and subjected to all applicable 2, and subjected to all applicable wage withholding, even if the employee is no longer on wage withholding, even if the employee is no longer on the employer’s payrollthe employer’s payrollthe employer s payroll.the employer s payroll.

The “standard” exemptions apply to the claimant, so if The “standard” exemptions apply to the claimant, so if the claimant is a:the claimant is a: CorporationCorporation TaxTax--exempt entityexempt entity Government entityGovernment entity

No reporting is required.No reporting is required.


Please fill out your evaluation form for today’s programPlease fill out your evaluation form for today’s programand email it toand email it to

[email protected]@cokala.com

To receive credit, be sure to fill in the day and time and To receive credit, be sure to fill in the day and time and sign at the bottom of the evaluation form.sign at the bottom of the evaluation form.


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Questions?Questions?Questions

?Questions?


Q ?Questions?

Any tax advice included in this written Any tax advice included in this written or electronic communication was not or electronic communication was not intended or written to be used, and it intended or written to be used, and it

cannot be used by the taxpayer, for the cannot be used by the taxpayer, for the purpose of avoiding any penalties that purpose of avoiding any penalties that


purpose of avoiding any penalties that purpose of avoiding any penalties that may be imposed on the taxpayer by any may be imposed on the taxpayer by any

governmental taxing authority or governmental taxing authority or agency.agency.

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