2015 ESOP Benefit Payment Government Filings (IRS Forms 1099-R, 1096, 945)

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Tue, Jan 05, 2016
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2015_ESOP_Benefit_Payment_Government_Filings.jpgIf you paid any ESOP or other qualified retirement plan distribution of $10 or more last year you will have to prepare and file some government forms: Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

The 2015 Instructions for Forms 1099-R and 5498 provides guidance on how to prepare and file the 2015 forms.  Prior instructions can be found here.

What's New with the 2015 IRS Forms 1099-R

FATCA filing requirements of certain foreign financial institutions (FFIs).  Beginning in 2014, an FFI with a chapter 4 requirement to report a cash value insurance contract or annuity contract that is a U.S. account held by a specified U.S. person with the FFI may satisfy this requirement by electing to report the account in a manner similar to that required under section 6047(d).  Form 1099-R is to be used for such reporting.  See Regulations section 1.1471-4(d)(5)(i)(B) for this election.  Also see Regulations section 1.1471-4(d)(2)(iii)(A) for how a U.S. payer may satisfy its chapter 4 reporting requirements by reporting on Form(s) 1099.

Guide to Distribution Codes

Distribution code K.  The subheadings for distribution code K reported on Form 1099-R have been rewritten to match the types of investments reported on Form 5498 in box 15b.

IRS Forms 1099-R

Copies B, C, and 2 must be furnished by February 1, 2016 to anyone who received a plan distribution (of $10 or more).  Copy A must be filed with the IRS by February 29, 2016 or March 31, 2016 if filing the forms electronically

Generally, you are required to file electronically if you file 250 or more information returns.

IRS Publication 1220 - Specifications for Electronic Filing of Forms 1098, 1099, 3921, 3922, 5498, 8935, and W-2G provides the procedures for reporting electronically through the IRS Filing Information Returns Electronically (FIRE) System.  The IRS also encourages filers who have less than 250 information returns to file electronically.  Beginning with Tax Year 2013, the guidance provided in IRS Publication 1220 ceased to be issued as a Revenue Procedure. 

IRS Form 1096

This form must be sent as a transmittal document whenever paper copies of the IRS Forms 1099-R are sent to the IRS.  IRS Form 1096 is not used when transmitting forms electronically.  Because the paper forms are scanned during processing, you cannot file with the forms printed from the IRS website.

IRS Form 945

This form is used to report federal withholding from non-payroll payments, including distributions from qualified retirement plans.  The deadline is February 1, 2016.  However, if you made deposits on time in full payment of the taxes for the year, you may file the return by February 10, 2016.

Net Unrealized Appreciation

As you are preparing the IRS Form 1099-R, you may be processing some forms for participants that received lump sum distributions that may qualify for net unrealized appreciation (NUA) treatment.  Assuming a distribution qualifies for NUA treatment, the amounts would generally be recorded as follows:

  • Box 1 – Gross distribution – This amount will be equal to the fair market value of the shares plus and cash distributed.
  • Box 2a – Taxable amount – This amount will be equal to the lesser of the cost basis and the fair market value of the shares distributed plus any cash distributed.
  • Box 6 - Net unrealized appreciation in employer's securities – This amount will be the difference between box 1 and box 2a.

ESOP Administration Timeline eBook

Topics: Compliance, ESOP distributions, ESOP Administration

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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