2017 ESOP Benefit Payment Government Filings (IRS Forms 1099-R, 1096, 945)

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Tue, Jan 30, 2018
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2017 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 2017 Instructions for Forms 1099-R and 5498 provides guidance on how to prepare and file the 2017 forms.  Prior instructions can be found here

What's New with the 201 IRS Forms 1099-R

Below is an excerpt from the IRS' instructions sheet explaining what's new on the 2017 form:

Reporting late rollover contributions to an IRA. Report late rollover contributions certified by the participant in boxes 13a and 13b on Form 5498. Report the self-certification code in box 13c.

IRS Forms 1099-R

IRS Form 1099-R is the form to report Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc. and IRA Contribution Information.  Copies B, C, and 2 must be furnished by January 31, 2018 to anyone who received a plan distribution (of $10 or more).  Copy A must be filed with the IRS by February 28, 2018 or April 2, 2018 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

IRS Form 1096 is the Annual Summary and Transmittal of U.S. Information Returns.  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

IRS Form 945 is the Annual Return of Withheld Federal Income Tax.  The purpose of the form is to report federal withholding from non-payroll payments, including distributions from qualified retirement plans.  The deadline is January 31, 2018.  However, if you made deposits on time in full payment of the taxes for the year, you may file the return by February 12, 2018.

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 any 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.

Future Developments

Normally the IRS has published the next year’s instructions for IRS Form 1099-R.  As of the date of this article they have not published the 2018 Instructions for Forms 1099-R and 5498.  They have provided the following guidance on a recent development:

Use Distribution Code 2 on Form 1099-R to report retirement plan (including IRAs) participant distributions made in 2017 due to Hurricanes Harvey, Irma, or Maria.  
-- Jan-2018

For other information and developments related to Forms 1099-R, go to the following:

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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