During the offseason it is always a good idea to check in on general information reporting rules that may go unnoticed. One recommendation we always have is to review the rules for electronic delivery of recipient statements. Generally, these can be found in Section 4.6 of Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.
Here are a few reminders regarding consent from recipients and formatting that are not always top of mind.
A recipient must provide consent in the affirmative to receiving the statement electronically. This is done electronically and in a way that demonstrates that he or she can access the statement in the electronic format in which it will be furnished. The recipient must not have withdrawn this consent before the payor or withholding agent furnishes the statement.
Payors and withholding agents are required to notify recipients whether there are any hardware or software updates before furnishing the statement, so that the recipient may adjust accordingly. Each time there is a new hardware or software release or updates, then the recipient must provide a new consent to receive the statement electronically.
Prior to furnishing the statements electronically, payors and withholding agents must provide recipients with a statement that prominently displays the following:
– If the recipient does not consent to receive the statement electronically, a paper copy will be provided.
– The scope and duration of the consent. Does it apply to every year the statement is furnished? Does it apply only for the statement for a particular year immediately following the date of consent?
– Instructions for the recipient on how to obtain a paper copy after giving consent.
– Instructions for the recipient on how to withdraw the consent. The recipient may withdraw consent at any time by furnishing the withdrawal in writing (electronically or on paper) to the person whose name appears on the statement. The confirmation of the withdrawal will also be in writing (electronically or on paper).
– The details of the Notice of termination. The notice must state under what conditions the statements will no longer be furnished to the recipient.
– Procedures for the recipient to update its information.
– A description of the hardware and software required to access, print, and retain a statement, and a date the statement will no longer be available on the website.
Payors and withholding agents must confirm that the electronic format contains all of the information required and that it complies with the guidelines in Publication 1179 to ensure a valid substitute form. In compliance with the information reporting deadlines, payors and withholding agents must post, on or before the due date, the applicable statement on a website accessible to the recipient through October 15 of that year. Finally, they must be sure to inform recipients electronically or by mail, of the posting and how to access and print the statement.
Here are a few items to consider:
Review any vendor applications and packages to confirm whether they include these statements. If there have been updates, be sure to update the consents as well.
Double check your statements annually to recipients to confirm that they include the required language.
Discuss consents and statements to recipients with your legal department and other interested departments such as marketing, client services, etc. to understand any impacts to existing statements.
Review timelines and deadlines to confirm that you are posting recipient statements on time.
Review Publication 1179 each year to confirm required updates to format and guidelines to ensure your statements meet the substitute form requirements.
Update process and procedure manuals accordingly for the consents, retention and overall process to obtain and maintain consents as well as the year end process for the electronic delivery.