IRS Requirements
 Information returns made to the IRS by a credit union are used by the IRS to confirm the truthfulness of members’ tax returns.
 Credit unions should not give advice about how information returns affect a member’s tax liability. The credit union only reports information to the IRS. The individual member, along with his or her tax advisor, should determine how that information applies.
 Required each calendar year in which a credit union receives $600 or more in mortgage interest and points from a member: o Includes interest paid on HELOCS o Points are only reported under certain circumstances (consumer loan, purchase, principal residence)
 The $600 threshold applies separately to each mortgage.
 Optional to file a Form 1098 to report mortgage interest of less than $600.
 Include points paid by the seller.
 Required if, during any calendar year, a credit union receives at least $600 in interest from a member on a “covered student loan.”
 A loan does not necessarily need to be made as part of a guaranteed student loan program in order to be a “covered student loan” for tax purposes. A “covered student loan” is one that is made to a member solely for that member’s (or that member’s spouse’s or dependent’s) educational expenses paid within a reasonable time before or after the loan was taken out and that either: o Qualifies as part of a guaranteed student loan program of the federal, state, or local government; or o Is documented by the member’s certification on IRS Form W-9S that the loan proceeds were used solely for educational expenses.
Required if:
 A member was paid at least $10 in interest or dividends during a calendar year, or
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IRS Requirements
 Federal income tax was withheld under the backup withholding rules regardless of the amount withheld.
 The IRS considers a debt that is not repaid to be “income” to the non-repaying borrower.
 Financial institutions are required to provide information about debt that will not repaid if the unpaid amount is $600 or more.
 Form 1099-C is triggered by certain “identifiable events” that indicate a debt is not likely to be repaid
 The following are identifiable events: o A debt discharged in bankruptcy, but only if the credit union knows from its books and records that the debt was for business or investment purposes. o A discharge of indebtedness pursuant to an agreement between the credit union and the member. o A discharge of indebtedness as a result of a credit union decision to discontinue its collection activity against the debtor. o A debt for which the 36-month “nonpayment testing period” has expired. o A debt that is canceled or extinguished due to the expiration of the statute of limitations. o A debt that is canceled or extinguished in receivership or foreclosure in a state or federal court. o A debt that is canceled or extinguished pursuant to the credit union’s election of foreclosure remedies. o A debt that is canceled or extinguished, rendering it unenforceable, pursuant to a probate or similar hearing.
 **Most debts discharged in bankruptcy must not be reported as income to members on a Form 1099-C **
 Required to be filed annually by state-chartered credit unions (not required for federally chartered credit unions).
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IRS Requirements
 Public document used to obtain information about the operations of tax-exempt organizations.
 Adopted in 2012
 File IRS Form 1042-S for interest payments of $10 or more paid to a nonresident alien.
 Applies to nonresident aliens who are residents of a country with which the U.S. has an information-sharing agreement.
 May file on all nonresident aliens regardless of the information sharing agreement.
 May rely on the permanent residence address provided on the W-8BEN for purposes of determining the residence of a nonresident alien.
 Information returns must be either hand-delivered or sent by first-class mail to the member’s last known address.
 They can be attached by perforation to a member’s year-end statement, or sent separately.
 If an information return is attached to a member’s year-end credit union statement, the credit union statement must be stamped in bold and conspicuous type:
“IMPORTANT TAX DOCUMENT ATTACHED.”
 No other enclosures are permitted with a mailing of an information return to a credit union member although the credit union’s logo may appear on the statement.
 The envelope that contains a member’s information return(s) must include on its face, also in bold and conspicuous type: “IMPORTANT TAX DOCUMENT ENCLOSED.”
A credit union logo may also appear on the envelope.
The following IRS forms may be furnished to members electronically using E-sign rules:
 1098
 1098-C
 1098-E
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IRS Requirements
 1099-INT
 1099-C
 1099- MISC
 5498
 W-2
 Within 30 days of the filing date, then the penalty is a maximum of $15 per return, with the total penalty not to exceed $75,000.
 After 30 days, but by August 1 of the year the return is required, then the penalty is a maximum of $30 per return with the total penalty not to exceed $150,000.
 After August 1 of the year the return is required, then the penalty is $50 per return, with the total penalty not to exceed $250,000.
 If the credit union fails to furnish a member with his or her information return by
January 31, the penalties can range up to $50 per affected member, with a maximum penalty of $100,000.
Credit Unions will not be penalized for inconsequential errors on information returns.
Inconsequential errors are any errors that do not prevent the IRS from processing a return, correlating the information with an individual’s tax return, or otherwise putting the return to its extended use.
The following types of errors are never inconsequential:
 The member’s taxpayer identification number
 The member’s surname
 Any dollar amounts
 Significant omissions in the member’s address, if the member provided them previously to the credit union
 The manner in furnishing the information returns to the member
Credit unions must retain all records that contribute to the creation of each member’s information returns, and a copy of each information return itself for four years.
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IRS Requirements
Credit unions are required to withhold a percentage of “reportable payments” (generally
28%) when certain conditions exist.
The credit union must apply backup withholding when:
1.
A member fails to provide a TIN or certify that the TIN is correct
2.
The IRS notifies the credit union that backup withholding must begin due to a missing or incorrect TIN
3.
The IRS notifies the credit union that the member is subject to backup withholding
(C-Notice)
4.
The member fails to certify that he or she is not subject to backup withholding
(unless the member qualifies for an exemption).
5.
The member fails to provide a W-8 BEN or does not renew the form after three years.
Circumstance that caused backup withholding
The member failed to provide a TIN and W-9
Credit union received an IRS 2100 or
2100A Notice
Stop backup withholding when:
Credit union receives the TIN and a signed W-9
Credit union received a “C-Notice”
Backup Withholding Notification
The member does not provide or renew IRS Form W-8BEN
 For missing TINS, backup withholding can stop when you receive the correct TIN and W-9 certification.
 For incorrect Name/TIN combinations, backup withholding can stop when you receive either
SSA Form 7028 Notice to Third Party of Social
Security Number Assignment or IRS Letter
147C from the member
Credit union receives an official notice from the
IRS to stop
Credit union receives a signed W-8BEN from the member
 When a member opens a new account at a credit union, the account will not be subject to backup withholding if the member certifies, under penalty of perjury that:
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IRS Requirements o The TIN provided by the member is correct o The member is not subject to backup withholding o The member is a U.S. person (including a U.S. resident alien). Note: Members with an ITIN also use Form W-9 Certification.
 Obtain certification by o Having the member complete IRS Form W-9 or a substitute W-9. o Having members who are non-resident aliens complete Form W-8BEN,
“Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding.”
 Form W-8BEN must be retained by the credit union. It is valid for three calendar years after the year it was signed.
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