A new 2019 form has been issued by the Internal Revenue Service (“IRS”) to help governments and government entities comply with a portion of the Tax Cuts and Jobs Act (“TCJA”) involving reporting fines or penalties. Form 1098-F requires governments and related entities to disclose fines, penalties, or other amounts assessed against a taxpayer. Government agencies and related entities must file Form 1098-F with the IRS and the taxpayer to report information about the fine or court settlement, whether one or multiple payments will be made, and the total payments actually made by the taxpayer. The new form also requires that reportable penalties are subdivided to show:
- Amounts assessed for violations of law,
- Amounts assessed to comply with a law, and
- Amounts assessed for restitution or remediation.
Form 1098-F is filed when the aggregate amount penalty or fine incurred reaches a minimum of $600. The IRS has authority to change this threshold amount. The IRS has also released instructions on filing Form 1098-F. Please note, Notice 2018-23, 2018-15 IRB, states that this new reporting for fines and penalties is not yet required. The IRS will issue proposed regulations to implement these new reporting requirements and will state in the proposed regulations the date that the new reporting regime will begin.
For taxpayers who may be assessed fines or penalties, it is important to set a clear understanding with the government agency of how the assessment will be characterized: as payment for violation of law or as payment for restitution, remediation, or compliance. Agreement up front between the taxpayer and the government agency can lead to consistent reporting on Form 1098-F at the end of the year.
More on 2019 Form 1098-F is available here.