FWHT on forms other than W-2 or 1099-R

[Roland Slugg]

The IRS instructions require that all forms W-2 be attached to the return, and that forms W-2G and 1099-R be attached if there is federal tax withheld. So far, so good. However, there is sometimes FWHT reported on other forms, such as SSA-1099 (voluntary withholding on soc sec benefits), 1099-G (unemployment), and backup withholding reported on forms 1099-INT, 1099-DIV, 1099-B and others. The instructions say to include the FWHT on the appropriate line of the tax return, but they do NOT say to attach a copy of those 1099s to the return itself. The instructions to F-1040 have similar wording.

Has anyone here had issues with this when 1099s with FWHT are NOT attached to a return? Does the IRS seem to have adequate controls and matching protocols in place to verify such FWHT even when the related 1099s are not attached? If you have direct experience with this, either positive or negative, please respond.

[Ken]

w-2 forms

The IRS also says that if you are a paid preparer and do more than 10 returns a years , you must e-file them, in which case there is no need to attach w-2 forms.

[JohnH]

I always photocopy and attach forms which have withholding when there are not filing copies provided, such as SSA-1099, 1099DIV/INT, etc.
Better to spend a minute doing that than trying to respond to a written inquiry.

Incidentally, the 10-return requirement applies to anyone who FILES a return, not to anyone who "does" a return.
Preparing a return is a separate act from filing a return.
It's a subtle difference, but significant.

This is spelled out very clearly on Page 2 of the Form 8944, as well as the instructions for line 6ii on page 3.
.
When a Return is Considered Filed by Preparer
For the e-file requirement, a return is considered filed by a preparer if the preparer or any member, employee, or agent of the preparer or the preparer's firm submits the tax return to the IRS on the taxpayer's behalf, either electronically or in paper format. For example, the act of submitting includes having the preparer or a member of the preparer's firm drop the return in a mailbox for the taxpayer. Acts such as providing filing or delivery instructions, an addressed envelope, postage estimates, stamps, or similar acts designed to assist the taxpayer in the taxpayer's efforts to correctly mail or otherwise deliver a paper return to the IRS do not constitute filing by the preparer as long as the taxpayer actually mails or otherwise delivers the return to the IRS.

[JudyL]

When I paper filed these, I attached all forms that had federal withholding on them. I never had any questioned. As JohnH said, it's easier to make a photocopy or two than to answer notices later on.

[TXEA]

JohnH -

Just curious, are you saying that if the client mails the return that the preparer does not get a penalty for not e-filing the return. I have read the references you provided before; however, my software always wants to print out a document for the client to sign indicating they want to paper file the return. There is also a form (can't remember the form number) where the preparer has to explain why the return is not being e-filed. This form is included with the paper copy of the return (titled "Preparer explanation for not electronically filing).

I guess, here is my question. If the client files on paper, are you preparing the form to submit with the return explaining why you are not e-filing?

The whole mandatory e-file is annoying since it makes the responsibility for timely filing a tax return the preparer's problem. We have enough to worry about, and I get tired of hunting down clients to return the e-file signature authorization.

[JohnH]

I think the IRS contradicts themselves with their statements, so the answer to your question is a little fuzzy. My solution is to request a waiver, explaining that I prepare the return and give it to the taxpayer to file however they wish. Every year so far, their response has been that I am not required to file electronically, but they give me a waiver number anyhow. They actually say that right in their reply. So since I have a waiver number, I attach a Form 8948 to each return, showing my waiver number, which keeps me in the clear and keeps the computers all happy. I don't have to keep anything in my files saying that the client declined to e-fling the return. The waiver must be applied for by Feb 15 of each year for the subsequent filing season. Right now I'm waiting for the reply to my most recent application, which will probably determine whether I continue preparing returns in 2016.

I think anyone filing the 8944 may have a problem, though, if they have ever done electronic filing. The 8944 asks how many returns you plan to file next year, and also how many returns you filed last year. I've wondered how that would work if someone who filed over 10 returns electronically last year asks for a hardship waiver for the upcoming year. The IRS position may just be that once you start e-flinging, there's no way out. In my case, I change the words "Filed" and "File" to "Prepared" and "Prepare" right on the form, and then I explain why I did that in the comments section. They slightly altered the wording on the 8944 instructions this year, and they also required that it be mailed to a different address, so it may be that they've made other changes and maybe won't accept that explanation any more. I'll know within a couple of weeks.

Your last sentence is my primary reason for staying out of the e-flinging game.
It's nothing but an annoyance to me.
I don't want the responsibility for filing the return - not interested.
I'll prepare it and let the client handle their responsibility to file it.
I'm OK with that arrangement and have no desire to take on their responsibility.

Having said all that, and reading the wording on the back of the 8944, I suspect that a paper return filed with no 8948 but bearing a PTIN will probably sail right on through. I say that for the simple reason that when a paper return goes in to IRS, the only question at issue is whether the tax preparer dropped it in the mail box. That is, did the preparer "FILE" the return? So as long as the client puts it in the mail box, there's no problem even in the absence of any other paperwork. I think that might be true even for anyone who e-flings right now. But nobody should take my advice on that. If I were on the e-flnging bandwagon and a client said they want to paper file, I'd probably be a good little soldier and fill out the excuse form my software spit out.

Also, there were times many years ago when I'd occasionally have a client sign their return and I'd drop it in the mail for them as a courtesy. Usually it was an elderly client, someone who was really busy and forgetful, a favored client, or maybe someone going out of town. Not any more. Once this mandate showed up, I stopped doing any of that. I can honestly say that the only return I file is my own.

[FEDUKE404]

No submission to IRS of all withholding documents

Over the years I've had many clients with non-W2/1099R federal withholding. The most common is withholding on Social Security benefits and unemployment compensation, and the occasional "Oops!" (usually did not verify Social Security number) that results in same for interest/dividends.

I've never attached anything other than the "filing copies" of the W2/1099R to the tax returns.

Now all of my returns are filed electronically, so the point is moot. I do, as required, keep the federal/state copies of (only) W2s/1099Rs with the signed Form 8879.

FE

[DonPriebe]

Back to the original question ...

No, you don't have to include copies of other documents showing withholding with your paper filed return. Yes, I have filed returns that way and never had any problems.

As far as e-file goes, there is no e-file format for a (e.g.) 1099-DIV, so one with withholding could not be sent to the IRS. [NY had to invent a form to transmit a 1099-MISC with state withholding.] Just because your software may have a place to enter the EIN from a bank doesn't mean it goes anywhere.

[Roland Slugg]

Thanks for all your responses, especially FEDUKE404 and DonPriebe who actually replied to the original question. I did not intend for the question to become a debate on the virtues or evils of e-file; the question, of course, was posted in contemplation of paper-filed returns.

I can't resist, though, commenting on part of JohnH's first reply:

Preparing a return is a separate act from filing a return. It's a subtle difference, but significant.

Nothing "subtle" about it. Preparing a return and filing a return are two completely different acts. I believe many tax preparers got duped into e-filing because they read the IRS requirement, that says "if you filed ..." and mistakenly thought it said "if you prepared ... ."

[JohnH]

I think the IRS contradicts themselves with their statements, so the answer to your question is a little fuzzy. My solution is to request a waiver, explaining that I prepare the return and give it to the taxpayer to file however they wish. Every year so far, their response has been that I am not required to file electronically, but they give me a waiver number anyhow. They actually say that right in their reply. So since I have a waiver number, I attach a Form 8948 to each return, showing my waiver number, which keeps me in the clear and keeps the computers all happy. I don't have to keep anything in my files saying that the client declined to e-fling the return. The waiver must be applied for by Feb 15 of each year for the subsequent filing season. Right now I'm waiting for the reply to my most recent application, which will probably determine whether I continue preparing returns in 2016.

I think anyone filing the 8944 may have a problem, though, if they have ever done electronic filing. The 8944 asks how many returns you plan to file next year, and also how many returns you filed last year. I've wondered how that would work if someone who filed over 10 returns electronically last year asks for a hardship waiver for the upcoming year. The IRS position may just be that once you start e-flinging, there's no way out. In my case, I change the words "Filed" and "File" to "Prepared" and "Prepare" right on the form, and then I explain why I did that in the comments section. They slightly altered the wording on the 8944 instructions this year, and they also required that it be mailed to a different address, so it may be that they've made other changes and maybe won't accept that explanation any more. I'll know within a couple of weeks.

Your last sentence is my primary reason for staying out of the e-flinging game.
It's nothing but an annoyance to me.
I don't want the responsibility for filing the return - not interested.
I'll prepare it and let the client handle their responsibility to file it.
I'm OK with that arrangement and have no desire to take on their responsibility.

Having said all that, and reading the wording on the back of the 8944, I suspect that a paper return filed with no 8948 but bearing a PTIN will probably sail right on through. I say that for the simple reason that when a paper return goes in to IRS, the only question at issue is whether the tax preparer dropped it in the mail box. That is, did the preparer "FILE" the return? So as long as the client puts it in the mail box, there's no problem even in the absence of any other paperwork. I think that might be true even for anyone who e-flings right now. But nobody should take my advice on that. If I were on the e-flnging bandwagon and a client said they want to paper file, I'd probably be a good little soldier and fill out the excuse form my software spit out.

Also, there were times many years ago when I'd occasionally have a client sign their return and I'd drop it in the mail for them as a courtesy. Usually it was an elderly client, someone who was really busy and forgetful, a favored client, or maybe someone going out of town. Not any more. Once this mandate showed up, I stopped doing any of that. I can honestly say that the only return I file is my own.

Happy day in this office - retirement postponed another year.
Just got my official IRS permission to skip e-flinging again next year.

Looking for those paper specials at Office Depot/Staples - I guess it's a sad day for another hundred trees.
And I may actually succeed in being the one who finally turns out the lights in the paper-filing room some day.
Meanwhle, I think I'll change my user name to "T-Rex" or "DinoPhiler" - any other suggestions.