What is the 1099-PATR form?
The forms in the IRS 1099 Series helps taxpayers report money received from various lesser-known sources. Form 1099-PATR is the IRS form sent to taxpayers to enable them to report distributions received from a co-operative that may need to be included in their taxable income.
You would receive this form if a credit union paid you at least $ 10 in patronage dividend and other distributions during the previous year, as described in the IRS code. A patronage dividend is a distribution that a co-operative pays to its members or investors based on the proportion of the company's profits.
Form 1099-PATR often pays dividends associated with farms. Still, you may also receive them for other reasons, including if you withheld federal income tax from the co-operative per withholding rules, regardless of the payment amount.
Key Points to Note
In some cases, the form will tell you the deduction fees and the money that the tax code allows your credit union to claim.
It is often used to declare dividends associated with farms. Still, you may also receive dividends for other reasons, including if you have federal withholding tax related to a co-operative.
You would receive a 1099-PATR if you received at least $ 10 in patronage dividends and other distributions from a co-operative in the previous year.
How to read Form 1099-PATR
1099-PATR will include all or part of the tax identification number (TIN), social security number, adoption tax identification number, or employer identification number. The form also displays the account number and the amount received. The latter might be detailed if you were part of an agricultural co-operative and might include things like your share of cash benefits, certificates of retention of qualifying units, and other assets. The form will show the federal income tax you withheld if you did not send the correct TIN to the credit union.
In some cases, your form will show your deduction costs and the money the tax code allows your co-operative to claim under new regulations that are part of the TCJA. Additional information includes your share of the co-operative deduction that has been transferred to you. This amount must have been disclosed in a written communication sent to you by the co-operative and corresponds to the number of eligible payments made to you.
Some of the above options may also be considered business items or non-business or department-specific business items for the section 199A (a) deduction, which will also be in 1099-PATR.
1099-PATR will also display your federal tax credits. This includes investment loans, employment opportunities, and more, including loans for renewables and refined fuels, training zones, and health insurance premiums for small employers.
Some cooperatives may be exempt from applying a PATR 1099.
Special Considerations
It has often been debated whether the patronage of dividends from worker co-operatives should be subject to self-employment tax. Also, a co-operative determined to be essentially engaged in the retail sale of goods or involved in rendering services that are generally for personal, living, or family use of the members may be exempt from filing a 1099-PATR
INSTRUCTIONS FOR FORM 1099-PATR
File Form 1099-PATR, taxable distributions received from co-operative, for each person to whom the co-operative paid at least $10 in patronage dividends described in section 6044 (b), or who withheld any federal tax on rents per withholding tax rules, regardless of the amount of the payment. A co-operative that is considered primarily involved in the retail sale of goods or services that are generally intended for the personal, vital, or family use of members may apply for and receive a waiver from completing Form 1099-PATR.
Report on Form 1099-PATR only income, expenses, and credits that you correctly transfer to users, so they can report them on the user's tax return.
Exceptions
Typically, you do not need to complete Form 1099-PATR for payments made to a corporation, to a tax-exempt organization that includes tax-exempt trusts (HSA, Archer MSA, and Coverdell ESA), in the United States, to a state, property, or district from Columbia.
Truncating the recipient's TIN in the recipient's statements.
All taxpayers of this form can truncate the TIN code (social security number (SSN), individual tax identification number (ITIN), tax identification number of a beneficiary of adoption (ATIN), or Employer Identification Number (EIN) in beneficiary declarations. Truncation is not permitted in all documents submitted by the applicant to the IRS. A declarant's TIN cannot, in any case, be truncated.
The 2nd TIN Not
You can enter an "X" in this box if the IRS has notified you twice in 3 calendar years that the recipient provided an incorrect TIN code. If you check this box, the IRS will no longer send alerts to this account.
However, if you received both notifications from the IRS in the same year, or if you received them in different years, but both relate to disclosures submitted for the same year, do not check the box at this time. For the two notifications of the 3-year rule, the user is considered to have received a notification and is not required to send a second "B" notification to the taxpayer after receiving the second notification.
Account number
This is required if you have multiple accounts for a recipient to whom you are sending more than one 1099-PATR form. Additionally, the IRS recommends that you assign an account number to all 1099-PATR forms that you submit.
Box 1. Patronage dividends
Enter the share of total patronage dividends paid in cash (including qualified or 'consent' checks), qualified written allocation notifications (face value), and other property (excluding written distribution notifications without reserve) allowed in the deduction.
Box 2. Non-Patronage Distributions
This is for farmer cooperatives exempt from tax per section 521 only, enter the patron's share of the amount paid in cash (including qualified checks or "consent"), qualified written notice of allocation (face value). Other properties (except non qualified written notice of allocation) based on patronage regarding the income of a co-operative enterprise in the United States or any of its agencies or unsponsored sources permitted as a deduction.
Box 3. per-unit retain allocation.
Enter the user's share of the total licenses held for units paid in cash, certificates held for qualifying units (face value), and other properties (excluding certificates held for unqualified units) allowable as a deduction.
Box 4. Federal income tax withholding
Enter the withholding tax for patronage payments. Persons who have not provided their TIN in the manner requested are subject to payment of withholding tax to be declared in boxes 1, 2, 3, and 5, as these payments are made in cash or by qualified check.
Box 5. Redeemed Nonqualified Notices
Enter the number of written unqualified redemption allocation notices paid as patronage dividends, and the number of unqualified redemption certificates held per share that was paid as withholding tax per share.
Box 6. Section 199A(g) Deduction
For specific agricultural and horticultural cooperatives only, enter the patron's share of the section 199A (g) deduction required by the co-operative under section 199A (g) and pass through to the patron. This amount must have been designated by written notice sent to the patron by the co-operative during the payment period. The deduction allocated to each user cannot exceed 9% of the eligible payments declared in box 7 and cannot be transferred to C corporations' patrons.
Box 7. Qualified Payments
Only for certain agricultural and horticultural co-operatives, enter the eligible payments made to the patron. You must provide this information on whether you pass on the domestic production activities deduction (DPAD) to the patrons.
Box 8. Items Qualified to Section 199A (a)
Enter the amounts declared to patrons that are eligible income, gains, deductions, or losses from eligible activities or activities that are not a business or service activity (SSTB) within the meaning of section 199A. Examples of non-qualifying income include non-taxable income, capital gains, and income not related to business or commerce in the United States.
Box 9. Section 199A(a) SSTB Items
Enter values reported to patrons who are qualified items or qualified companies, which are SSTBs within the meaning of Section 199A. Some examples of SSTB include providing services in the areas of health, law, accounting, etc.
Box 10. Investment credit
Enter the patron's share of the total investment credit.
Box 11. Credit for employment opportunities
Enter the patron's share of the total employment opportunity credit.
Box 12. Other credits and deductions
For the patron, indicate separately in box 12 the type and value of each of the following credits and deductions.
Credit for biodiesel and renewable diesel fuels (model 8864).
Credit for biofuels (including second-generation biofuels) (form 6478).
Credit for producing renewable electricity, refined coal, and Indian coal (form 8835).
Credit for the generation of low sulfur diesel (Form 8896).
Deduction of capital costs incurred by small-scale refining co-operatives per EPA sulfur regulations.
Employer differential compensation credit (form 8932).
Empowerment zone credit (form 8844).
Indian Employment Credit (Form 8845).
Small Employer Health Insurance Premium Credit (Form 8941).
Box 13. Specific co-operatives
Check this box if you are reporting information such as a particular agricultural or horticultural co-operative.
Bottom Line
Form 1099-PATR is an important form for the tax declaration of co-operatives and companies in the tax return. It contains a significant amount of specific information that must be reported correctly and in the appropriate tax categories. If you have questions, work with a tax preparer or specialist.
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