Boxes for
taxpayer name and identification numbers: It is important that the cooperative
and patron recipient have identification numbers aligned with the entity who
actually received the distribution.
Original,
void or corrected Form 1099-PATRs: The
IRS will match all cooperative distributions reported on box 1 and 3 to the
recipient’s tax returns. If members are
not flagged appropriately by the cooperative, and the form was issued to the
party who did not receive the distribution, then voided and corrected forms
should be issued. The issuer will check the "void" or
"corrected" box at the top of the 1099 form if applicable.
Box 1 – Patronage Dividends: Lists the patronage dividends paid to the
recipient in cash, qualified written notices of allocation (at stated dollar
value) or other property.
Cooperatives
generally issue "qualified written notices of allocation" to their
members in the form of equity in the cooperative. At least 20% of the patronage dividend or
payment must be in cash to be a "qualified written notice of
allocation." In this case, if the source of the patronage dividend was
derived from an expenditure deducted on your tax return, then the entire amount
both cash and noncash portions of the patronage dividend must be reported as
income on your tax return. If related to
farming expenditures, then report the patronage dividend on Schedule F as
cooperative distributions. The noncash portion represents the amount of
qualified patronage dividends which have been reported as income for tax
purposes, but which have been retained by the cooperative for its use. At some
future time, you may be able to receive additional cash redemptions. The cash
received at the later date will not be taxable, because you have already
reported the amounts on previous tax returns.
Box 2 – Non-patronage Distributions: Shows the non-patronage distributions paid to
the recipient in cash, qualified written notices of allocation or other
property.
Box 3 – Per-Unit Retain Allocations: A per-unit retain allocation is an amount
paid to patrons for products sold for them that is fixed without regard to the
net earnings of the cooperative. These allocations can be paid in money, other
property, or qualified certificates.
Per-unit retain allocations issued by a cooperative generally receive
the same tax treatment as patronage dividends and are reported on Schedule F as
cooperative distributions.
Per-unit
retain allocations paid in money (PURPIMs) include amounts paid to patrons for
grain. The amount reported on Form 1099-PATR box 3 is the recipient’s calendar
year 2012 gross grain sales (rather than net grain sales) to the cooperative. Members should reclassify grain sales as
PURPIMs on the farm income tax schedule.
Generally, the items that differ from net grain sales to gross grain sales
include deductions from grain checks for storage, drying, trucking and
check-off expenses. Remember that even
if the cooperative has a fiscal year, the cooperative will report these
payments to members for their grain purchases paid during calendar year 2012 on
Form 1099-PATR box 3.
Box 4 – Federal Income Tax Withheld:
Lists the backup withholdings for the recipient. If the recipient did not provide the
cooperative with a tax ID number, the cooperative must withhold 28% of any
distributions.
Box 5 – Redemption of Nonqualified Notices
and Per Unit Retain Allocations:
Shows the amount the recipient got when he or she redeemed nonqualified
written notices of allocation and nonqualified per-unit retain
allocations. If you receive a non-qualified
patronage dividend, the cash received is taxable income. If you receive a nonqualified notice of
allocation, retain the notice in your permanent records, but no tax impact
occurs at this time, only when cash is received upon later redemption.
Box 6 – Domestic Production Activities
Deduction: Reports the amount of Section 199 Domestic Production Activities
Deduction (DPAD) that the cooperative allocated to the recipient during
calendar 2012. The deduction represents
the amount the recipient may take based on his or her portion of patronage
dividends or per-unit retain allocations attributable to Qualified Production
Activities Income (QPAI).
Your local
cooperative computes DPAD for its fiscal year-end based on 9% of QPAI. Recent IRS rulings allow cooperatives to
treat grain purchases from its members as per unit retain allocations paid in
money (PURPIMs) for purposes of calculating the DPAD. This classification means that the
cooperative is not required to deduct the PURPIMs when calculating QPAI and therefore
DPAD. The cooperative, for its fiscal year, computes the DPAD in accordance
with these rules and then elects to pass through the deduction to its members
during 2012. The deduction is based on
grain payments made to its members during the applicable payment period (from
the beginning to the end of the cooperative’s fiscal year). The deduction is also limited to 50% of
qualified wages paid by cooperative. The
wage limitation does not apply a second time to the amount passed through to
the member on its tax return.
In order for
the patron to qualify for the deduction, the cooperative must designate the
patron’s portion of the Section 199 deduction in a written notice of allocation
of DPAD (required to be mailed to the patron no later than the 15th day of the
ninth month following the close of the cooperative’s fiscal year) indicating
that the cooperative made an election to pass the DPAD on to its members. The
recipient’s allocated DPAD is deductible on Form 8903 line 23 for members with
a calendar or fiscal year ending within the date of the written notice.
Boxes 7, 8, 9 and 10 – Various Tax Credits: These boxes list various tax credits, such as
the investment tax credit or work opportunity credit, passed through from the
cooperative to the recipient.
Should you have
any questions regarding the information on any tax form and what it means for
you and your agribusiness, please contact one of the Bergan Paulsen ag team
members for more information.
No comments:
Post a Comment