1099s May have Truncated Taxpayer ID Numbers

IRS just released Notice 2009-93 allowing us to issue 1099s to our payees using the kind of truncated numbers we generally use when we pay credit card bills and other bills. This applies to calendar year notices for 2009 and 2010.

This permission only applies to the payee's copy of the paper  Form 1098 series, Form 1099 series, and Form 5498 series.

In order to qualify to have the right to truncate your 1099s, you must follow these very stringent rules:

  1. The identifying number is a social security number, IRS individual taxpayer identification number, or IRS adoption taxpayer identification number;
  2. The identifying number is truncated by replacing the first five digits of thenine-digit number with asterisks or Xs (for example, a social security number 123-45-6789 would appear on the paper payee statement as ***-**-6789 or XXX-XX-6789); and
  3. The truncated identifying number appears on a paper payee statement(including substitute and composite substitute statements) in the Form 1098 series,Form 1099 series, or Form 5498 series for calendar year 2009 or 2010.

Sheesh, that seems easy enough. And that helps prevent our clients' SSNs and TINs from getting into the wrong hands.

So, what's the big deal?

Nothing really.   Except for two things:

1) In Circular 230 IRS has alerted tax professionals to take great caution when sending out anything with TINs, whether on paper or electronically, as a security risk. So why doesn't this permission apply to electronically transmitted/delivered Information Returns, as well?

2) Is your 1099 software ddesigned to issue payee forms with the truncated numbers?

IRS is inviting you to comment - the details are on page 4 of Notice 2009-93

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Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

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