Welcome to our discussion on the requirements for furnishing Form 1099-G electronically.

Many of you either furnish 1099-Gs electronically to recipients or are considering electronically furnishing and have questions.

The TE/GE Office of Federal, State and Local Government has oversight for 1099-G filing for government entities.

  I’ll share how to successfully implement furnishing 1099-Gs electronically, discuss the requirements, and answer questions that many have about the process. Our goal is to provide all the information to help you   implement an e-furnishing system for these information returns that complies with the rules and regulations.

We all know that our income tax system relies on self-reporting of income, and most Americans depend on receiving and including income reported on various information returns. The likelihood of income being reported   properly is greatly improved when information returns are prepared correctly and delivered to payees efficiently.

Therefore, the IRS has focused for many years on e-filing and educating payers about e-furnishing to recipients.

  The Office of Federal State and Local Governments published a web article on this topic, and you can find it by going to IRS.gov and search "requirements for furnishing Form 1099-G electronically".

  You may want to refer to the article later to review the information provided. It contains many resource links, but the most important one we will be discussing today, which will be mentioned throughout, is   Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, W-2G, and 1042-S.

Your best resource for developing a system to electronically furnish information returns is found in Section 4.6, Electronic Delivery of Recipient Statements on pages 28 and 29 of the publication.

  As is true with all IRS forms and publications, Publication 1179 can be accessed by going to IRS.gov and selecting 'Forms and Instructions'. You can view forms and publications online, download a PDF, or order   hard copies via the Forms and Instructions page.

Let's talk about the Form 1099-G, which is an information return that is used by government entities to report certain payments.

Government entities are required to file and furnish Form 1099-G if payments were made throughout the year for:   unemployment compensation; state or local income tax refunds, credits or offsets; Reemployment Trade Adjustment Assistance payments; taxable grants; and agricultural payments. You must also file Form 1099-G if you received payments on a commodity credit corporation loan. More details on the types of payments reportable can be found   in the instructions for Form 1099-G, also available via IRS.gov.

In general, the furnishing requirement is met by providing the recipient or payee with a paper copy of Form 1099-G by January 31 of the year following the year of payment. You must also file a copy of the 1099-G with the IRS before February 28, unless you file electronically, which allows for a due date of March 31st of the same year.

  The Internal Revenue Code and regulations allow for most information returns to be furnished electronically.

A complete list of allowable returns is found on pages 28 of Pub. 1179, under Section 4.6, Electronic Delivery of Recipient Statements.

  The 2021 General Instructions for Certain Information Returns specifies who must file information returns, when and where to file them and information about electronic reporting.

The instructions also cover correcting and voiding returns, providing statements to recipients, taxpayer identification numbers,   backup withholding, penalties and more.

With our focus today on furnishing 1099-Gs to recipients electronically what are the incentives to do so?

Why migrate to furnishing Form 1099-G electronically to recipients? There are quite a few advantages to it.

There may be significant cost benefits that result when paper and printing costs are reduced, mailing processes and fees are reduced if not eliminated, paper handling costs from filing, sorting,   storing and shredding are reduced; eliminating re-typing and/or editing of documents reduces costs; and finally, accessibility is a factor. Distribution via secure web access and email is usually most cost-effective and convenient for recipients.

  How must it be done? In general, organizations will request affirmative consent, receive and document the consent, provide required notifications, and furnish statements to consenting payees electronically.

Now let's go into a little more detail on these steps. To use electronic deliveries for information returns to payees,   the payer must obtain an affirmative consent from each recipient to whom a statement will be furnished electronically.

The consent must be made by the recipient electronically in a way that confirms the recipient can access the statement   in the same electronic format in which it will be furnished. For example, if the Form 1099-G will be delivered as a portable   document format, or PDF file, then the affirmative consent document format should also be in PDF. In addition, the payer must make certain notifications to each consenting individual. These will be addressed later in the presentation.

  What does the consent process look like? The first step in the process is to obtain consent from your payees.

The procedures that follow were originally included in Revenue Procedure 2004-58 and have been annually   updated without material change through and including the current Revenue Procedure 2021-27.

You may refer to the affirmative consent procedures on pages 28 and 29 of Publication 1179, under Section 4.6, Electronic Delivery of Recipient Statements. The process begins with correspondence sent to each individual payee,   requesting affirmative consent to electronic delivery of their Form 1099-G. The correspondence may be delivered by mail,   electronic mail, in person, or via web site posting, and it must provide instructions on how to affirmatively consent.

The correspondence must include the following statement in capital letters: "IMPORTANT TAX RETURN DOCUMENT AVAILABLE."   If the correspondence is provided by electronic mail, the foregoing statement must be on the subject line of the electronic mail.

If the electronic notice is returned as undeliverable and the correct electronic address cannot be obtained from the payee's records, or from the payee, then the furnisher must furnish the notice by mail, or in person,   within 30 days after the electronic notice is returned.

The following examples for securing consent are found in Regulation 31.6051-1. These examples apply to any electronically furnished information return.

  Example one: consent is requested via correspondence.

The state sends the recipient a letter, stating the recipient may consent to receive the form electronically on a web site, instead of paper.

The letter contains instructions explaining how to consent to receive the form electronically, by accessing the web site,   downloading the consent document, completing the consent document, and emailing it back to the state.

The consent document posted on the web site uses the same electronic format that the state will use for the electronically furnished form. The recipient reads the instructions and submits the consent in the manner provided in the instructions.

  The recipient has consented to receive the statements electronically in the manner described in the regulations.

  Example two: consent is requested via e-mail.

The state sends the recipient an e-mail, stating the recipient may consent to receive the form electronically instead of paper format.

  The email contains an attachment, instructing the recipient how to consent to receive the form electronically.

The e-mail attachment uses the same electronic format that the state will use for the electronically furnished form.

  The recipient opens the attachment, reads the instructions, and submits the consent in the manner provided in the instructions.

  The recipient has consented to receive the form electronically in the manner described in the regulations.

Example three: consent is requested via a web site posting.

The state posts a notice on its web site, stating the recipient may receive the form electronically instead of paper format.

  The web site contains instructions on how the recipient may access a secure web page and consent to receive the statements electronically By accessing the secure web page and giving consent, the recipient has consented to receive the form electronically in the manner described   in the regulations. In each case, the payer took the steps to notify recipients by letter, email or web site posting about the availability of a consent election, prior to issuing returns electronically. Electronic statements are furnished to an individual   only after that individual responded with an affirmative consent.

If the payee does not consent, a paper document must be sent. As part of the consent process, the government entity must provide   a statement with all the following notifications prominently displayed. There are seven notifications.

Number one is, if the payee does not consent, a paper copy will be provided. Two, the scope and duration of the consent.

Three, how to obtain a paper copy after giving consent.

Four, how to withdraw the consent. Five, conditions under which an electronic statement will no longer be furnished.

Six, procedures to update payee information. And   Seven, a description of hardware and software required to access, print and retain a state-ment, and when it will no longer be available.

If the government entity makes any hardware or software changes that create a risk that the recipient won't be able to access the statement, a notice of these changes must be provided to the recipient before changing the hardware or software. The notice must inform the recipient   that a new consent to receive the form in the revised electronic format must be provided.

After implementing the revised hardware and software changes, the furnisher must obtain   a new consent or confirmation of consent from the recipient to receive the form electronically.

You can refer to the affirmative consent procedures on pages 28 and 29 of Publication 1179, under Section 4.6.2, Consent.

  What do you need to do after you have secured consent? The government entity must place electronically posted Forms 1099-G on the applicable web site by January 31, the due date, and the statement must remain available until at least October 15 of that year.

When Forms 1099-G are posted, the issuing entity must notify the consenting payees, either electronically or by mail.

  For payees who do not provide consent, or who withdraw their consent to receive the Form 1099-G electronically before the statement is furnished, the payer must provide a paper payee statement within the regular deadline.

And again, the deadline would be January 31 for the Form 1099-G.

  As a payor, you should have a record of the payee consent for every statement you furnish electronically. If you fail to furnish the information in the required manner, this could result in the payee neglecting to report the income on their individual federal, state   or local income tax returns. And this could subject them to enforcement actions, including penalties and possibly interest, by multiple government taxing authorities on any taxes that were due and owing. The affirmative consent requirement ensures each   payee will either receive the statement on paper or agrees to the electronic delivery.

Now here are a few reminders. One, the recipient must not have withdrawn the consent before the statement is furnished.

  Two, if the recipient subsequently withdraws their consent, your system must notify you and a paper reporting requirement must be resumed. You must provide a paper payee statement within the regular deadline, and again that is January 31 for Form 1099-Gs.

  Three, remember, a new consent to receive the statement electronically is required after any new hardware or new software is put into service. And four, all electronic statements must be in a format that conforms to the requirements as stated in Publication 1179.

The affirmative consent requirements assure a payee knows the information statement will be furnished electronically,   they have the right hardware and software to receive the information statement, and if they don't consent, a paper statement will be provided to them. I’ll share a few common questions we receive about this process and the answers next:   The first question is, does the consent to receive the statement electronically have to be provided each tax year, or does it stay in effect   until the payee withdraws the consent? The answer is the furnisher can make the determination regarding the scope and duration of the consent if the payee is informed. They can decide whether a consent to receive payee statements electronically lasts   for each succeeding tax year, unless it is withdrawn or there is a change in hardware or software requirements, or whether the consent is only effective for the first information return required to be furnished following the date the consent is given. Remember, prior to furnishing the statements electronically, you must provide the recipient a statement with prominently displayed notices, including the scope and duration of the consent.

The second question is whether the furnisher has met its obligation to furnish the information return if the payee has affirmatively consented   to receive the information return electronically but does not actually retrieve the information return?

The answer is they've met their obligation to furnish the info return under Internal Revenue Code Sections 6050B(b) and 6050E(b)

if the payee affirmatively consents to receive it electronically. Section 401 of the Job Creation and Workers' Assistance Act of 2002 permits   the electronic furnishing of all statements required under Section 6041 through 6050W, if the recipient consents to receive the statement in a manner similar to the one permitted by regulations under Section 6051, or in such other manner as provided by the Secretary.

The next question is: Does the furnisher have to obtain affirmative consent to furnish the Form 1099-G electronically?

  The answer is the furnisher must obtain affirmative consent before they may furnish the Form 1099-G electronically.

If a furnisher does not obtain affirmative consent, they must furnish the return by paper,   or they will be in violation of the Internal Revenue Code and regulations.

The fourth question is: Why should the furnisher comply with the affirmative consent requirement?

The affirmative consent requirement assures the payee knows the information return or statement will be furnished electronically and has the right hardware and software to receive the information statement. If the payee does not know   the statement is furnished electronically or does not have the right hardware and software to receive it electronically, they may not report income when required. This would result in loss of revenue and increased correspondence and compliance costs. Moreover, and this is not to say that the Internal Revenue Service is considering doing this, the legislative history to the Tax Reform Act of 1984 states, the conferees anticipate the Secretary would seriously consider terminating any exchange of returns or return information under Section 6103 with the state that does not report refunds to   the taxpayer. This statement was in the House-Senate Conference Report, HR report number 861, at page 992, dated June 23, 1984.

Question five is: What does the phrase 'must furnish a Form 1099-G' mean? The answer is the furnisher must either furnish the payee   a paper copy of the Form 1099-G or furnish the Form 1099-G electronically by email or on a secure web site, if it has obtained affirmative consent by the payee.

The next question is: Is it acceptable to stop mailing Form 1099-G and furnish the form electronically to the recipients?

  The answer is the furnisher may furnish the information return electronically if the payee has affirmatively consented to receive the information return electronically. Under current regulations, this means furnishing either by email or on a secure web site.

And the last question is: What is a Form 4419 and who needs to file it? The answer is a Form 4419, Application for Filing Information Returns Electronically, is submitted by those payers or agents who file information returns with the IRS electronically. Please review the instructions to Form 4419 for information on how to fill out/submit Form 4419 to the IRS.

I hope this has helped clarify the procedures to furnish recipients Form 1099-Gs electronically.

These procedures include requesting affirmative consents, receiving and documenting consents, providing required   notifications, and furnishing statements to consenting payees electronically.

  Again, if you want more information, visit IRS.gov. Thank you and we hope you have a successful day.