ALTA® Successful on Proposed Rules on "Middleman" Reporting
November 20, 2000
Washington, DC? The American Land Title Association (ALTA), was successful in having suggestions to limit administrative burdens on the title industry included in proposed regulations released recently by the Treasury and the IRS. The regulations, commonly called "middleman" regulations, provide guidance on certain information reporting requirements under Internal Revenue Code Section 6041.
Section 6041 imposes information reporting requirements (generally Form 1099-MISC) for payments of income made to another person of $600 or more in a calendar year. When a payment is made by a person other than the person that is the actual source of the funds, this so-called "middleman" may be deemed the payor obligated to report the payment.
The ALTA inclusion states that a settlement agent that provides real estate closing services to real estate brokers and agents and makes disbursements from an escrow account is not required to file Form 1099-MISC for services rendered. When the settlement agent is performing management or oversight functions, he/she must file Forms 1099-MISC. For example, when the settlement agent is instructed by the seller to hire a contractor for repairs, the agent selects the contractor, negotiates the cost and inspects the work.
"This addition to Section 6041 will definitely help us avoid unnecessary paperwork," said Cara Detring, President of the Preferred Land Title Company in Farmington, MO, and ALTA President. "The proposed regulations will help us avoid situations, as had occurred in past years, when IRS field agents would require individual agencies to report all disbursements from escrow, an incredibly onerous administrative task," added Detring.
Contact ALTA at 202-296-3671 or email@example.com.