26 Cfr 1.6041-1

eCFR — Code of Federal Regulations

Page 1 of 5

§1.6041-1 Return of information as to payments of $600 or more.
(a) General rule—(1) Information returns required—(i) Payments required to be reported. Except as otherwise provided in
§§1.6041-3 and 1.6041-4, every person engaged in a trade or business shall make an information return for each calendar year
with respect to payments it makes during the calendar year in the course of its trade or business to another person of fixed or
determinable income described in paragraph (a)(1)(i) (A) or (B) of this section. For purposes of the regulations under this section,
the person described in this paragraph (a)(1)(i) is a payor.
(A) Salaries, wages, commissions, fees, and other forms of compensation for services rendered aggregating $600 or more.
(B) Interest (including original issue discount), rents, royalties, annuities, pensions, and other gains, profits, and income
aggregating $600 or more.
(ii) Information returns required under other provisions of the Internal Revenue Code. The payments described in
paragraphs (a)(1)(i)(A) and (B) of this section shall not include any payments of amounts with respect to which an information
return is required by, or may be required under authority of, section 6042(a) (relating to dividends), section 6043(a)(2) (relating to
distributions in liquidation), section 6044(a) (relating to patronage dividends), section 6045 (relating to brokers' transactions with
customers and certain other transactions), sections 6049(a)(1) and (2) (relating to interest), section 6050N(a) (relating to
royalties), or section 6050P(a) or (b) (relating to cancellation of indebtedness). For information returns required under section
6045(f) (relating to payments to attorneys), see special rules in §§1.6041-1(a)(1)(iii) and 1.6045-5(c)(4). For payment card
transactions (as described in §1.6050W-1(b)) and third party network transactions (as defined in §1.6050W-1(c)) required to be
reported on information returns required under section 6050W (relating to payment card and third party network transactions),
see special rules in §1.6041-1(a)(1)(iv).
(iii) Information returns required under section 6045(f) on or after January 1, 2007. For payments made on or after January
1, 2007 to which section 6045(f) (relating to payments to attorneys) applies, the following rules apply. Not withstanding the
provisions of paragraph (a)(1)(ii) of this section, payments to an attorney that are described in paragraph (a)(1)(i) of this section
but which otherwise would be reportable under section 6045(f) are reported under section 6041 and this section and not section
6045(f). This exception applies only if the payments are reportable with respect to the same payee under both sections. Thus, a
person who, in the course of a trade or business, pays $600 of taxable damages to a claimant by paying that amount to the
claimant's attorney is required to file an information return under section 6041 with respect to the claimant, as well as another
information return under section 6045(f) with respect to the claimant's attorney. For provisions relating to information reporting for
payments to attorneys, see §1.6045-5.
(iv) Information returns required under section 6050W for calendar years beginning after December 31, 2010. For payments
made by payment card (as defined in §1.6050W-1(b)(3)) or through a third party payment network (as defined in §1.6050W-1(c)
(3)) after December 31, 2010, that are required to be reported on an information return under section 6050W (relating to
payment card and third party network transactions), the following rule applies. Transactions that are described in paragraph (a)
(1)(ii) of this section that otherwise would be subject to reporting under both sections 6041 and 6050W are reported under
section 6050W and not section 6041. For provisions relating to information reporting for payment card and third party network
transactions, see §1.6050W-1. Solely for purposes of this paragraph, the de minimis threshold for third party network
transactions in §1.6050W-1(c)(4) is disregarded in determining whether the transaction is subject to reporting under section
6050W.
(v) Examples. The provisions of paragraph (a)(1)(iv) of this section are illustrated by the following examples:
Example 1. Restaurant owner A, in the course of business, pays $600 of fixed or determinable income to B, a repairman, by credit
card. B is one of a network of unrelated persons that has agreed to accept A's credit card as payment under an agreement that provides
standards and mechanisms for settling the transactions between a merchant acquiring bank and the persons who accept the cards.
Merchant acquiring bank Y is responsible for making the payment to B. Under paragraph (a)(1)(iv) of this section, A, as payor, is not
required to file an information return under section 6041 with respect to the transaction because Y, as the payment settlement entity for the
payment card transaction, is required to file an information return under section 6050W.
Example 2. Restaurant owner A, in the course of business, pays $600 of fixed or determinable income to B, a repairman, through a
third party payment network. B is one of a substantial number of persons who have established accounts with Y, a third party settlement
organization that provides standards and mechanisms for settling the transactions and guarantees payments to those persons for goods or
services purchased through the network. Y is responsible for making the payment to B. Under paragraph (a)(1)(iv) of this section, A, as
payor, is not required to file an information return under section 6041 with respect to the transaction because the transaction is a third party
network transaction that is subject to reporting under section 6050W. Solely for purposes of determining whether A is eligible for relief from
reporting under section 6041, the de minimis threshold for third party network transactions in §1.6050W-1(c)(4) is disregarded.

(2) Prescribed form. The return required by subparagraph (1) of this paragraph shall be made on Forms 1096 and 1099
except that (i) the return with respect to distributions to beneficiaries of a trust or of an estate shall be made on Form 1041, and
(ii) the return with respect to certain payments of compensation to an employee by his employer shall be made on Forms W-3
and W-2 under the provisions of §1.6041-2 (relating to return of information as to payments to employees). Where Form 1099 is
required to be filed under this section, a separate Form 1099 shall be furnished for each person to whom payments described in
subdivision (i), (ii), or (iii) of subparagraph (1) of this paragraph are made. For time and place for filing Forms 1096 and 1099,
see §1.6041-6. For the requirement to submit the information required by Form 1099 on magnetic media for payments after
December 31, 1983, see section 6011(e) and §301.6011-2 of this chapter (Procedure and Administration Regulations).

https://www.ecfr.gov/cgi-bin/text-idx?SID=d0451d271edbc4a1af2dff3146456903&mc=true... 5/3/2018

eCFR — Code of Federal Regulations

Page 2 of 5

(b) Persons engaged in trade or business—(1) In general. The term “all persons engaged in a trade or business”, as used in
section 6041(a), includes not only those so engaged for gain or profit, but also organizations the activities of which are not for the
purpose of gain or profit. Thus, the term includes the organizations referred to in section 401(a), 501(c), 501(d) and 521 and in
paragraph (i) of this section. On the other hand, section 6041(a) applies only to payments in the course of trade or business;
hence it does not apply to an amount paid by the proprietor of a business to a physician for medical services rendered by the
physician to the proprietor's child.
(2) Special rule for REMICs. For purposes of chapter 1 subtitle F, chapter 61A, part IIIB, the terms “all persons engaged in a
trade or business” and “any service-recipient engaged in a trade or business” includes a real estate mortgage investment conduit
or REMIC (as defined in section 860D).
(c) Fixed or determinable income. Income is fixed when it is to be paid in amounts definitely predetermined. Income is
determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained. The income need not
be paid annually or at regular intervals. The fact that the payments may be increased or decreased in accordance with the
happening of an event does not for purposes of this section make the payments any the less determinable. A payment made
jointly to two or more payees may be fixed and determinable income to one payee even though the payment is not fixed and
determinable income to another payee. For example, property insurance proceeds paid jointly to the owner of damaged property
and to a contractor that repairs the property may be fixed and determinable income to the contractor but not fixed and
determinable income to the owner, and should be reported to the contractor. A salesman working by the month for a commission
on sales which is paid or credited monthly receives determinable income.
(d) Payments specifically included—(1) In general. Amounts paid in respect of life insurance, endowment, or annuity
contracts are required to be reported in returns of information under this section—
(i) Unless the payment is made in respect of a life insurance or endowment contract by reason of the death of the insured
and is not required to be reported by paragraph (b) of §1.6041-2,
(ii) Unless the payment is made by reason of the surrender prior to maturity or lapse of a policy, other than a policy which
was purchased (a) by a trust described in section 401(a) which is exempt from tax under section 501(a), (b) as part of a plan
described in section 403(a), or (c) by an employer described in section 403(b)(1)(A),
(iii) Unless the payment is interest as defined in §1.6049-2 and is made after December 31, 1962,
(iv) Unless the payment is a payment with respect to which a return is required by §1.6047-1, relating to employee
retirement plans covering owner-employees,
(v) Unless the payment is payment with respect to which a return is required by §1.6052-1, relating to payment of wages in
the form of group-term life insurance.
(2) Professional fees. Fees for professional services paid to attorneys, physicians, and members of other professions are
required to be reported in returns of information if paid by persons engaged in a trade or business and paid in the course of such
trade or business.
(3) Prizes and awards. Amounts paid as prizes and awards that are required to be included in gross income under section
74 and §1.74-1 when paid in the course of a trade or business are required to be reported in returns of information under this
section.
(4) Disability payments. Amounts paid as disability payments under section 105(d) are required to be reported in returns of
information under this section.
(5) Notional principal contracts. Except as provided in paragraphs (b)(5)(i) and (ii) of this section, amounts paid after
December 31, 2000, with respect to notional principal contracts referred to in §1.863-7 or 1.988-2(e) to persons who are not
described in §1.6049-4(c)(1)(ii) are required to be reported in returns of information under this section. The amount required to
be reported under this paragraph (d)(5) is limited to the amount of cash paid from the notional principal contract as described in
§1.446-3(d). A non-periodic payment is reportable for the year in which an actual payment is made. Any amount of interest
determined under the provisions of §1.446-3(g)(4) (dealing with interest in the case of a significant non-periodic payment) is
reportable under this paragraph (d)(5) and not under section 6049 (see §1.6049-5(b)(15)). See §1.6041-4(a)(4) for reporting
exceptions regarding payments to foreign persons. See, however, §1.1461-1(c)(1) for reporting amounts described under this
paragraph (d)(5) that are paid to foreign persons. The provisions of §1.6049-5(d) shall apply for determining whether a payment
with respect to a notional principal contract is made to a foreign person. See §1.6049-4(a) for a definition of payor. For purposes
of this paragraph (d)(5), a payor includes a middleman defined in §1.6049-4(f)(4).
(i) An amount paid with respect to a notional principal contract is not required to be reported if the amount is paid by a
non-U.S. payor or a non-U.S. middleman and is paid and received outside the United States (as defined in §1.6049-4(f)(16)).
(ii) An amount paid with respect to a notional principal contract is not required to be reported if the amount is paid by a payor
that has no actual knowledge that the payee is a U.S. person and is paid and received outside the United States (as defined in
§1.6049-4(f)(16)), and the payor is—

https://www.ecfr.gov/cgi-bin/text-idx?SID=d0451d271edbc4a1af2dff3146456903&mc=true... 5/3/2018

eCFR — Code of Federal Regulations

Page 3 of 5

(A) A U.S. payor or U.S. middleman that is not a U.S. person (such as a controlled foreign corporation defined in section 957
(a) or certain foreign corporations or foreign partnerships engaged in a U.S. trade or business); or
(B) A foreign branch of a U.S. bank. See §1.6049-5(c)(5) for a definition of a U.S. payor, a U.S. middleman, a non-U.S.
payor, and a non-U.S. middleman.
(e) Payment made on behalf of another person—(1) In general. A person that makes a payment in the course of its trade or
business on behalf of another person is the payor that must make a return of information under this section with respect to that
payment if the payment is described in paragraph (a) of this section and, under all the facts and circumstances, that person—
(i) Performs management or oversight functions in connection with the payment (this would exclude, for example, a person
who performs mere administrative or ministerial functions such as writing checks at another's direction); or
(ii) Has a significant economic interest in the payment (i.e., an economic interest that would be compromised if the payment
were not made, such as by creation of a mechanic's lien on property to which the payment relates, or a loss of collateral).
(2) Determination of payor obligated to report. If two or more persons meet the requirements for making a return of
information with respect to a payment, as set forth in paragraph (e)(1) of this section, the person obligated to report the payment
is the person closest in the chain to the payee, unless the parties agree in writing that one of the other parties meeting the
requirements set forth in paragraph (e)(1) of this section will report the payment.
(3) Special rule for payment by employee to employer. Notwithstanding the provisions of paragraph (e)(1) of this section, an
employee acting in the course of his employment who makes a payment to his employer on behalf of another person is not
required to make a return of information with respect to that payment.
(4) Optional method to report. A person that makes a payment on behalf of another person but is not required to make an
information return under paragraph (e)(1) of this section may elect to do so pursuant to the procedures established by the
Commissioner. See, e.g., Rev. Proc. 84-33 (1984-1 C.B. 502) (optional method for a paying agent to report and deposit amounts
withheld for payors under the statutory provisions of backup withholding) (see §601.601(d)(2) of this chapter).
(5) Examples. The provisions of this paragraph (e) are illustrated by the following examples:
Example 1. Bank B provides financing to C, a real estate developer, for a construction project. B makes disbursements from the
account for labor, materials, services, and other expenses related to the construction project. In connection with the payments, B performs
the following functions: approves payments to the general contractor or subcontractors; ensures that loan proceeds are properly applied
and that all approved bills are properly paid to avoid mechanics' or materialmen's liens; conducts site inspections to determine whether
work has been completed (but does not check the quality of the work). B is performing management or oversight functions in connection
with the payments and is subject to the information reporting requirements of section 6041 with respect to payments.
Example 2. Mortgage company D holds a mortgage on business property owned by E. When the property is damaged by a storm, E's
insurance company issues a check payable to both D and E in settlement of E's claim. Pursuant to the contract between D and E, D holds
the insurance proceeds in an escrow account and makes disbursements, according to E's instructions, to contractors and subcontractors
performing repairs on the property. D is not performing management or oversight functions, but D has a significant economic interest in the
payments because the purpose of the arrangement is to ensure that property on which D holds a mortgage is repaired or replaced. D is
subject to the information reporting requirements of section 6041 with respect to the payments to contractors.
Example 3. Settlement agent F provides real estate closing services to real estate brokers and agents. F deposits money received from
the buyer or lender in an escrow account and makes payments from the account to real estate agents or brokers, appraisers, land
surveyors, building inspectors, or similar service providers according to the provisions of the real estate contract and written instructions
from the lender. F may also make disbursements pursuant to oral instructions of the seller or purchaser at closing. F is not performing
management or oversight functions and does not have a significant economic interest in the payments, and is not subject to the information
reporting requirements of section 6041. For the rules relating to F's obligation to report the gross proceeds of the sale, see section 6045(e)
and §1.6045-4.
Example 4. Assume the same facts as in Example 3. In addition, the seller instructs F to hire a contractor to perform repairs on the
property. F selects the contractor, negotiates the cost, monitors the progress of the project, and inspects the work to ensure it complies with
the contract. With respect to the payments to the contractor, F is performing management or oversight functions and is subject to the
information reporting requirements of section 6041.
Example 5. G is a rental agent who manages certain rental property on behalf of property owner H. G finds tenants, arranges leases,
collects rent, responds to tenant inquiries regarding maintenance, and hires and makes payments to repairmen. G subtracts her
commission and any maintenance payments from rental payments and remits the remainder to H. With respect to payments to repairmen,
G is performing management or oversight functions and is subject to the information reporting requirements of section 6041. With respect to
the payment of rent to H, G is subject to the information reporting requirements of section 6041 regardless of whether she performs
management or oversight functions or has a significant economic interest in the payment. See §1.6041-3(d) for rules relating to rental
agents. See §1.6041-1(f) to determine the amount that G should report to H as rent.
Example 6. Literary agent J receives a payment from publisher L of fees earned by J's client, author K. J deposits the payment into a
bank account in J's name. From time to time and as directed by K, J makes payments from these funds to attorneys, managers, and other
third parties for services rendered to K. After subtracting J's commission, J pays K the net amount. J does not order or direct the provision
of services by the third parties to K, and J exercises no discretion in making the payments to the third parties or to K. J is not performing
management or oversight functions and does not have a significant economic interest in the payments and is not subject to the information
reporting requirements of section 6041 in connection with the payments to K or to the third parties. For the rules relating to L's obligation to

https://www.ecfr.gov/cgi-bin/text-idx?SID=d0451d271edbc4a1af2dff3146456903&mc=true... 5/3/2018

eCFR — Code of Federal Regulations

Page 4 of 5

report the payment of the fees to K, see paragraphs (a)(1)(i) and (f) of this section. For the rules relating to K's obligation to report the
payment of the commission to J and the payments to the third parties for services, see paragraphs (a)(1)(i) and (d)(2) of this section.
Example 7. Attorney P deposits into a client trust fund a settlement payment from R, the defendant in a breach of contract action for
lost profits in which P represented plaintiff Q. P makes payments from the client trust fund to service providers such as expert witnesses
and private investigators for expenses incurred in the litigation. P decides whom to hire, negotiates the amount of payment, and determines
that the services have been satisfactorily performed. In the event of a dispute with a service provider, P withholds payment until the dispute
is settled. With respect to payments to the service providers, P is performing management or oversight functions and is subject to the
information reporting requirements of section 6041.
Example 8. Assume the same facts as in Example 7. In addition, assume that after paying the service providers and deducting his legal
fee, P pays Q the remaining funds that P had received from the settlement with R. With respect to the payment to Q, P is not performing
management or oversight functions, does not have a significant economic interest in the payment, and is not subject to the information
reporting requirements of section 6041. For the rules relating to R's obligation to report the payment of the settlement proceeds to P, see
section 6045(f) and the regulations thereunder. For the rules relating to R's obligation to report the payment of the settlement proceeds to
Q, see paragraphs (a)(1)(i) and (f) of this section. For the rules relating to Q's obligation to report the payment of attorney fees to P, see
paragraphs (a)(1)(i) and (d)(2) of this section.
Example 9. Medical insurer S operates as the administrator of a health care program under a contract with a state. S makes payments
of government funds to health care providers who provide care to eligible patients. S receives and reviews claims submitted by patients or
health care providers, determines if the claims meet all the requirements of the program (e.g., that the care is authorized and that the
patients are eligible beneficiaries), and determines the amount of payment. S is performing management or oversight functions and is
subject to the information reporting requirements of section 6041 with respect to the payments.
Example 10. Race track employee T holds deposits made by horse owner U in a special escrow account in U's name. U enters into a
contract with jockey V to ride U's horse in a race at the track. As directed by U, T pays V the fee for riding U's horse from U's escrow
account. T is not performing management or oversight functions, does not have a significant economic interest in the payment, and is not
subject to the information reporting requirements of section 6041. For the rules relating to U's obligation to report the payment of the fee to
V, see paragraph (a)(1)(i) of this section.
Example 11. X is a certified public accountant employed by Firm Y, and is not a partner. Client Z pays X directly for accounting
services. X remits the amount received to Y, as required by the terms of his employment. X does not have any reporting obligation with
respect to the payment to Y. For the rules relating to Z's obligation to report the payment to Y for services, see paragraphs (a)(1)(i) and (d)
(2) of this section.
Example 12. Bank contracts with Title Company with respect to the disbursement of funds on a construction loan. Pursuant to their
arrangement, the contractor sends draw requests to Title Company, which inspects the work, verifies the amount requested, and then
sends the draw request to Bank with supporting documents. Bank pays Title Company the amount of the draw request, and Title Company
insures Bank against any loss if it cannot obtain the necessary lien waivers. Bank has a significant economic interest in the payment as a
mortgagee, and Title Company exercises management or oversight over the payment. Since Title Company is closest in the chain to the
contractor, Title Company should report the payment, unless the parties agree in writing that Bank will report the payment.

(f) Amount to be reported when fees, expenses or commissions are deducted—(1) In general. The amount to be reported as
paid to a payee is the amount includible in the gross income of the payee (which in many cases will be the gross amount of the
payment or payments before fees, commissions, expenses, or other amounts owed by the payee to another person have been
deducted), whether the payment is made jointly or separately to the payee and another person. The Commissioner may, by
guidance published in the Internal Revenue Bulletin, illustrate the circumstances under which the gross amount or less than the
gross amount may be reported.
(2) Examples. The provisions of this paragraph (f) are illustrated by the following examples:
Example 1. Attorney P represents client Q in a breach of contract action for lost profits against defendant R. R settles the case for
$100,000 damages and $40,000 for attorney fees. Under applicable law, the full $140,000 is includible in Q's gross taxable income. R
issues a check payable to P and Q in the amount of $140,000. R is required to make an information return reporting a payment to Q in the
amount of $140,000. For the rules with respect to R's obligation to report the payment to P, see section 6045(f) and the regulations
thereunder.
Example 2. Assume the same facts as in Example 1, except that R issues a check to Q for $100,000 and a separate check to P for
$40,000. R is required to make an information return reporting a payment to Q in the amount of $140,000. For the rules with respect to R's
obligation to report the payment to P, see section 6045(f) and the regulations thereunder.

(g) Payment made in medium other than cash. If any payment required to be reported on Form 1099 is made in property
other than money, the fair market value of the property at the time of payment is the amount to be included on such form.
(h) When payment deemed made. For purposes of a return of information, an amount is deemed to have been paid when it
is credited or set apart to a person without any substantial limitation or restriction as to the time or manner of payment or
condition upon which payment is to be made, and is made available to him so that it may be drawn at any time, and its receipt
brought within his own control and disposition.
(i) Payments made by the United States or a State. Information returns on:
(1) Forms 1096 and 1099 and
(2) Forms W-3 and W-2 (when made under the provisions of §1.6041-2)

https://www.ecfr.gov/cgi-bin/text-idx?SID=d0451d271edbc4a1af2dff3146456903&mc=true... 5/3/2018

eCFR — Code of Federal Regulations

Page 5 of 5

of payments made by the United States or a State, or political subdivision thereof, or the District of Columbia, or any agency or
instrumentality of any one or more of the foregoing, shall be made by the officer or employee of the United States, or of such
State, or political subdivision, or of the District of Columbia, or of such agency or instrumentality, as the case may be, having
control of such payments or by the officer or employee appropriately designated to make such returns.
(j) Effective/applicability date. This section applies to payments made on or after January 6, 2017. (For payments made after
June 30, 2014, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1, as revised April 1,
2016. For payments made after December 31, 2010, and before July 1, 2014, see this section as in effect and contained in 26
CFR part 1, as revised April 1, 2013.)
[T.D. 6500, 25 FR 12108, Nov. 26, 1960]

https://www.ecfr.gov/cgi-bin/text-idx?SID=d0451d271edbc4a1af2dff3146456903&mc=true... 5/3/2018