26 CFR 1.6045-5 - Information reporting on payments to attorneys.
(a) Requirement of reporting -
(1) In general. Except as provided in paragraph (c) of this section, every payor engaged in a trade or business who, in the course of that trade or business, makes payments aggregating $600 or more during a calendar year to an attorney in connection with legal services (whether or not the services are performed for the payor) must file an information return for such payments. The information return must be filed on the form and in the manner required by the Commissioner. For the time and place for filing the form, see § 1.6041-6. For definitions of the terms under this section, see paragraph (d) of this section. The requirements of this paragraph (a)(1) apply whether or not -
(i) A portion of a payment is kept by the attorney as compensation for legal services rendered; or
(ii) Other information returns are required with respect to some or all of a payment under other provisions of the Internal Revenue Code and the regulations thereunder.
(2) Information required. The information return required under paragraph (a)(1) of this section must include the following information:
(i) The name, address, and taxpayer identifying number (TIN) (as defined in section 7701(a)) of the payor;
(ii) The name, address, and TIN of the payee attorney;
(iii) The amount of the payment or payments (as defined in paragraph (d)(5) of this section); and
(iv) Any other information required by the Commissioner in forms, instructions or publications.
(3) Requirement to furnish statement -
(i) General requirements. A person required to file an information return under paragraph (a)(1) of this section must furnish to the attorney a written statement of the information required to be shown on the return. This requirement may be met by furnishing a copy of the return to the attorney. An IRS truncated taxpayer identifying number (TTIN) may be used as the identifying number of the attorney in lieu of the identifying number appearing on the information return filed with the Internal Revenue Service. For provisions relating to the use of TTINs, see § 301.6109-4 of this chapter (Procedure and Administration Regulations). The written statement must be furnished to the attorney on or before February 15 of the year following the calendar year in which the payment was made.
(ii) Consolidated reporting. (A) The term consolidated reporting statement means a grouping of statements the same payor furnishes to the same payee or group of payees on the same date for the same reporting year that includes a statement required under this section. A consolidated reporting statement is limited to statements based on the same relationship of payor to payee as the statement required to be furnished under this section.
(B) A consolidated reporting statement must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting statement.
(b) Special rules -
(1) Joint or multiple payees -
(i) Check delivered to one payee attorney. If more than one attorney is listed as a payee on a check, an information return must be filed under paragraph (a)(1) of this section with respect to the payee attorney to whom the check is delivered.
(ii) Check delivered to payee nonattorney. If an attorney is listed as a payee on a check but the check is delivered to a nonattorney who is a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the payee attorney listed on the check. If more than one attorney is listed as a payee on a check but the check is delivered to a nonattorney who is a payee on the check, the information return must be filed with respect to the first-listed payee attorney on the check.
(iii) Check delivered to nonpayee. If two or more attorneys are listed as payees on a check, but the check is delivered to a person who is not a payee on the check, an information return must be filed under paragraph (a)(1) of this section with respect to the first-listed payee attorney on the check.
(2) Attorney required to report payments made to other attorneys. If an information return is required to be filed with respect to a payee attorney under paragraph (b)(1) of this section, the attorney with respect to whom the information return is required to be filed (tier-one attorney) must file an information return under this section for any payment that the tier-one attorney makes to other payee attorneys with respect to that check, regardless of whether the tier-one attorney is a payor under paragraph (d)(3) of this section.
(c) Exceptions. Notwithstanding paragraphs (a) and (b) of this section, a return of information is not required under section 6045(f) with respect to the following payments:
(1) Payments of wages or other compensation paid to an attorney by the attorney's employer.
(2) Payments of compensation or profits paid or distributed to its partners by a partnership engaged in providing legal services.
(3) Payments of dividends or corporate earnings and profits paid to its shareholders by a corporation engaged in providing legal services.
(4) Payments made by a person to the extent that the person is required to report with respect to the same payee the payments or portions thereof under section 6041(a) and § 1.6041-1(a) (or would be required to so report the payments or portions thereof but for the dollar amount limitation contained in section 6041(a) and § 1.6041-1(a)).
(5) Payments made to a nonresident alien individual, foreign partnership, or foreign corporation that is not engaged in trade or business within the United States, and does not perform any labor or personal services in the United States, in the taxable year to which the payment relates. For how a payor determines whether a payment is subject to this exception, see § 1.6041-4(a)(1).
(6) Payments made to an attorney in the attorney's capacity as the person responsible for closing a transaction within the meaning of § 1.6045-4(e)(3) for the sale or exchange or financing of any present or future ownership interest in real estate described in § 1.6045-4(b)(2)(i) through (iv).
(7) Payments made to an attorney in the attorney's capacity as a trustee in bankruptcy under title 11, United States Code.
(d) Definitions. The following definitions apply for purposes of this section:
(1) Attorney means a person engaged in the practice of law, whether as a sole proprietorship, partnership, corporation, or joint venture.
(2) Legal services means all services related to, or in support of, the practice of law performed by, or under the supervision of, an attorney.
(3) Payor means a person who makes a payment if that person is an obligor on the payment, or the obligor's insurer or guarantor. For example, a payor includes -
(i) A person who pays a settlement amount to an attorney of a client who has asserted a tort, contract, violation of law, or workers' compensation claim against that person; and
(ii) The person's insurer if the insurer pays the settlement amount to the attorney.
(4) Payments to an attorney include payments by check or other method such as cash, wire or electronic transfer. Payment by check to an attorney means a check on which the attorney is named as a sole, joint, or alternative payee. The attorney is the payee on a check written to the attorney's client trust fund. However, the attorney is not a payee when the attorney's name is included on the payee line as “in care of,” such as a check written to “client c/o attorney,” or if the attorney's name is included on the check in any other manner that does not give the attorney the right to negotiate the check.
(5) Amount of the payment means the amount tendered (e.g., the amount of a check) plus the amount required to be withheld from the payment under section 3406(a)(1), because a condition for withholding exists with respect to the attorney for whom an information return is required to be filed under paragraph (a)(1) of this section.
(e) Attorney to furnish TIN. A payor that is required to file an information return under this section must solicit a TIN from the attorney at or before the time the payor makes a payment to the attorney. The attorney must furnish the correct TIN to the payor, but is not required to certify the TIN. A payment for which a return of information is required under this section is subject to backup withholding under section 3406 and the regulations thereunder.
(f) Examples. The following examples illustrate the provisions of this section. The examples assume that P is not a payor with respect to A, the attorney, under section 6041. See section 6041 and the regulations thereunder for rules regarding whether P is required under section 6041 to file information returns with respect to C. The examples are as follows:
(ii) Rather than paying by joint check to C and A, P will pay the damages by a joint check to C and F, A's law firm. F failed to furnish its TIN to P. P is required to deduct and withhold 28 percent tax from the $300,000 under section 3406(a)(1)(A) and paragraph (e) of this section. P writes the check to C and F as joint payees, in the amount of $216,000. P also must file an information return with respect to F under paragraph (a)(1) of this section in the amount of $300,000, as prescribed in paragraph (d)(5) of this section. If the damages are reportable under section 6041 because they are not excludable from gross income under existing legal principles, and are not subject to any exception under section 6041, P must also file an information return with respect to C pursuant to § 1.6041-1(a) and (f) in the amount of $300,000.
(ii) P, not L, is the payor of the payment to A under paragraph (d)(3) of this section. P, however, is not required to file an information return with respect to A under paragraph (a)(1) of this section because the payment was not made in the course of P's trade or business. Even if P made the payment in the course of P's trade or business, P would not be required to file an information return under section 6045(f) with respect to A because P is excepted under paragraph (c)(6) of this section.
(iii) A is not required to file an information return under paragraph (a)(1) of this section with respect to the payment to B because A is not the payor as that term is defined under paragraph (d)(3) of this section. A is not required to file an information return under paragraph (b)(2) with respect to the payment to B because A was listed as sole payee on the check it received from P. See section 6041 and § 1.6041-1(e) for whether A or L must file information returns under that section. See section 6045(e) and § 1.6045-4 for whether A is required to file an information return under that section.
(g) Cross reference to penalties. See the following sections regarding penalties for failure to comply with the requirements of section 6045(f) and this section:
(1) Section 6721 for failure to file a correct information return.
(2) Section 6722 for failure to furnish a correct payee statement.
(3) Section 6723 for failure to comply with other information reporting requirements (including the requirement to furnish a TIN).
(4) Section 7203 for willful failure to supply information (including a TIN).
(h) Effective/applicability date. The rules in this section apply to payments made on or after January 1, 2007. The amendments to paragraph (a)(3)(i) apply to payee statements due after December 31, 2014. For payee statements due before January 1, 2015, § 1.6045-5(a)(3)(i) (as contained in 26 CFR part 1, revised April 2013) shall apply.