NEWS ALERT

1099 Reporting of Closing Fees Delayed

The Internal Revenue Service has issued a notice delaying the implementation of regulations that would require the filing of 1099 forms for attorneys’ closing fees.  Section 6045 (f) of the Internal Revenue Code, which was added by the Taxpayer Relief Act of 1997, requires businesses to report payments made to attorneys in connection with legal services.  Proposed IRS regulations would have expanded reporting requirements to include payments made for real estate closings and disbursements from an attorney’s IOLTA account. The American Land Title Association (ALTA) reports on this latest development in 1099 reporting of legal fees on its web site (www.alta.org).

 The IRS originally issued its proposed regulations in May of 1999.  During the subsequent comment period numerous objections and comments were filed, including those made by ALTA. In its testimony and comment, ALTA sought exceptions in the regulations for disbursements of mortgage loans and for persons acting as paying agents not exercising oversight. In response to the numerous comments it received, the IRS delayed the effective date of the regulations through 2000.

 With its most recent notice (Notice 2000-7) the IRS has extended that delay through 2001. Notice 2001-7 is scheduled to appear in Internal Revenue Bulletin 2001-4, dated January 22, 2001.

 The full ALTA report can be viewed on their web site at www.alta.org.  The specific web page covering Notice 2000-7 is at www.alta.org/content/govt/2001/update_01.htm.