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Notice to Taxpayers Regarding IRS Form 1098-F
Issued: March 9, 2023
Beginning in 2023, federal law requires government entities, such as the Michigan Department of Treasury (Treasury), to file information returns (Form 1098-F) with the IRS concerning particular payments required to be made to, or at the direction of, the government entity involving certain “suits or agreements.” It also requires the government entity to furnish a written statement (Form 1098-F (Copy B) or “Copy B”) to the payor, which contains the same information provided to the IRS.
As summarized by the IRS, a government entity must file Form 1098-F if:
- It is a party to a suit with respect to which there has been a court order or agreement with a payor;
- On the date the suit or agreement became binding under applicable law, the suit or agreement requires the payor to pay to, or at the direction of, the government entity an aggregate amount equal to or in excess of $50,000; and
- The payment is with respect to a violation of a law, or an investigation or inquiry into the potential violation of a law.
Questions and Answers About the Reporting Requirement Under Section 6050X
The IRS has determined the above requirement applies to final state tax assessments. Consequently, each year, Treasury is required to provide the IRS a Form 1098-F for every final assessment Treasury issued during the immediately preceding tax year that meets the above criteria. Treasury must also provide Copy B to the taxpayer. As a result, some Michigan taxpayers may receive this form for the first time in 2023.
Form 1098-F is known as an “information return” and does not require any action by the taxpayer. By filing the return, Treasury is providing the IRS information the IRS may subsequently use to determine whether particular items a taxpayer may claim on the taxpayer’s federal tax return, related to the required Treasury payments, are deductible under federal law.
Importantly, Form 1098-F is not a tax bill or a statement of outstanding Michigan tax liability. Rather, it is a record of amounts the taxpayer was required to pay to Treasury pursuant to a final assessment. Because the form is intended to document the original determined obligation, a taxpayer will receive a Copy B even if the listed amounts have already been paid, are being contested in court, or were subsequently canceled or reduced (for example, through an offer in compromise or penalty waiver).
If you have received a Copy B, you should keep it for your records. In some cases, a taxpayer may have received this form from Treasury in error or with incorrect amounts listed. Those instances have been corrected with the IRS, and Treasury is in the process of issuing corrected Copy B forms to the impacted taxpayers. In many cases, the updated form will list $0 in Box 1, indicating the $50,000 threshold described above was not met with respect to any Treasury obligations; however, as each state department is responsible for its own 1098-F notices, the taxpayer may receive separate Copy B forms from other state departments.
Form 1098-F and Copy B are required by federal law and Treasury cannot edit or alter the form in any way. If you have questions about these documents, please reach out to your tax preparer or the IRS.
Learn more about Form 1098-F, including IRS FAQs
If you have questions related to the amount listed in Box 1, please contact us at Treas-Collections-Customer-Service@michigan.gov.