Questions: IRS Information Reporting for Financial Institutions

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Question:

I took part in the 2001 IRS Information Reporting for Financial Institutions on 10/4/01 and have a couple of questions about IRS reporting. (1) It stated that if we issue checks on real estate secured loans to an appraiser then we must file a 1099 misc. Is this true for checks issued to a title company or flood determination company? (2)On sole proprietorships, it stated that the individuals first name should be the name listed first, however, we have been putting the name they filed as first. Is this wrong? (3) Is the loan origination fee to be included on the 1098? (4) Also where can we find some guidance on OREO loans and what needs to be reported?

Answer:

Yes. In general, the financial institution is the "payor" when it distributes its own checks to pay vendors at a real estate closing. (This is true even though it is making the payments with client funds.) However, please remember that payments to corporations are not reportable on a 1099MISC. Some of the providers you mentioned are normally incorporated.
Regardless of the TIN used, the name of the sole proprietor; i.e. the person, should be listed first in the account title. You can find support for this on the W-9. For those who ignore those instructions, the B-Notice sent when a bank reports on an invalid name/TIN combination contains the same advice.
Loan origination fees listed on the Uniform Settlement Statement are reportable as "points" if they meet several tests. They must be calculated as a percentage of the loan amount, not exceed local standards and not exceed the amount of money the borrower had in the transaction. In addition, the loan must be for the acquisition of the borrower's primary residence and be secured by that residence.
You may want to review the instructions for Form 1099A, but the form is required whenever a lender takes an interest in real estate in partial or full satisfaction of a debt. Thus, every OREO property generates a 1099A.

First published on BankersOnline.com 11/5/01