Jennifer Cronenberg, Interim CEO

Well friends, it’s time again for the SSA-IRS alphanumeric soup that brings us all joyless tears once a year. The good news is, now that the assignment to entities process is in full swing, we are all now extremely familiar with the relevant “16-9 forms” (as SSA calls them) that impact our taxes. Here’s a refresher:

SSA-1694 – Request for Business Entity Taxpayer Information – this form should be completed by every firm or organization who employs appointed representatives that may be paid more than $600 by Social Security for their representation in association with a firm or organization. It allows SSA to obtain the name, employer identification number (EIN), banking information, and address of the business entity so that the representatives can then be properly associated with the firm or organization. It also allows the entity to establish a Point of Contact (POC) so that fee assignment to the entity is possible. If you’re running a Social Security firm or organization, you should have one of these on file and up to date with SSA at all times.

SSA-1695 – obsolete since 2020, this form previously associated the individual representative with the firm – this is now accomplished via Section 5 Part B of the SSA-1696.

SSA-1696 – Claimant’s Appointment of a Representative – this form attaches you to your claimant’s case and indicates if you intend to collect a fee. If you are a salaried (or contract) employee of a firm or organization, and are either affiliating with or assigning fees to an entity, proper completion of Section 5 Parts B and C is essential. This form must be filed in every case.

SSA-1699 – Registration for Appointed Representative Services and Direct Payment – this form should be completed by all representatives who wish to be listed by name on a SSA-1696. This form should be updated any time the individual representative’s information or firm association (or information) changes. If you perform contract work for multiple firms simultaneously and are paid by the firm instead of by Social Security, your 1699 should include multiple Section Vs to reflect this (Section V: Your Information When You Are Working for a Firm or Organization). This form is a one-time filing unless your information or firm association or contact information changes.

IRS 1099-MISC – This is the form you should receive if you were an appointed representative that was paid more than $600 by Social Security AND were properly associated to a firm or entity as an employee at the time of those payments. These payments should appear in Box 10 and are NOT reported as income to you.

IRS 1099-NEC – If you receive this form as an individual, any monies that are reported in Box 1 are considered “nonemployee compensation” and have been reported to the IRS as income to you. If you receive this form as a firm or entity, the form should show the total direct fee payments made to employees affiliated with your firm, which is taxable income for the firm or entity.

SSA offers this handy PowerPoint that provides additional information on the tax form process for appointed representatives. POMS GN 03913.050 outlines the details for proper registration of business entities, and POMS GN 03913.010 outlines how to properly update representative registration.

How the process should work:

Each January, SSA issues a Form 1099-MISC to each representative who received aggregate fee payments of $600 or more by direct payment in the previous year. If that representative is affiliated with an entity, the fee payments may be deemed income to the firm.

The Form 1099-MISC sent to the individual representative will include fees paid in his or her name in the previous calendar year reported in box 10 (Gross proceeds paid to an attorney, previously box 14). These amounts are not reported to the IRS as personal income to the individual representative.

Since 2021, if the firm is properly registered (i.e., it has submitted a Form SSA-1694), SSA will issue a Form 1099-NEC to the firm, as identified by the firm’s taxpayer identification number (i.e., Employer Identification Number (EIN)). The firm’s Form 1099-NEC includes the total direct fee payments made to employees affiliated with the firm in the previous year, but only for those cases in which the employees properly filed Form SSA-1696, “Claimant’s Appointment of Representative,” specifically Section 5 on the old 1696, Section 5 Part B on the new 1696. This amount is reported in box 1 of the Form 1099-NEC (Nonemployee compensation) and the IRS considers this taxable income to the firm. 

Since January 1, 2015, SSA does not provide the Fee Detail Summary along with the 1099 form. Representatives and firms should maintain an accounting system to account for these fees. You can also utilize the AARPS portal to review your earnings and double check your accounting.

Representatives who work as sole proprietors, or who work for business entities that have not registered with SSA by submitting a Form SSA-1694, will receive a Form 1099-NEC, with income reported in box 1 (Nonemployee compensation). Prior to January 2021, SSA reported these earnings in box 7 on the previous version of the IRS 1099-MISC.

Troubleshooting errors:

Erroneous reporting may occur if the representative has not properly completed Section 5, Part B of Form SSA-1696.

Tax errors primarily occur due to a lack of firm registration (i.e., Form SSA-1694) or proper linking between the individual representative and firm affiliation (i.e., Form SSA-1699 – Section V). This is why it is very important for each firm to register with SSA via the Form SSA-1694, and for employees of the firm to indicate affiliation with the firm through the Form SSA-1699. Individual representatives and firms should also resubmit/update these forms whenever their information changes.

What about user fees?

When reviewing your Form 1099-MISC or Form 1099-NEC information, remember that the user fees are included on these forms. The IRS considers the gross amount as the amount that should be reported on the Form 1099-MISC and Form 1099-NEC. The representatives and firms should then report the gross amounts in their income tax returns (e.g., Sch C for sole proprietor; Form 1065 for partnerships, etc.) with the user fee assessments reflected as a deductible business expense (similar to commissions, fees, etc.). The regulatory authority for reporting the gross amount is in section 1.6041-1(f) of the Internal Revenue Code regulations.

Why is the representative’s SSN on the Form 1099-MISC or Form 1099-NEC?

Slide 25 of SSA’s PowerPoint explains that “[t]he Internal Revenue Service (IRS) requires that [SSA] use your Social Security number to identify you. Your Social Security number will always appear on the Form 1099-MISC. If you are a sole proprietor and have an Employer Identification Number (EIN), your Social Security number will appear in the Recipient’s Identification Number box, and your EIN will appear in the Account Number box. If you do not have an EIN, only your SSN will appear. If you work for a firm or organization, your Social Security number will appear in the Recipient’s Identification Number block, and the EIN for the firm will appear in the Account Number box.”

What can you do if your forms are wrong?

If an individual representative receives a Form 1099-NEC with amounts reported that should be income to the firm and not to the individual representative, the individual representative is considered a nominee recipient. The individual representative should file a new Form 1099-NEC and Form 1096 “Annual Summary and Transmittal of U.S. Information Returns” with the IRS. The individual representative should also provide the new Form 1099-NEC to the firm. On the new Form 1099-NEC, the individual representative should be indicated as the “payer” and the firm as the “recipient.” On the new Form 1096, the individual representative should be indicated as the “filer.” 

The IRS has published the instructions above for Nominee/Middleman returns in the General Instructions for Certain Information Returns – Section A – Who Must File for the Form 1099-MISC (pg. 3). Although the IRS provides specific instructions for completing the different types of 1099 forms and Form 1096 on its website, we suggest working with an accountant. 

What can you do to avoid potential reporting issues?

According to SSA’s Office of the Deputy Commissioner for Budget, Finance, Quality, and Management, one preventive measure representatives can take to avoid possible reporting mistakes is to verify their affiliations and their firms’ registration with the RCC at 1-877-626-6363. NOSSCR has been told that the RCC is able to review and confirm whether a representative is properly registered and affiliated with his/her firm and whether the representative’s firm is properly registered with SSA. However, the RCC cannot make any corrections or updates to this information; if any changes are required, an updated SSA-1699 or SSA-1694 must be submitted. 

If you have additional questions, SSA has instructed representatives to contact the RCC or the IRS at 1-866-455-7438. Additional information is also available online and via SSA’s PowerPoint presentation. Please also refer to POMS GN 03913.050 and POMS GN 03913.010 for added clarity.  

What about the tax issues our clients face because of their SSA benefits?

The IRS provides the following information on their website regarding taxes and Social Security benefits. Please share this information with your clients:

Social Security benefits include monthly retirement, survivor and disability benefits. They don’t include supplemental security income (SSI) payments, which aren’t taxable. The net amount of Social Security benefits that you receive from the Social Security Administration is reported in Box 5 of Form SSA-1099, Social Security Benefit Statement, and you report that amount on line 6a of Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors. The taxable portion of the benefits that’s included in your income and used to calculate your income tax liability depends on the total amount of your income and benefits for the taxable year. You report the taxable portion of your Social Security benefits on line 6b of Form 1040 or Form 1040-SR.

Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.

The base amount for your filing status is:

• $25,000 if you’re single, head of household, or qualifying surviving spouse,
• $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
• $32,000 if you’re married filing jointly,
• $0 if you’re married filing separately and lived with your spouse at any time during the tax year.

If you’re married and file a joint return, you and your spouse must combine your incomes and Social Security benefits when figuring the taxable portion of your benefits. Even if your spouse didn’t receive any benefits, you must add your spouse’s income to yours when figuring on a joint return if any of your benefits are taxable.

Generally, you can figure the taxable amount of the benefits in Are my Social Security or railroad retirement tier I benefits taxable?, on a worksheet in the Instructions for Form 1040 (and Form 1040-SR) or in Publication 915, Social Security and Equivalent Railroad Retirement Benefits. However, if you made contributions to a traditional Individual Retirement Arrangement (IRA) for 2024 and you or your spouse were covered by a retirement plan at work or through self-employment, use the special worksheets in in Appendix B of Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), to see if any of your Social Security benefits are taxable and to figure your IRA deduction.

If you did not receive your SSA-1099 from Social Security, also called a Social Security Benefit Statement, you can request one online with a my Social Security account. Replacement SSA-1099s are available beginning February 1 for the previous year. You can also contact Social Security directly if you cannot request it online or if your SSA-1099 needs a correction.

The IRS also provides an Interactive Tax Assistance Tool on their website. SSA provides additional Information for Tax Preparers on their site should your clients have additional questions.

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