Jennifer Cronenberg, Senior Counsel, Director of Legal Information

Understanding SSA’s tax reporting system for Social Security representatives first requires familiarity with several (very similarly labeled) numerical forms. Here’s a primer:

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), and address of the business entity so that the representatives can then be properly associated with the firm or organization. Essentially, 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 of SSA-1696.

SSA-1696 – Claimant’s Appointment of a Representative – if you are a salaried (or contract) employee of a firm or organization, proper completion of Section 5 of this form 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 want to register for direct payment of fees. 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 – “Complete this section if your work as a representative will be affiliated with a firm or organization. If you work for more than one firm or organization complete and attach as many copies of this section as needed. You will need an EIN in order to complete this section”). This form is a one-time filing unless your information or firm association 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 an employee of a firm (associate or partner), the fee payments may be deemed income to the firm, provided the firm has completed and submitted a Form SSA-1694, “Request for Business Entity Taxpayer Information.” Importantly, employees should ensure that Section V: “Your Information When You Are Working for a Firm or Organization,” of the Form SSA-1699, “Registration for Appointed Representative Services and Direct Payment” reflects their current firm affiliation. Please note, if you do contract work for more than one firm where you are paid by the firm instead of Social Security, your SSA-1699 should reflect this by having an additional Section V completed for every firm for which you do work.

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.  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.

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 of the revised Form SSA-1696, which is now required for every case where a fee is to be withheld.  The revised SSA-1696, which was originally published on February 11, 2020, collects direct payment information previously collected on the Form SSA-1695, which is now obsolete.  Representatives who are eligible for and wish to receive direct payment of their fee no longer need to use a second form or provide their SSNs to give SSA the information needed for fee withholding and direct payment.  Instead, the revised Form SSA-1696 requires the individual representative to include both his or her Rep ID and the firm’s EIN in order to connect the representative to the firm on each case. 

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. 

Please note that system access issues currently prevent SSA’s Representative Call Center (RCC) from making changes to existing 1099 forms, which the Office of Public Service and Operations Support (OPSOS) has been “diligently” working to resolve.

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.  The RCC’s benefit authorizers have been instructed to prioritize these inquiries and refer these actions to claims specialists, who will contact the representative to confirm the information SSA has on file for them and their firms within two business days.  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.