Dos and Don’ts with 1099-Rs
It’s tax season, and there are some dos and don’ts you should be aware of as you prepare your donors’ 1099-Rs.
DO mail a 1099-R to your gift annuitants so it is received by them on or before Monday, February 2, 2015 (January 31 is usually the deadline but we get a few more days because it’s a Saturday this year).
DO include an explanation of the information contained on the 1099-R. The IRS provides instructions on the back of their standard forms which is usually a good place to start. You can reproduce this in another form and highlight what is relevant for charitable gift annuities.
DO include a cover letter that is limited in scope but donor friendly (a sample letter can be found as Appendix 13 of Chapter 5 of PG Calc’s Charitable Gift Annuities: The Complete Resource Manual.) If you use the typical, almost square double window envelopes, be careful that your letter doesn’t get between the form and the envelope!
DON’T include marketing material that violates the IRS rules. The IRS 2015 General Instructions for Certain Information Returns prohibit the inclusion of any marketing materials for several types of 1099 mailings. While it does not make it impermissible for 1099-Rs, your donors may potentially be put off if they receive marketing material in your mailing but not in the other 1099 mailings they receive. More importantly, don’t include any marketing material on the front or back of the Form 1099-R itself. The IRS regulations find that “a payee may not recognize the importance of the payee copy for tax reporting purposes due to the use of logos, slogans, and advertisements.” See section 1.3.2 of IRS Publication 1179 for the very strict requirements on what is allowed on the form itself.
DO include the logo of your charity on the outside of the envelope or any allowed enclosure (promotional, yes, but it’s acceptable to the IRS).
DO consider a separate mailing during the year that lets donors know there are options if they no longer need their gift annuity payments. They could give back annuity payments as received or assign back their entire income interest, and most likely receive an additional charitable deduction.
In short, DO make your 1099-R mailing as donor friendly as possible but DON’T necessarily use it for a marketing message.