IRS ANNOUNCEMENT PERMITS REPORTING OF NEGATIVE EARNINGS ON FORM 1099-Q, QUALIFIED TUITION PROGRAM PAYMENTS UNDER SECTION 529

[15142] September 11, 2002 TO: 529 PLAN ADVISORY COMMITTEE No. 30-02 OPERATIONS MEMBERS No. 28-02 TAX MEMBERS No. 41-02 TRANSFER AGENT ADVISORY COMMITTEE No. 83-02 RE: IRS ANNOUNCEMENT PERMITS REPORTING OF NEGATIVE EARNINGS ON FORM 1099-Q, QUALIFIED TUITION PROGRAM PAYMENTS UNDER SECTION 529 The Internal Revenue Service has issued Announcement 2002-76 (attached), which provides guidance for reporting earnings on Form 1099-Q, Qualified Tuition Program Payments under section 529 of the Internal Revenue Code. This announcement changes and clarifies Revenue Procedure 2002-34, which provides specifications for filing various forms, including Forms 1099, electronically or magnetically. As requested by the Institute,1 the announcement permits the reporting of negative earnings when an account balance has declined. Specifically, the announcement provides that Box 2 (Earnings) of Form 1099-Q may contain either a positive or negative number. If a negative amount is reported in Box 2, filers should follow the Revenue Procedure 2002-34 reporting guidelines contained in the general information section for Payment Amount Fields in the Payee ‘B’ record, to the extent Announcement 2002-76 has not changed or clarified such guidelines. Additionally, the announcement provides that Coverdell ESA contributions and rollover amounts should be reported in Payment Amount Field B of the Payee ‘B’ Record on Form 5498. Lisa Robinson Assistant Counsel Attachment (in .pdf format) Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website (http://members.ici.org) and search for memo 15142, or call the ICI Library at (202) 326-8304 and request the attachment for memo 15142. 1 See Institute Memorandum to 529 Plan Advisory Committee No. 13-02, dated March 22, 2002.