Form 1099-PATR, Taxable Distributions Received From Cooperatives Definition

What Is Form 1099-PATR, Taxable Distributions Received From Cooperatives?

Form 1099-PATR, Taxable Distributions Received From Cooperatives is an IRS form sent to taxpayers to allow them to report distributions received from a cooperative that may have to be included in their taxable income. Form 1099-PATR is part of the 1099 series of forms from the Internal Revenue Service (IRS) that helps taxpayers report monies received from a variety of less-familiar sources.

Taxpayers would receive Form 1099-PATR if, in the previous year, they were paid at least $10 in patronage dividends and other distributions by a cooperative as described in the Internal Revenue Code. A patronage dividend is a dividend or distribution that a cooperative pays its members or investors based on a proportion of profit that a business has earned.

Form 1099-PATR often reports dividends associated with farms. However, taxpayers can also receive it for other reasons, including for any federal income tax withheld in connection with the cooperative under backup withholding rules, regardless of the amount of the payment. You would enter the information into your tax return under general business or farming income.

How to Read Form 1099-PATR

The 1099-PATR will include all or part of your taxpayer identification number (TIN), Social Security number, adoption taxpayer identification number, or employer identification number (EIN). The form also shows your account number and the amount you were paid. The latter might be more detailed if you were part of a farmer’s cooperative and may include items such as your share of allocations paid in cash, qualified per-unit retain certificates, and other property. Your form will show the federal income that was withheld if you didn’t give your correct TIN to the cooperative.

In some cases, your form will show your share of the deduction and monies the tax code allows your cooperative to claim under regulations that are part of the Tax Cuts and Jobs Act (TCJA). Additional information includes your share of the cooperative’s Internal Revenue Code Section 199A(g) deduction passed through to you. This amount must have been designated in a written notice sent to you earlier from the cooperative and is the number of qualified payments paid to you on which the cooperative computed its Section 199A(g) deduction.

Some of the above may also qualify as items from trades or businesses that are not a specified service trade or business (SSTB) for purposes of the Section 199A(a) deduction, which will also be on your 1099-PATR.

All copies of Form 1099-PATR are available on the IRS website. The 1099-PATR will also show your federal tax credits. These include investment credits, the work opportunity credit, and others, including credits for renewable energy and refined fuel, empowerment zones, and small-employer health insurance premiums.

Special Considerations When Filing Form 1099-PATR

There has been frequent discussion as to whether patronage dividends from worker cooperatives should be subject to self-employment tax. Also, a cooperative determined to be primarily engaged in the retail sale of goods or services that are generally for personal, living, or family use of the members may be exempt from filing a 1099-PATR.

The account number on Form 1099-PATR may be required if the recipient is to receive multiple forms. The use of the account number is to simply distinguish between each instance. In addition, the IRS does encourage that all Form 1099-PATRs are issued with a designation in the account field.

The Bottom Line

Form 1099-PATR is an important form in which you report cooperative and business income on your tax return. It contains considerable specific information that must be reported correctly and in the right tax categories. If you have questions, work with a tax preparer or expert.