September 30, 2012
Internal Revenue Service
Philadelphia, PA 19255-0633
RE: Notice 972CG
Farmers Union Oil Company
100 Main St
Anytown, MN 99999
We are writing to request waiver of the proposed penalty we received for incorrect filing of Form 1099. We believe we have consistently followed the process required to establish reasonable cause and we have outlined those steps below.
As a cooperative, we distribute our earnings back to our patrons through a patronage distribution process. As such we issue hundreds of 1099 forms on an annual basis. This process of distributing our earnings requires us to obtain both written consent of the patron to receive the patronage and bring it into their taxable income when required and the name and taxpayer identification numbers under which to report any amounts paid on Form 1099-PATR. When a patron establishes a new account with our cooperative we require them to complete either both a written consent form and official Form W-9 or a substitute form that combines both pieces of information. The request typically includes a notice that failure to provide correct information can result in a penalty to both the patron and our cooperative. The information submitted by the patron is entered into our computer system in a timely manner.
Annually, as we prepare to process our patronage for the completed year, our computer system allows us to print a list of accounts that are missing identification numbers. Those accounts are then either distributed a new form requesting the required information or contacted by telephone to obtain the correct information.
In addition, for the past few years when we received the IRS listing of Incorrect/Mismatched Names and Taxpayer Identification Numbers such as the one we are now responding to, we compared the listing received with our records. Where we found that we had made clerical errors in entering the information we corrected those accounts. Where the information in the IRS list matched our records we contacted those people either by sending out the required mailings or through the telephone to obtain corrected information. In many cases the patron did not understand the IRS matching process for sole proprietor and/or partnership reporting so we took time to explain which name and identification number they should be using.
Publication 1586 states “Acting in a responsible manner includes making an initial solicitation (request) for the payee’s name and TIN and, if required, an annual solicitation. Upon receipt of this information, it must be used on any future information returns filed.” We believe we have met those requirements in trying to obtain the correct information to report on our Form 1099s. We also ask that IRS look at our past filing history to see that we meet our filing requirements in a timely manner and to understand we take our filing requirements seriously and do our best to comply with the rules and regulations. Last, some of the names appearing on the list have been paid using the same information for a number of years and were not considered mismatches in the past. Some names appearing this year were corrected after receiving last year’s list but that was after we had submitted the 2010 information.
Please take into account our efforts to meet our reporting obligation. Your consideration in waiving the proposed penalty is appreciated. If more information is needed regarding our processes please contact us.
Sincerely,
A Bookkeeper