The Internal Revenue Service said Tuesday that it would provide penalty relief to farmers who incurred estimated tax penalties because they did not receive their 1099 forms from MF Global or the bankrupt financial firm’s court-appointed trustee on a timely basis.
The firm, headed by former New Jersey Governor and U.S. Senator Jon Corzine, also a former chief of Goldman Sachs, collapsed last fall after apparently dipping into client funds to make risky investments in European sovereign debt funds (see MF Global’s Accounting Helped Cover Risky Bets and Corzine Faces Congress over MF Global Bankruptcy).
The IRS said it would provide penalty relief to farmers who did not receive their 1099 forms from the defunct firm, which invested in commodities such as crop futures, or its trustee in time and were thus unable to complete their calendar year 2011 tax returns by March 1, 2012. The IRS also provided the affected farmers with instructions on how to apply for tax penalty relief.
While most taxpayers typically have until April 15 to file their taxes most years (April 17 this year because April 15 falls on a weekend), farmers and fishermen are subject to a penalty for underpayment of estimated taxes unless they file by March 1, if they owe income taxes. Generally, farmers can avoid an estimated tax penalty if they file their returns and pay the full amount of tax shown on their return by March 1, 2012. An individual is a farmer for these purposes if two-thirds of the individual’s total gross income for the taxable year or the preceding taxable year is from farming. This rule and the relief being provided also apply for fishermen, the IRS noted.
MF Global filed for bankruptcy on Oct. 31, 2011, after revealing that hundreds of millions of dollars in customer money was missing. While the court-appointed trustees are working to untangle MF Global’s financial records, the IRS said it understands that the magnitude of the records and the associated untangling delayed the issuance of Forms 1099 in a timely manner. Many former customers of MF Global did not receive their Forms 1099 by March 1, 2012.
While the IRS has been advised that former customers have recently received their 1099s, the delay in mailing the Forms 1099 may have affected the ability of many farmers to file their 2011 calendar year return by March 1, 2012.
If a taxpayer has an underpayment of estimated tax, all or part of the penalty for the underpayment may be waived if the IRS determines that the underpayment was due to a casualty, disaster or other unusual circumstance and it would be inequitable to impose the penalty.
To request a waiver of the estimated tax penalty, taxpayers should complete Form 2210-F, Underpayment of Estimated Tax by Farmers and Fisherman. As stated in the instructions to Form 2210-F, a short statement should be attached to the form stating that you received a late 1099 from MF Global. At the top of the Form 2210-F, write “MF Global”. Taxpayers should be aware that the Form 2210-F and the accompanying Form 1040 cannot be submitted electronically. In the case of farmers who have filed their tax returns and an estimated tax penalty is assessed, please contact the IRS, identify this relief and the penalty will be abated.
Taxpayers may download the forms and publications from the IRS’s Web site or they may order them by calling 1 (800) TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1 (800) 829-1040.
For information about the liquidation of MF Global, including the trustee’s statements on the issuance of Forms 1099, former customers may go to the trustee’s Web page at www.mfglobaltrustee.com.