Form 1099-CAP: Changes in Corporate Control and Capital Structure (2022)

When a corporation goes through major changes—like being bought out, merging with another company, or restructuring in significant ways—the IRS wants to know about it. That's where Form 1099-CAP comes in. This specialized tax form tracks cash, stock, and other property that shareholders receive during major corporate shake-ups. If you're a shareholder who received something during a corporate takeover or major restructuring in 2022, you might receive this form. Here's everything you need to know.

What the Form Is For

Form 1099-CAP stands for "Changes in Corporate Control and Capital Structure." Think of it as the IRS's way of keeping track of what happens to shareholders when corporations undergo dramatic changes. IRS.gov

The form reports two main scenarios:

1. Acquisition of Control

This happens when one corporation buys enough stock in another corporation to take control—specifically, at least 50% of voting power or total stock value. The catch? The transaction must involve at least $100 million in stock value, and either the corporation or its shareholders must recognize taxable gain under tax code Section 367(a).

2. Substantial Change in Capital Structure

This occurs when a corporation merges, consolidates, transfers substantially all its assets, goes through bankruptcy reorganization, or changes its identity, form, or place of organization—and the amount of cash or property provided to shareholders totals $100 million or more.

As a shareholder, you'll receive Copy B of this form showing the cash, stock, or other property you received. This information helps you calculate whether you owe taxes on the transaction. The reporting corporation sends Copy A to the IRS and keeps records for their files.

When You’d Use It (Late Filing and Amended Returns)

Filing Deadlines for Corporations (2022 Tax Year)

• Paper filing: February 28, 2023
• Electronic filing: March 31, 2023
• Special rule for clearing organizations (like the Depository Trust Company): January 6, 2023 (for 2022 transactions) or January 5 in subsequent years

For Shareholders

You don't file Form 1099-CAP yourself—the corporation sends it to you. You should receive your copy by January 31, 2023. You'll use the information when preparing your tax return to report any gains from the corporate transaction on Form 8949 and Schedule D. IRS.gov

Late or Amended Returns

If a corporation discovers errors after filing, they must correct them as soon as possible. This involves:

• Filing a corrected Copy A with the IRS along with Form 1096
• Sending corrected statements to affected shareholders
• Marking the corrected form with the word "CORRECTED" in the appropriate box

For late filings, penalties escalate based on how late the form is filed (see penalties section below).

Key Rules for 2022

Electronic Filing Threshold

For 2022, corporations filing 250 or more Forms 1099-CAP must file electronically through the IRS Information Returns Intake System (IRIS) or compatible software. This threshold may decrease in future years due to the Taxpayer First Act of 2019, which authorized the IRS to lower it. IRS.gov

Who Is Exempt from Receiving the Form

Corporations don't need to file Form 1099-CAP for:

• Corporate shareholders (except S corporations)
• Tax-exempt organizations and IRAs
• U.S. government entities and foreign governments
• Financial institutions, REITs, and regulated investment companies
• Foreign shareholders who provided valid Form W-8BEN documentation
• Any shareholder receiving less than $1,000 in total cash and property
• Shareholders who received stock in exchanges not subject to gain recognition under Section 367(a)

The $100 Million Rule

Both triggering events require transactions valued at $100 million or more. Below this threshold, no Form 1099-CAP reporting is required—even if control changes hands or capital structure changes occur.

Consent Election Option

Corporations can make a "consent election" on Form 8806 that allows them to skip filing Form 1099-CAP for shares held by clearing organizations. Instead, the IRS publishes the information so brokers can meet their reporting obligations. This reduces paperwork for the corporation.

Step-by-Step (High Level)

For Corporations

Step 1: Determine if Reporting Is Required

Ask these questions:

• Did we acquire control of another corporation or did someone acquire control of us?
• Did we undergo a substantial change in capital structure?
• Is the transaction value at least $100 million?
• Do we or our shareholders need to recognize gain under Section 367(a)?

If you answered yes to all questions, proceed to Step 2.

Step 2: File Form 8806

Before filing Form 1099-CAP, file Form 8806 (Information Return for Acquisition of Control or Substantial Change in Capital Structure) with the IRS. Decide whether to make the consent election to avoid filing 1099-CAP for clearing organizations.

Step 3: Gather Shareholder Information

Compile the following for each non-exempt shareholder:

• Name, address, and taxpayer identification number (TIN)
• Date of the transaction
• Aggregate amount of cash and fair market value of stock/property received
• Number of shares exchanged
• Class of stock exchanged (common, preferred, etc.)

Step 4: Complete Form 1099-CAP

Fill out the form completely, ensuring all dollar amounts include decimal points (e.g., 1230.00, not 1230). Use separate forms for each shareholder.

Step 5: File with IRS

• Paper filers: Group all Forms 1099-CAP together and submit with a single Form 1096 to your IRS Submission Processing Center
• Electronic filers (250+ forms): Use the FIRE system or approved software to file by March 31

Step 6: Send Copies to Shareholders

Furnish Copy B to each shareholder by January 31 (or January 6 for clearing organizations).

For Shareholders

Step 1: Review Your Form 1099-CAP

When you receive it (by January 31), verify the information matches your records regarding shares exchanged and property received.

Step 2: Calculate Your Gain or Loss

Use the information to complete Form 8949 (Sales and Other Dispositions of Capital Assets). You'll need to determine your basis in the shares you gave up and compare it to what you received.

Step 3: Report on Your Tax Return

Transfer the information from Form 8949 to Schedule D (Capital Gains and Losses) when filing your individual tax return (Form 1040).

Common Mistakes and How to Avoid Them

Mistake #1: Missing the Electronic Filing Requirement

If your corporation files 250 or more Forms 1099-CAP, you must file electronically. Filing on paper when required to e-file can result in penalties.
Solution: Track your filing volume early in the year and set up electronic filing capabilities well before deadlines.

Mistake #2: Mixing Form Types with One Form 1096

Some corporations submit multiple types of 1099 forms (like 1099-CAP, 1099-INT, 1099-DIV) with a single Form 1096 transmittal. Each form type requires its own separate Form 1096.
Solution: Organize your paper filings by form type and prepare a dedicated Form 1096 for each batch.

Mistake #3: Forgetting Decimal Points

Dollar amounts without decimal points cause processing errors. Writing "1230" instead of "1230.00" creates confusion.
Solution: Always include two decimal places for all dollar amounts, even for whole numbers.

Mistake #4: Mismatched Identification Information

The filer's name, address, and taxpayer identification number on Form 1096 must exactly match the same information on the attached Forms 1099-CAP.
Solution: Use consistent company information across all forms and double-check before submission.

Mistake #5: Duplicate Filing

Some corporations file the same information both electronically and on paper, or send duplicate paper submissions.
Solution: Choose one filing method and implement internal controls to prevent duplicate submissions.

Mistake #6: Reporting Stock Not Subject to Gain

If the corporation can reasonably determine that receiving stock wouldn't cause a shareholder to recognize gain, reporting the fair market value of that stock is unnecessary.
Solution: Consult with tax professionals to determine when stock receipt triggers gain recognition under Section 367(a).

Mistake #7: Not Verifying Shareholder TINs

Incorrect or missing TINs lead to IRS notices and potential penalties.
Solution: Use the IRS TIN Matching program before filing to validate taxpayer identification numbers against IRS records.

What Happens After You File

For Corporations

Once you submit Form 1099-CAP to the IRS:

• The IRS processes the information and matches it against shareholder tax returns
• If shareholders don't report the transactions properly, the IRS may send them notices
• Your company's records become part of the IRS compliance system
• If errors are found, you may receive CP2100 or CP2100A notices indicating TIN/name mismatches requiring correction

You must retain copies for at least three years from the filing due date.

Penalties Continue to Accrue

If you failed to file or filed late, penalties continue until you file correctly:

• Within 30 days late: $50 per form (maximum $588,500 per year; $206,000 for small businesses)
• 31 days to August 1: $110 per form (maximum $1,766,000 per year; $588,500 for small businesses)
• After August 1 or no filing: $290 per form (maximum $3,532,500 per year; $1,177,500 for small businesses)
• Intentional disregard: At least $580 per form with no maximum penalty

For Form 8806:
The penalty structure treats Form 8806 and all related Forms 1099-CAP as one return. The penalty won't exceed $500 per day the failure continues, up to $100,000 maximum per acquisition or capital structure change.

For Shareholders

After receiving your Form 1099-CAP:

• You must report the transaction on your tax return when you file (typically April 15 deadline)
• If you don't report it correctly, the IRS may send you a CP2000 notice (proposed adjustment)
• If you sold or exchanged stock but don't report capital gains/losses, you could face penalties and interest
• Keep your Form 1099-CAP with your tax records for at least seven years

The IRS cross-references the Form 1099-CAP information against your reported capital gains, so accurate reporting is essential.

FAQs

1. Do I need to file Form 1099-CAP if the transaction was under $100 million?

No. Both acquisition of control and substantial change in capital structure have a $100 million threshold. Below that amount, Form 1099-CAP filing is not required by the IRS.

2. What if a shareholder is a foreign person?

Foreign shareholders who provide valid Form W-8BEN documentation are exempt from receiving Form 1099-CAP. However, corporations still have withholding obligations under Section 1441 for nonresident aliens. Don't confuse reporting relief with withholding relief—they're separate requirements.

3. Can brokers file Form 1099-CAP instead of the corporation?

Yes. Brokers holding shares on behalf of customers in a corporation that undergoes an acquisition of control or substantial capital structure change must file Form 1099-B (not Form 1099-CAP) unless the customer is an exempt recipient. Brokers rely on information from clearing organizations or published IRS data (Form 8806 information).

4. What happens if both the predecessor and successor corporation fail to file?

Both become jointly and severally liable for penalties. The transferor (predecessor) has primary responsibility, but if they fail to file, the transferee (successor) must meet the requirements. The IRS can pursue either or both for the full penalty amount.

5. How do I request an extension to file Form 1099-CAP?

File Form 8809 (Application for Extension of Time to File Information Returns) before the original due date. You can get an automatic 30-day extension. For additional hardship extensions, explain your circumstances on Form 8809. However, extensions for statements to recipients work differently—those require a written explanation via fax to the IRS.

6. Is there a minimum amount threshold for individual shareholders?

Yes. Corporations don't need to file Form 1099-CAP for any shareholder whose total cash plus fair market value of stock and other property doesn't exceed $1,000.

7. What if I receive a corrected Form 1099-CAP after filing my tax return?

You may need to file an amended tax return (Form 1040-X) if the correction changes your reported capital gains or losses. Compare the corrected form to what you originally reported. If there's a material difference affecting your tax liability, amend your return. You have three years from the original filing date to claim a refund.

Additional Resources

For more detailed information, visit these IRS.gov resources:

• About Form 1099-CAP
• Instructions for Form 1099-CAP
• General Instructions for Certain Information Returns
• Form 8806 Information

This guide is based on IRS guidance for the 2022 tax year. Tax laws and regulations change regularly, so always verify current requirements at IRS.gov or consult with a tax professional.

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