IRS Form 1099-CAP (2025): Control Change Guide
What Form 1099-CAP (2025) Is For
IRS Form 1099-CAP (2025) is used to report significant changes in corporate control or capital structure that affect shareholders’ investments. When a corporation merges, restructures, or transfers assets valued at $100 million or more, it must notify shareholders who received cash, stock, or other property in the transaction. The form ensures accurate reporting of capital gains, interest income, and other taxable amounts on a taxpayer’s income tax return. It also helps determine whether shareholders are liable for taxes or qualify for specific tax deductions or refunds for the tax year.
Corporations, brokers, or transfer agents must provide the form by January 31 of the year following the transaction date. It must also be filed with the IRS, either as a paper form or through electronic filing. Shareholders use the details from Form 1099-CAP to complete other tax forms when filing taxes, reporting distributions, or documenting income from the sale of stocks, dividends, or mutual funds.
When You’d Use Form 1099-CAP
Form 1099-CAP is used when a shareholder receives value from corporate mergers, acquisitions, or reorganizations during a specific calendar year. It applies to individuals who received $1,000 or more in cash or property. Taxpayers include this information when filing a tax return to ensure proper reporting of capital gains or losses and to calculate any owed taxes or remaining balance after a tax refund.
If the form arrives late or contains errors, an amended return must be filed. Taxpayers should verify all information against brokerage account statements and other securities documentation. Filing accurately prevents penalties and helps taxpayers maintain compliance with federal law regarding interest payments, business income, and other investments.
For complete details on reporting, withholdings, and tax filings, see our guide for Information Returns & Reporting Forms.
Key Rules or Details for 2025
For the 2025 tax year, corporations must electronically file if issuing ten or more forms. Those filing fewer can use a paper form. The due date for paper filing is February 28, and March 31 for those who e-file. A foreign person may be exempt if proper eligibility requirements and documentation are provided. Failure to file correctly can result in a filing penalty under IRS rules.
Corporations should ensure accuracy when reporting distributions or nonemployee compensation, especially when transactions involve eligible accounts, health savings accounts, or accelerated death benefits. Properly maintaining tax forms and following IRS filing instructions provides maximum flexibility and reduces business risks for both companies and their shareholders.
Step-by-Step (High Level)
For Corporations
- Determine Filing Requirement: Confirm whether the transaction meets the $100 million threshold and involves reportable shareholder gains.
- File Form 8806 First: Before submitting any Forms 1099-CAP, corporations must file Form 8806 to report the acquisition or structural change.
- Identify Shareholders: Compile a list of all shareholders who received cash, stock, or other property exceeding $1,000.
- Calculate Values: Determine the total cash and fair market value of property or stock distributed to each shareholder.
- Complete and Submit: File electronically through the IRS Information Returns Intake System (IRIS) by March 31 or mail paper forms by February 28. Furnish copies to shareholders by January 31.
For Shareholders
- Review the Form: Verify that the details and values match your brokerage account records.
- Calculate Gain or Loss: Use the amounts to complete Form 8949 and Schedule D.
- Include in Your Return: Report the capital gains or losses when you file taxes for the applicable calendar year.
- Amend if Needed: File an amended return if corrected information is received after filing.
Common Mistakes and How to Avoid Them
- Missing the electronic filing requirement: Corporations must e-file if they submit ten or more information returns in total. Always confirm e-filing obligations before submission.
- Filing for exempt shareholders: Do not file for banks, government entities, or other exempt organizations. Verify shareholder exemption status before preparing the form.
- Missing the January 6 clearing organization deadline: Check business days around holidays to ensure timely submission and avoid late penalties.
- Omitting fair market value of non-cash property: Include cash, stock, and property values in Box 2 when calculating the total amount. Use accurate valuation data for each component.
By confirming e-file thresholds, verifying exemptions, and reporting complete transaction values, corporations can ensure timely and compliant Form 1099-CAP filings.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once filed, the IRS compares the reported information with taxpayer returns to confirm accuracy. If discrepancies occur, a notice may be issued requiring taxpayers to correct their income tax return or pay additional taxes. The IRS uses advanced systems (represented by the locked padlock icon on its website) to secure submitted tax forms and electronic data.
Corporations must retain copies for at least three years, while taxpayers should keep them for subsequent years in case of future audits or adjustments. Timely payment of taxes, compliance with due dates, and maintaining accurate records of investments, loans, and accounts help avoid penalties and ensure ongoing eligibility for deductions and benefits.
FAQs
What is IRS Form 1099-CAP (2025)?
IRS Form 1099-CAP (2025) reports changes in corporate control or capital structure when shareholders receive cash, stocks, or other securities. Taxpayers use this form to complete their tax return, calculate capital gains, and comply with federal tax laws.
How does electronic filing or e-file apply to this form?
Corporations issuing ten or more tax forms must use electronic filing through the IRS system. Smaller companies may use a paper form. Electronically file early to meet the due date and avoid any file penalty for late submission.
Can local income tax refunds or mutual funds affect my reporting?
Yes, local income tax refunds, mutual funds, and other investments can influence income or capital gains reported on your tax return. Include interest payments, dividends, or distributions from all accounts to ensure accurate reporting of total revenue for the tax year.
Who is exempt from receiving Form 1099-CAP?
Certain recipients, such as foreign persons, C corporations, banks, or health savings accounts, may be exempt from this requirement. Eligibility requirements must be verified before filing to ensure compliance with IRS forms, business law, and reporting standards for taxpayers and companies.
What happens if a corporation fails to file on time?
If a corporation misses the filing due date or files inaccurate tax forms, the IRS may impose a filing penalty. Penalties increase each business day the filing is late, so timely payments and electronic submissions help minimize risks and maintain compliance.
How does Form 1099-CAP relate to other securities or sold stocks?
This form tracks distributions or cash paid directly to shareholders during company restructuring. Investors use information from their brokerage account to report sold stocks, dividends, and capital gains while ensuring consistency with other tax forms and accounts.
What should taxpayers do after filing their tax return?
After filing, taxpayers should review the remaining balance and confirm whether they owe taxes or are due refunds. Maintain accurate records, including able accounts, life insurance contract proceeds, and accelerated death benefits, for subsequent years to avoid future filing issues.
