What Form 1099-CAP (2013) Is For
IRS Form 1099-CAP (2013) is an IRS information return used by corporations that have experienced a change in corporate control or capital structure. It is required when a company undergoes a merger, acquisition, or other substantial change that affects shareholders. The form ensures that both the IRS and shareholders report any cash, stock, or other property received as a result of these corporate events.
A corporation must file Form 1099-CAP if another company acquires control—meaning ownership of at least 50 percent of total voting power or value—or if there is a significant change in capital structure involving $100 million or more in stock or assets. Shareholders use this information to report capital gains, taxable income, and other investments on their tax return. This includes individuals with investment accounts, brokerage accounts, or mutual funds that hold shares affected by the event.
When You’d Use Form 1099-CAP
Corporations file Form 1099-CAP when an acquisition or restructuring results in a change in ownership or control. It applies when shareholders receive stock, cash, or other property after a corporate event. Companies must file with the IRS and send copies to their shareholders to maintain accurate reporting.
Shareholders use this information to calculate gains or losses from their investments and report them when they e-file their tax return. It ensures transparency between the corporation, investors, and the IRS, minimizing penalties for late or incorrect filings.
Key Rules for 2013
Any domestic corporation required to file Form 8806 must also issue Form 1099-CAP to shareholders affected by ownership changes. Publicly traded companies, financial institutions, and mutual funds must report the fair market value of stock or other property received by each shareholder.
Exemptions apply if shareholders only receive stock or if payments are below the $1,000 threshold. The IRS may assess penalties for late or incorrect filings. Understanding these filing rules enables companies to manage taxes, assets, and shareholder accounts more effectively.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Information Returns & Reporting Forms.
Step-by-Step Filing Process (High Level)
Step 1: Determine If You Must File
Review whether your corporation meets the filing criteria. A Form 1099-CAP must be filed if there has been an acquisition of control or a substantial change in capital structure involving at least $100 million in assets or stock. Confirm if Form 8806 was filed; if so, Forms 1099-CAP must also be prepared for shareholders.
Step 2: Identify Reportable Shareholders
List every shareholder who received cash, stock, or other property due to the transaction. Exclude those whose total received value was $1,000 or less or who are exempt. Maintain accurate shareholder records to ensure correct reporting.
Step 3: Gather Required Information
Collect the following data before preparing each form:
- Shareholder name, address, and taxpayer identification number
- Transaction date and type of corporate change
- Total amount received, including cash and the fair market value of other property
- Number and class of shares exchanged
- Corporation’s employer identification number and contact details
Step 4: Complete the Form
Accurately record the dollar amounts and transaction details. Mark “CORRECTED” if you are amending a previous submission. If multiple forms are filed for one shareholder, use account numbers for easy reference. Ensure the data aligns with shareholder records and the IRS requirements.
Step 5: File and Distribute Copies
Submit Copy A of the form to the IRS by the deadline, along with Form 1096 if filing on paper. Provide Copy B to shareholders by January 31, 2014. Use e-file if filing 250 or more information returns. Filing electronically provides greater accuracy and helps corporations manage deadlines more effectively, reducing penalties.
Common Mistakes and How to Avoid Them
Corporations often make avoidable errors when filing Form 1099-CAP, which can result in penalties or unnecessary filings. The most common mistakes include:
- Filing for shareholders below the reporting threshold: Do not file for shareholders whose total proceeds from the transaction were $1,000 or less.
- Submitting incorrect or missing TINs: Verify that all Taxpayer Identification Numbers are complete and accurate before submission.
- Reporting non-taxable stock exchanges: Do not report stock-for-stock exchanges when no cash or other property was received, as these are not taxable events.
- Misstating fair market value: Use accurate market data to determine the fair market value of stock and property at the time of the transaction.
- Filing paper forms when electronic filing is required: File electronically when meeting the IRS e-file threshold to ensure compliance.
- Overlooking the consent election on Form 8806: Clearing organizations holding shares must file a consent election to satisfy reporting requirements properly.
Corporations can avoid penalties and ensure compliance by verifying shareholder data, confirming eligibility, and maintaining accurate records for each reportable transaction.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After filing, the IRS reviews Form 1099-CAP information to verify that shareholders accurately report their income, dividends, and capital gains on their tax returns. This process helps maintain compliance and accuracy across corporate and individual filings.
Shareholders can use data from their investment, brokerage, or retirement accounts to track how changes in corporate control affect their savings, growth, and risk tolerance. Accurate reporting supports better financial management and enables investors to leverage tax advantages with greater flexibility.
FAQs
What is IRS Form 1099-CAP (2013), and why is it important for corporations and shareholders?
IRS Form 1099-CAP (2013) reports a corporation’s substantial change in corporate control or capital structure. It helps shareholders, mutual funds, and investors track money, stock, or other property received during acquisitions. This form ensures the accurate reporting of investments, capital gains, and taxable income on tax returns.
How do investment accounts and brokerage accounts handle payments and securities changes?
When publicly traded companies or corporations experience a merger or acquisition, brokerage accounts and investment accounts must report dividends, securities, or cash paid to shareholders. Accurate management of assets, investments, and capital gains helps maintain a balanced account and compliance with IRS filing rules.
Can shareholders with retirement accounts or mutual funds benefit from e-filing their tax return?
Yes, e-filing offers maximum flexibility and more accuracy for shareholders and investors with retirement accounts or mutual funds. It ensures that contributions, taxable income, and capital gains from investments or other property are accurately recorded and processed more efficiently by the IRS.
What risks and penalties apply if corporations fail to file correctly?
Corporations and companies that fail to file or report ownership changes on IRS Form 1099-CAP (2013) may face penalties. Incorrect reporting of funds, stocks, or payments can affect shareholders’ savings, interest, and taxable income, reducing the tax advantages of their investments.
How should shareholders manage investments and capital gains after receiving Form 1099-CAP?
Shareholders should review all brokerage and bank accounts to confirm reported income, dividends, and gains. Properly managing funds, bonds, and stocks helps reduce risks, maintain savings, and ensure accurate reporting of money paid, investment value, and taxes owed to the IRS.
