Completing section 5 (affiliation and direct payment) on form SSA-1696 Claimant’s Representative Appointment in each instance of representation. This means that the representative must provide the information each time:
- Completing section 5 (affiliation and direct payment) on form SSA-1696 Claimant’s Representative Appointment in each instance of representation. This means that the representative must provide the information each time:
- he or she is appointed to represent a claimant before SSA and will request direct fee payment;
- a Federal court approves a fee, if the attorney requests direct payment and did not complete an appointment form when the claim was pending before SSA; or
- he or she ends affiliation with an entity and has pending case(s) related to that entity affiliation. The representative must provide a revised SSA-1696, Section 5 (page 5) to update the EIN for every pending case and prevent delayed or incorrect fee payments. Note that it is not necessary to submit to submit the complete SSA-1696 again.
In order to receive direct payment, an attorney or a qualified non-attorney must complete direct payment information in section 5 of Form SSA-1696 each time he or she is appointed to represent a claimant before SSA.
A court attorney who did not register when the claim was pending before SSA should complete section 5 (affiliation and direct payment) of Form SSA-1696 and submit it to the local Social Security Office each time the Federal court approves a fee.
Is There Also a Registration for Firms or Employers?
Firms or organizations that have individual representatives as employees or partners are encouraged to register voluntarily in order to receive IRS Forms 1099-NEC. This will allow SSA to report to the IRS that the payments made to the individual representatives are taxable income to the firm or organization rather than to the individual representatives. To register, these firms or organizations may file a Form SSA-1694, Request for Business Entity Taxpayer Information, online or by submitting a completed paper form to the local Social Security office.
If a Representative is an Employee or Partner of a Firm, and the Fee Payment is Income to the Firm, will the Representative Receive a Form 1099-MISC or 1099-NEC?
Effective in tax year 2020, the IRS requires SSA to issue a Form 1099-MISC to each representative who is affiliated with a registered firm or business entity and receives aggregate fees of $600 or more in a calendar year, with the total fee payments reflected in box 10 (Gross proceeds paid to an attorney). Pursuant to section 6041 of the IRC, SSA will also issue informational Forms 1099-NEC to the entity or entities with whom with representative is affiliated. Representatives who work as sole proprietors, or who work for business entities who are not registered with us, will receive a Form 1099-NEC, with income reported in box 1 (Nonemployee compensation).
NOTE: As of January 1, 2015, SSA no longer provides the Fee Detail Summary with the IRS Form 1099-MISC.
In the past, we have provided the Fee Detail Summary as a courtesy to representatives, but due to increasing costs associated with processing, printing, and mailing the sheets, we have discontinued this service.With the payments, we provide information to the financial institutions where representatives receive their direct payments. We also recommend that representatives retain all detailed claim and authorized fee payment notices from us. This will help for an easier reconciliation of the payments at the end of the year.
Will the Gross or Net Aggregate Fee Payments be Reported on the Form 1099-MISC/1099-NEC?
Section 406 of Public Law 106-170, the Ticket to Work and Work Incentives Improvement Act of 1999, established an assessment for the services required by SSA to determine and certify payments to representatives under the section 206(d) of the Social Security Act. This assessment is currently deducted from each fee payment to representatives. However, pursuant to 1.6041-1(f) of the IRC regulations, the IRS considers the gross amount (before the assessment) as the amount that should be reported on the Forms 1099-MISC and 1099-NEC. The aggregate assessments may be taken as a business expense as appropriate.
Do Representatives Have the Option to Receive Fee Payments via Direct Deposit?
Direct deposit of fee payments for both title II claims and title XVI claims is available for representatives who have completed both steps in the registration process and requested fee payment by electronic fund transfer. The financial institution receiving the direct deposit is provided with information which may assist representatives to identify the source of the payment. This information includes the first four letters of the claimants' first name, the first thirteen letters of the claimants' last name, any suffix to the claimants name, the claimants' SSN, and the payment amount. It is at the discretion of the financial institution to provide this information to representatives and other account holders.
You can learn more at Direct Deposit of Fees Factsheet: Social Security Expands Its Use of Prearranged Payment and Deposit (PPD+) Format For Direct Deposit of Representative Fee Payments..