What You Should Know About IRS Form 1098F

1. Why did I receive a Form 1098-F from the EEOC?

Section 162(f)(2) of the federal tax code allows employers to deduct “certain amounts paid or incurred for restitution, remediation, or to come into compliance with a law” as part of an agreement with the government.  Section 6050X requires the EEOC, as a government entity involved in a suit or agreement described in 162(f), to (1) file an information return with the IRS regarding amounts paid or incurred for restitution, remediation or to come into compliance with a law pursuant to a court order or agreement and (2) furnish a written statement to the payer (i.e., the relevant employer/respondent/defendant).

If you received a document titled “Form 1098-F, Fines, Penalties and Other Amounts” from the EEOC, that means that our records show that this employer was either party to an agreement signed by EEOC or the defendant in a lawsuit brought by the EEOC, and there was a resolution in which the EEOC believes the settlement led or will lead to the employer incurring costs of $50,000 or more.

The fact that the EEOC is providing this form does not mean that a determination has been made that the requirements to claim a deduction under section 162(f) have been met. The determination of whether the requirements have been met for a deduction is made solely by the IRS. The EEOC has no role in that determination.

The 6050X reporting requirement applies to orders and agreements that become binding on or after January 1, 2022. Under the regulations implementing 162(f) and 6050x, every agreement or court order to which EEOC is a signatory where EEOC reasonably expects the total amount that will be paid or incurred by the employer to be $50,000 or more, is subject to these reporting requirements. 

2. Has the EEOC determined that the requirements for a tax deduction are met?

No. The fact that the EEOC is providing this form does not mean that a determination has been made that the requirements to claim a deduction under section 162(f) have been met. The determination of whether an employer qualifies for a deduction is made solely by the IRS. The EEOC has no role in that determination.

3. The Form 1098-F indicates that the total amount to be paid is $50,000, but that is different (either more or less) than the actual settlement amount. Why does the Form 1098-F say “$50,000”?

The EEOC completes every form 1098-F the same way and only indicates that it believes that the $50,000 threshold has been met. The EEOC does not specify the exact amount it expects the employer to incur.

In determining whether the $50,000 threshold has been met, the EEOC considers the amount paid by the employer directly and the potential amounts paid for injunctive relief that the employer may incur such as payments for training or wages because of hiring or promotions.

Form 1098-F may not be used to satisfy the requirements necessary to obtain a deduction under 162(f)(2) nor must Form 1098-F be submitted in order for a deduction to be claimed. In determining what deductions it may claim under 162(f)(2), the employer/respondent/defendant should consult the IRS and its own tax professional.

4. Where can I obtain more information?

For more information about IRS Form 1098-F, please see the IRS instructions concerning the form available here: Instructions for Form 1098-F (Rev. January 2022) (irs.gov). For more information about the requirements of the Internal Revenue Code Section 162(f) and 6050x, please see the final regulations issued by the IRS available here: Federal Register: Denial of Deduction for Certain Fines, Penalties, and Other Amounts; Related Information Reporting Requirements. For further questions, please consult the IRS or your own tax professional.

If you have additional questions for the EEOC, please email IRC162FREQUEST@eeoc.gov. Please remember that the EEOC is not able to provide tax advice.