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General Tax Guidance

Federal law (26 U.S.C. Section 6050X) requires government entities receiving payments of $50,000 or more in certain suits or agreements, to file a specific information return with the IRS, as well as furnish a statement to each person who is a party to the suit or agreement.

For Federal tax purposes, the IRS generally does not allow taxpayers to claim deductions for amounts paid for certain violations of law. Beginning in 2023 (for orders in tax appeals issued in 2022 or later or settlements entered in 2022 and later), IDR must file an annual report with the IRS each year. The report must include certain amounts taxpayers must pay to IDR as a result of an order or final determination in a tax appeal or a settlement agreement. IDR must also issue Form 1098-Fs to a taxpayer by January 31 of the year after the taxpayer was ordered in a tax appeal to pay IDR or by January 31 of the year after the taxpayer entered a settlement agreement to pay IDR.

In completing this reporting obligation, IDR takes no position on whether the IRS will allow, or whether the taxpayer is entitled to, any deduction by the taxpayer of any amounts paid.