CCA 200851078: Every winner named on a Form 5754 gets their own Form W-2G

Plain-English summary

A short answer to a reporting question, relayed for a colleague to pass back to whoever asked it.

The setting is gambling winnings collected by one person on behalf of several. Someone has to walk up and claim the prize, and the payer sees one claimant. Form 5754 exists for that situation: the person who receives the winnings uses it to tell the payer that they are not the only winner, and to name the others. The question was what the payer does next.

The answer is that each named winner gets their own information return. The release quotes the regulation directly: for payments to more than one winner, a separate Form W-2G, which in no event shall be signed by the winner, shall be filed with respect to each such winner. The writer reads that together with the neighbouring provision on the statement furnished by the recipient, and concludes that the payer must send a Form W-2G to each person listed on the Form 5754. The instructions to both forms are cited as making the same point from the other direction: the person receiving the winnings must include the names of the other winners on Form 5754, and the payer must provide a Form W-2G to each of them.

The logic is worth spelling out. Withholding and reporting follow the person whose income it is, not the person who happened to collect the money. If the payer issued one Form W-2G to the claimant, the full amount would be reported against a single taxpayer who received only part of it, and the other winners would have income with no matching return. Form 5754 is what lets the payer split the reporting, and the separate Forms W-2G are what carry it out.

One detail in the quoted regulation is easy to skip over. The Form W-2G filed in a multiple-winner case is in no event signed by the winner. That is a deliberate contrast with the single-winner case, where the winner signs the form under penalties of perjury. In a shared-prize case the signed statement has already been made on the Form 5754, so the Forms W-2G generated from it are the payer's own filings.

The release is a working answer between colleagues rather than a formal ruling: the writer says it seems to them that this is the result, and refers to highlighted language in an attachment that was not released with the message. It also asks that the answer be passed along to the originator, so the recipient here is a relay rather than the person who raised the question.

This is a clean digital release rather than a scan, so no OCR correction was needed. Kept as released: "W2-Gs" in the third sentence where the rest of the message writes "W-2G"; "payor" alongside "payer"; "see pp.4"; and the stray dashes left on their own line under the subject heading.

Ruling snapshot

• Question: When a Form 5754 reports that winnings are shared, must the payer issue a Form W-2G to each person named?
• Outcome: Advice given. Yes. Treas. Reg. section 31.3402(q)-1(f) requires a separate Form W-2G, which in no event is signed by the winner, to be filed with respect to each winner, so the payer must send one to each person listed on the Form 5754. The instructions to Form W-2G and Form 5754 say the same.
• Key authorities: Treas. Reg. section 31.3402(q)-1(e) and (f); IRC section 3402(q); instructions to Form W-2G and Form 5754.

Full text (IRS public release)

ID: CCA_2008090915132152 Number: 200851078
Office: -------------- Release Date: 12/19/2008

UILC: 3402.00-00

From: -----------------------
Sent: Tuesday, September 09, 2008 3:13:24 PM
To: --------------------
Cc: -----------------
Subject: FW: FSLG question- form 5754

Treas. Reg. 31.3402(q)-1(f) sets out the answer to the question posed below. It states: "For payments to more than one winner, a separate Form W-2G, which in no event shall be signed by the winner, shall be filed with respect to each such winner." It seems to me that the payer must send out a W-2G to each person listed on the Form 5754 (see Treas. Reg. 31.3402(q)-1(e) and (f)). Also, the instructions to Form W-2G and Form 5754 make clear that the person receiving the winnings must include the names of other winners on Form 5754 and that the payor must provide W2-Gs to each winner. I have attached the instructions (see pp.4, highlighted language).

Could you please pass this along to the originator? Thanks.