Policy
FIACCT 05-19_00 Payments – 1099 Miscellaneous Income Reporting
Effective: July 1, 1994
Revised: July 1, 2006
Reviewed: July 1, 2017
Purpose
This policy defines the policies and procedures for issuing 1099 Forms to vendors who receive payments from the State.
Policy
A. By January 31 of each year, the Division of Finance will prepare an information return (Form 1099- MISC) for each vendor subject to 1099 reporting during the previous calendar year. The Division of Finance sends the information return to the vendor and to the IRS.
B. For any new vendor, agencies are required to provide complete information, including the TIN (Taxpayer Identification Number) and Taxpayer name (name shown by the vendor on the vendor’s required federal tax filings). For specific instructions, see the Payment – Vendors – Request New/Change policy in this section of the manual.
Background
Federal tax law requires that certain payments made to 1099 Reportable vendors be reported to the Internal Revenue Service using a U.S. Taxpayer Identification Number (TIN) and the Taxpayer Identification name. This TIN number is always a 9-digit number and can be a Social Security Number (SSN) assigned to an individual by the Social Security Administration or an Employer Identification Number (EIN) assigned to businesses and other entities by the Internal Revenue Service. The Taxpayer Identification name is name shown on the vendor’s required federal tax filings. The FINET term Federal ID Number refers to either a Social Security Number or an Employer Identification Number.
In FINET, the 1099R Table accumulates 1099 reportable payments by Vendor code. Actions which update the Vendor Income Table are Manual Disbursements (MD), Automated Disbursements (AD), or Electronic Fund Transfers (EFT) (all of which reference to GAX or PRC transactions); Disbursement Cancellations (DC); and, when used to process a vendor refund, Cash Receipts (CR) (a Cash Receipt decreases the 1099 reportable amount on the Vendor Income Table). 1099 reportable information occurs when BOTH:
1. The Vendor code used on the GAX, PRC, DC, or CR has the 1099 Indicator marked Yes.
2. The Object code used on the GAX, PRC, DC, or CR is an Object code set up on the Object Table as 1099 reportable in the 1099 Type of Return and 1099 Type of Income fields.
Types of Payments that Are Reportable:
Rents (all types of rents), e.g., real estate rentals, machine rentals, leases.
Services (including parts or materials if supplying the parts or materials was incidental to providing the service, e.g., auto or equipment repairs)
Medical and health care provider payments (including mental and behavioral health care providers, e.g., social workers, psychologists, guidance counselors, and therapists)
All payments to attorneys
Payments for damages for non-physical injuries or sickness (e.g., employment discrimination) and any other taxable damages (e.g., punitive damages).
Other non-merchandise taxable income payments (e.g., fees, awards, honorariums, taxable fringe benefits or other forms of remuneration)
Determining if a Vendor Is Subject to 1099 Reporting:
All payments to a corporation of attorney(s) or to a corporation of medical, physical, or mental
health care provider(s) are 1099 reportable. Payments made to all other corporations are not
required to be reported on a 1099.
Note: Payments to a vendor with the term Company or Co. or LLC or LC or .COM in its name cannot be assumed to be a corporation.
Payments to tax-exempt entities (US Government; states; political subdivisions; associations;
foundations; clubs; and religious, charitable, and educational organizations) are not required to be reported on a 1099.
Non-taxable payments to the recipients from a federal or state aid, or from a support, assistance or training program (e.g., difficulty-of-care payments) are not required to be reported on a 1099.
All other individuals, entities, and organizations are generally subject to 1099 reporting.