finance and administration division of accounts procedures for 1099 and 1042 reporting
TRANSCRIPT
F I N A N C E A N D A D M I N I S T R A T I O ND I V I S I O N O F A C C O U N T S
PROCEDURES FOR 1099 AND 1042 REPORTING
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PRESENTED BYDIVISION OF ACCOUNTS – VENDOR MAINTENANCE
• Speaker: • Donna Nicely, CGFM • [email protected] or (615) 253-5234• F&[email protected] is the address to submit reports
Available for questions:Don Shelton, Director of Vendor MaintenanceRobert McDonald, Accounting ManagerKatelyn Huckaby, Accountant
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PURPOSE OF 1099 AND 1042 REPORTING
• The IRS requires certain payments made to vendors to be reported on a Form 1099 or a Form 1042.
• The procedures in this presentation are specifically dealing with • Form 1099-MISC • Form 1099-G • Form 1042-S
• Vendor Maintenance will work with specific business units for other types of 1099 forms that must also be filed.
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WHAT DOES REPORTABLE MEAN ?
• It simply means that the IRS requires the State of Tennessee to report the payments on a 1099. The payment may or may not be taxable but the State is required to report it.
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DECIDING WHEN TO REPORT ON A 1099
• Payment Type: • Is the payment
reportable?
• Vendor Business Type: • Is the vendor
reportable?
• See charts of vendor business types and payment types on pages 3 and 4 of the Procedure for 1099 and 1042 Reporting
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IS THE PAYMENT REPORTABLE ON A 1099?
• Product: If the vendor sold a product to the State, it is not reportable on a 1099.
• Service: If the vendor provided a service to the State, it is reportable on a 1099 if the vendor is also reportable.
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IS THE PAYMENT REPORTABLEON A 1099?
• Other Reportable Payments• Rent• Prizes and Awards• Court Settlements• Certain GrantsIf the vendor is also reportable on a 1099. Gross Proceeds on settlements are always reported.
• See page 4 of the Procedures for 1099 and 1042 Reporting for more examples.
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IS THE VENDOR REPORTABLE ON A 1099?Reportable And Non-reportable Business
Types
• Vendors with business types 01, 02, 03, 04, 05, 06, 07, 09, 10, and 15 are all 1099 reportable vendors.
• Vendors with business type 08 are not reportable unless the payment is for medical or legal services.
• Vendors with business type 13 are tax exempt, therefore not reportable, except on a settlement.
• Vendors with business type 16 are reportable.
• Vendors with business type 17 are not reportable.
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IS THE VENDOR REPORTABLE ON A 1099?Reportable And Non-reportable Business Types
Corporations, (business type 08), are not 1099 reportable unless the payments made to them were for medical or legal services. If the term INC is in the name and there is not a W-9 on file(business type 15), the payments must be reported on a 1099.
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WHAT IS AN LLC?
• Corporation• Partnership• Single Member
LLC/Disregarded Entity• A single member
LLC/disregarded entity may be owned by a corporation, a partnership or a sole proprietor
An LLC is a Limited Liability Company and may be formed as a:
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WHAT IS A DISREGARDED ENTITY?
• A disregarded entity is a business entity that is regarded as separate from its owner, except for federal income tax purposes.
• The IRS looks to the owners of disregarded entities for federal income tax, including owners of single member LLC’s.
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A SINGLE MEMBER LLC/DISREGARDED ENTITY
• The Single Member LLC’s tax ID number is used for employment taxes, and excise taxes, but NOT Federal Income Tax.
• The IRS requires a1099 to be issued to the owner’s name and tax id number of single member LLC/Disregarded entity for reportable payments.
• A W-9 with the owner’s name and tax id number is required.
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MEDICAL SERVICES
• (A) for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.
• (B) for transportation primarily for and essential to medical care.
• Does the person or facility performing the service require a medical license to perform the service?
• If you are still not sure ask the vendor.
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MEDICAL VS NON MEDICAL
Reportable Medical Pmts.
• Speech Therapy• Test and Diagnosis.
• Home Care• Nurse – blood pressure
administers medication etc.
• Veterinarians
Non-Reportable Medical Pmts.
• Speech Therapy• The A sound, B sound.
• Home Care• Sitter- sits with patient,
bathes, dresses, feeds, etc.
• Medical Staffing Agencies
• Expert testimony, medical records or when Doctors sit on Boards, etc.
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LEGAL SERVICES
• Legal Services means all services related to, or in the support of the practice of law performed by, or under the supervision of an attorney.
• Legal fees are reported on a CAT 7 on reportable vendors including corporations.
• Process Servers, Court Reporters and Expert Testimony are not considered legal services. They are not reported on corporations, however, they are reported as a CAT7 if the vendor is reportable.
• Gross Proceeds to an attorney from a settlement are reported on CAT 14.
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LET’S RECAP: IS THE VENDOR’S BUSINESS TYPE REPORTABLE ON 1099’S?
• Business Type 01, 02, 03, 04, 05, 06, 07, 09, 10 and 15 – Yes
• Business Type 08 – No, unless payments are for medical or legal services.
• Business Type 13 – No, except for gross proceeds of settlements, which are reportable, even on tax exempt entities
• Business Type 16 –Yes
• Business Type 17 - No
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LET’S RECAP: ARE PAYMENTS REPORTABLE ON 1099’S?
• Products: No.• Services : Yes – If the vendor is also reportable.• Rent, Awards, Settlements, Certain Grants: Yes, if the vendor
is also reportable. Settlements are always reportable.• See pages 3 & 4 of the Procedures for 1099 and 1042
Reporting for examples.
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FREQUENTLY ASKED QUESTIONS
• Travel payments to individuals – not reportable if travel is accounted for on a travel claim within 60 days.
• Travel payments to hotels – reportable as rent, if the vendor is reportable.
• Court Reporters, Process Servers are not legal fees. Expert testimony is not legal or medical fees.
• Grants: The only way to know if a grant is non-reportable is to read the federal legislation that the grant was provided under.
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FREQUENTLY ASKED QUESTIONSIS FOOD REPORTABLE ON A 1099?
Food is Not Reportable
• Food that is purchased for a meeting, including boxed lunches, with no service from the vendor.
Catering is reportable
• Catering is when a food service is purchased and the vendor sets up tables, serves food and cleans up after the meeting.
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VOUCHER CANNOT BE SPLITWHAT IF PART OF THE VOUCHER OR INVOICE IS REPORTABLE
AND THE REST IS NOT?
• Generally, if part of a payment on a voucher is reportable and the rest of the payment is not, then we must consider the entire voucher as reportable on a 1099. • Example: A truck was repaired by a sole proprietor. Labor cost $1,400,
parts cost $600. A 1099 is issued for $2,000 to the vendor.
• Example: A computer was purchased with a maintenance agreement from a partnership. The computer cost $1,200, the maintenance agreement cost $300.00. A 1099 is issued for $1,500 to the vendor.
• Generally, shipping and delivery charges are considered incidental to the product. • Example: Copy paper was purchased for $800, delivery charge was
$50. A 1099 is not issued to the vendor because copy paper is a product and the deliver charge is incidental to the product.
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WHEN IN DOUBT
Don Shelton, Robert McDonald and Katelyn Huckaby can also answer questions. Our contact information is at the end of this slide show and in the Procedures for 1099 and 1042 Reporting
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WHAT LOCATIONS ARE REPORTABLE?
• Payments processed with location MAIN or location with a city name, for example NASHVI-001 will not be reported on a 1099, unless you ask Vendor Maintenance to correct the locations when submitting the reports.
• Payments processed with locations of CAT1, CAT3, CAT6, CAT7, CAT14 and CATG will be reported on a 1099, unless you ask Vendor Maintenance to correct the locations when submitting the reports.
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WE NEED YOUR HELP
• Vendors change business types or they close their business.
• Vendor Maintenance inactivates the vendor location or the entire vendor, which ever is appropriate.
• To process 1099’s, any reportable vendor locations that had payments during the year must be activated so the payments will post to the 1099 table.
• Payments were made to 240 Vendor Locations in 2014 that that should not have been, because the vendor locations were activated for 1099 processing only.
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INACTIVE VENDOR LOCATIONS
• Vendor Maintenance activates inactive vendor locations for 1099 processing in Nov. and Jan. each year.
• Vendor Maintenance runs process to post the 1099 table.• Business Units makes payments to the locations while active.• Vendor Maintenance inactivates the location again.• Business Units runs the query, finds that the payment needs
a correction and submits a correction request to VM.• Vendor Maintenance activates vendor location and makes
the correction.• Business Units makes payments to the locations while active.• Vendor Maintenance inactivates the location.• Repeat the cycle.
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TN_AP33_VENDOR_SEARCH QUERY
Find Vendor Number, Loc, Addr 4
Vendor
Address
Number Location Descr
Location_
Status Vendor Name Address 1 Address 2 City St Postal
0000086025 1 CAT1-001 DO NOT PAY ACTIVE FOR 1099 I Northwood Park Apartments Rental Account PO Box 756 Fayetteville TN 37334
0000086025 1 MAIN Northwood Park Apartments A Northwood Park Apartments Rental Account PO Box 756 Fayetteville TN 37334
0000086025 2 CAT1-002 Northwood Park Apartments I Northwood Park Apartments 223 Western Ave Lebanon TN 37087
0000086025 2 LEBANO-001 Northwood Park Apartments A Northwood Park Apartments 223 Western Ave Lebanon TN 37087
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SINGLE PAYMENTS AND OFFLINE PAYMENTS
• Existing Edison ID numbers available to use.• Business types are
in Edison.• Locations have
been set up to use.• Accounts Payable
has a 3 day turnaround policy.
• Missing Tax ID’s• Backup withhold 28%
on the payment.• Always ask for a W-9
to avoid backup withholding.
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IRS PENALTIES
• The withholding agent who fails to withhold is liable for any uncollected tax.• Failure to file• Failure to pay• Failure to deposit• Negligence• Also, interest will be assessed
on the under withholding
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SETTLEMENTS
• Send a list of all settlements that your agency made to [email protected] Note: Robert’s email does not have a middle initial.
• Gross Proceeds from most all settlements are reportable on a 1099, even to tax exempt entities.
• Settlements are reported with a CAT 3 and a CAT 14 only.
• 1099’s on settlement payments get reported to multiple parties for the same amount of money.
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EXAMPLE OF SETTLEMENT REPORTING
• Carl, an individual plaintiff in a suit against the State of Tennessee is represented by attorney Alex. The state settles the suit for $300,000, all of which will be includible in Carl’s gross income. The state writes two checks, one payable to Alex in the amount of $100,000 as compensation for legal services and the other payable to Carl in the amount of $200,000.
• The State must file:• Form 1099 MISC (Box 14) with respect to Alex for $100,000.• Form 1099 MISC (Box 3) with respect to Carl for $300,000.
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SETTLEMENTS CONTINUED
• A W-9 is needed on all parties involved.
• Never pay settlements on a Single Payment Voucher.
• The complete settlement agreement must be submitted to [email protected] before the voucher is ever keyed.
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1042 REPORTING – FOREIGN VENDORS
• The IRS requires foreign vendors to be reported on a 1042-S.
• A foreign vendor is a non-resident alien (individual or company) doing business in the U.S.
• Unlike 1099 reporting, both products and services must be included on the 1042 report.
• Foreign Vendors should not be paid on a Single Payment Voucher.
• W-8 are required on all foreign vendors. There are several types of W-8’s and can be found at www.irs.gov.
• W-8’s expire every three years and new forms must be submitted.
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WORKING WITH THE
QUERIES
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QUERY INFORMATION
The 1099 queries provide detailed data of each payment made during the year. The queries must be reviewed to determine if the payment was coded correctly.
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TYPES OF QUERIES
Each of the queries below must be run using the Query Scheduler in Edison for the appropriate period. Instructions for using the Query Scheduler can be found on page 11of the Procedures for 1099 and 1042 Reporting. Screen prints with instructions can be found on pages 12-24.
• Query 1: TN_1099_TO_REPORT• Query 2: TN_1099 _SLGP_VCHR_PAYMNTS• Query 3: TN_1099_RPRT_VDR_NORPRT_PAY• Query 4: TN_1099_RPRT_VDR_NORPRT_PAY2
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WORKING WITH THE QUERIES
• Columns may be hidden but NOT DELETED.• Additional columns
may be added to the RIGHT side of the spreadsheet only.
• If the format is altered in any other way, the file will be returned for correction.
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HIDDEN COLUMNS
• All of the examples of reports in this slideshow and in the Procedures for 1099 and 1042 Reporting have hidden columns.
Bus Unit FormCategory/Box VendorID Location Vdr IRS Name W-9 Bus Typ(F)EIN or (S)SN
Total Payment VoucherID
Voucher Amount
Exclude or Correct Reason
xxxxx 1099 6 722 CAT6-001 Medtox Diagnostics Inc 08-CorporationF 355.00 1506083 355.00 E suppliesxxxxx 1099 6 49308 CAT6-001 Lisa M Piercey MD 01-IndividualS 650.00 1505386 650.00 7 expert witnessxxxxx 1099 6 71607 CAT6-001 Middle Tn Juvenile Detent 08-CorporationF 87,370.80 1475396 2,779.98 E not medical or legalxxxxx 1099G 6 50595 CATG-001 Douglas Brent Bartholomew 01-IndividualS 1,249.00 45019 1,249.00 3 1099 MISCxxxxx 1099 7 159552 CAT7-001 Roger Risner 05-Sole Proprietor - No EmpS 1,995.00 1460539 220.00 G6 1099 G
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QUERY 1: TN_1099_TO_REPORT
• The data on this query will be reported on a 1099 unless you tell us to exclude or make corrections.
• Add two columns to the RIGHT SIDE of the spreadsheet titled “Exclude or Correct” and “Reason”
Bus Unit FormCategory/Box VendorID Location Vdr IRS Name W-9 Bus Typ
Total Payment VoucherID
Voucher Amount
Exclude or Correct Reason
xxxxx 1099 6 722 CAT6-001 Medtox Diagnostics Inc 08-Corporation 355.00 1506083 355.00 E suppliesxxxxx 1099 6 49308 CAT6-001 Lisa M Piercey MD 01-Individual 650.00 1505386 650.00 7 expert witnessxxxxx 1099 6 71607 CAT6-001 Middle Tn Juvenile Detent 08-Corporation 87,370.80 1475396 2,779.98 E not medical or legalxxxxx 1099G 6 50595 CATG-001 Douglas Brent Bartholomew 01-Individual 1,249.00 45019 1,249.00 3 1099 MISCxxxxx 1099 7 159552 CAT7-001 Roger Risner 05-Sole Proprietor - No Emp1,995.00 1460539 220.00 G6 1099 G
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QUERY 2: TN_1099_SLGP_VCHR_PAYMNTS
• The data on this query will NOT be reported on a 1099 unless you tell us to report.
• Add four columns to the RIGHT SIDE of the spreadsheet titled “TIN”, “Format”, “Type”, and “CAT”.
• REQUIRED: Tax ID Number (SSN or FEIN).• Tax ID Format requires hyphens to be entered into each cell
individually. • Type: Enter 1099 or 1099G.• CAT: Enter the correct category for the payment.
Unit Voucher IDVendor Name Address 1City St Postal Amount Descr TIN FORMAT TYPE CAT
xxxxx 00039244 Brooke Rainey Photos 3312 Hillsboro PikeNashville TN 37210 150.000 TNFLC Invitations xxx-xx-xxxx S 1099 7
xxxxx 00039183 Nichole Saulsberry-Scarboro, Ed.D1484 Vance AvenueMemphis TN 38104 1500.000 TNFLC Training Sessionsxx-xxxxxxx F 1099 7
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QUERY 3: TN_1099_RPRT_VDR_NORPRT_PAYQUERY 4: TN_1099_RPRT_VDR_NORPRT_PAY2
• The data on these queries will NOT be reported on a 1099 unless you tell us to report.
• These reports may be combined and submitted as one report. If the two reports have been combined, save the report as “30101 Pay-Pay2 Combined.”• TIP: Combining the results from these two queries will aid in reviewing
and correcting payment information.
• Add two columns to the RIGHT SIDE of the spreadsheet titled “Type” and “CAT”.
Unit Form Catagory VendorID Location Vdr IRS Name
W-9 Bus Typ
(F)EIN or (S)SN
Voucher Amount Descr Account Type CAT
xxxxx 1099 N 0000036292 GOODLE-001 Bills Hood Cleaning Service LLC06-Sole Proprietor - With EmpF 395.00 301 Hood Cleaning 1866170706000 1099 7xxxxx 1099 07 0000070371 CAT7-001 Margin Of Victory Partners LLC10-PartnershipF 5,287.00 301 Newsletter Gresham70601000 1099 7
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1042 REPORTS
• All 1042 lines found on the TN_1099_TO_REPORT must be submitted on a separate spreadsheet.
• Any vendors with foreign addresses found on the TN_1099_SLGP_VCHR_PAYMNTS query must be submitted on a separate spreadsheet as well.
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1042 INFORMATION REQUIRED
• Copy and paste the header of the query on which the foreign data was found to another spreadsheet. • Add three columns to the RIGHT
SIDE titled: • “Source of Income” (Enter U.S. or
Abroad)• “Number of days worked on U.S.
Soil” • “Description of the Service or
Product”
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EXAMPLES FROM THE TN_1099_TO_REPORT AND THE TN_1099_SLGP_VCHR_PAYMNTS
• 1042 TN_1099_TO_REPORT
• 1042 TN_1099_SLGP_VCHR_PAYMNTS
Unit Voucher ID Vendor Name Address 1 City St Postal Amount Descr AccountSource of Income
Number of Days worked on U.S. Soil
Description of Service or
Productxxxxx 118392 OSHSPA OSHSPA MeetingSan Juan PR 00919-5540 62.50 reg. fee 72102000 Abroad 0 Meeting-Reg Feexxxxx 02123859 Alberta Health Services 10th Floor, North TowerEdmonton, Alberta AB 0 20.00 1694500 71308000 Abroad 0 Medical Records
Bus Unit Form
Category
/Box VendorID Location Vdr IRS Name
W-
9
Bu
s
(F)EI
N or
(S)S
N
Voucher
ID
Voucher
Amount
Source
of
Income
Number
of
days
worked
Description of
Service or Product
xxxxx 1042 01 0000000197 MAIN Der Graphics Inc 08-CorporationF 00028428 402.00 Abroad 0 clinical folders
xxxxx 1042 1 164089 MAIN Pageant Media Ltd08-Corporation56961 674.80 U. S. 1 Registration fee
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NAMING YOUR REPORTS
• The REPORT NAME OF THE 1099 QUERY should always contain the business unit and name of the query for example: “30101 TN_1099_TO_REPORT”
• The REPORT NAME OF THE 1042 QUERY should always contain the business unit and name of the query for example: 30101-1042 TN_1099_TO_REPORT
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BEFORE SUBMITTING YOUR REPORT
Unhide all columns and unfreeze all panes.
• Only submit lines that require corrections or exclusions.
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SUBJECT OF THE EMAIL
• The SUBJECT LINE OF THE EMAIL should always contain the business unit and the name of the report, for example: “30101 TN_1099_TO_REPORT” or “30101 TN _ Pay-Pay2 Combined.”
• If you are submitting multiple reports on one email the subject line should use the term “1099 reports” or “1042 reports”, for example: “30101 1099 Reports” or “30101 1042 Report”.
• If you run a query and get no results, double check to ensure that you entered the correct dates. Send an email stating that there are no changes to the report. You do not have to attach the blank report.
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SUBMITTING THE REPORTS
• Don’t wait to submit the reports. • Send the spreadsheets as they are
completed rather than waiting until all four have been reviewed and/or corrected.
• Please submit the reports on separate spreadsheets, not on separate tabs.
• Email the 1099 and 1042 reports to F&[email protected]
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CERTIFICATIONS
• Certifications will be required to be signed by Fiscal Officers for the following:
• All 1099 Queries have been worked and corrections have been submitted to Division of Accounts.
• All 1042 payments have been worked and submitted on a separate spreadsheet to the Division of Accounts
• All Settlements have been submitted to the Division of Accounts.
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EMAIL ADDRESSES AND CONTACT INFORMATION
• Email 1099 and 1042 Reports to F&[email protected]
• Send 1099 questions to Donna Nicely at 615-253-5234 or email her at [email protected]
• Send Settlement and Foreign Vendor questions to Robert McDonald at 615-253 -6104 or email him at [email protected]
• Send LLC questions to Katelyn Huckaby at (615) 770-1104 or email her at [email protected]
• Don Shelton can answer any questions. His number is (615) 253-4758 or email him at [email protected]