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XII. Expenditures

Guide to Financial Operations

XII.6.M Lien Processing and Financial Reporting for Sole Custody Accounts

XII. Expenditures
Guide to Financial Operations

SECTION OVERVIEW AND POLICIES

This section provides Business Units with guidance and requirements on the Internal Revenue Service’s (IRS) Form 1099 reporting and filing requirements, as well as lien processing for those Business Units that make payments outside of the State’s joint custody account.

The IRS requires the annual reporting of certain payments made to vendors and others. Generally, payments to the same payee totaling over $600 in a single calendar year must be reported to the payee via a Form 1099 (information return), and a copy must be filed with the IRS. For a list of payments subject to IRS reporting, please see Chapter XII, Section 10.C.

Process and Document Preparation:

For Online Business Units, the Office of the State Comptroller (OSC) will automatically administer liens and issue 1099s. However, when a Business Unit makes its own payments outside the Statewide Financial System from a sole custody account, the Business Unit is required to ensure it complies with lien administration and IRS filing requirements. Business Units have three options to comply with these requirements:

A Business Unit is responsible for providing the following information to OSC for each payee: payee name, address, Vendor ID, applicable IRS payment type code, and the total reportable amount of payments made to that payee during the calendar year. This information should be encrypted and submitted to OSC in an Excel file as soon as possible after the last payment made during the calendar year, but no later than the first business day of January of each year to [email protected]. Business Units that are unable to email an encrypted file should contact the OSC’s Federal Reporting Unit for alternate instructions, either by email or phone at (518) 486-4602.

  1. A Business Unit may administer liens prior to processing payments, as well as prepare and distribute the required Form 1099 information return to the payee and file with the IRS directly. If a Business Unit chooses to prepare all forms and file directly, the Business Unit must:
    • Consult the IRS instructions for Form 1099 and Chapter XII, Section 10.C to determine whether a payment is subject to the reporting requirements. (For example, only certain types of payments to corporations are reportable). The IRS instructions may be accessed at www.irs.gov.
    • Report and file timely. The Form 1099 must be provided to payees by January 31st. This information must also be separately reported to the IRS. Generally, the due date for reporting to the IRS is March 31st.
    • All filing with the IRS must be done electronically. The IRS requires any payer filing 250 or more information returns to file electronically. Since the State far exceeds this limit, any Business Unit filing information returns using the State’s Employer Identification Number (EIN) must do so electronically. While a Business Unit may use the State’s EIN, it must use its own Transmitter Control Code (TCC) to distinguish its returns from those filed by OSC. Business Units may obtain their own TCC by completing an application at http://www.irs.gov/pub/irs-pdf/f4419.pdf. Under no circumstances may a Business Unit or its designee file paper information returns with the IRS when using the State’s EIN. Business Units not complying with IRS guidelines will be responsible for paying IRS penalties. These penalties may be as much as $100 for each unfiled or incorrectly filed information return, up to a maximum penalty of $1.5 million.
  2. A Business Unit may administer liens themselves, and report to OSC the payments it has made. OSC will distribute Form 1099 to payees and electronically file the information returns with the IRS.

    A Business Unit is responsible for providing the following information to OSC for each payee: payee name, address, Vendor ID, applicable IRS payment type code, and the total reportable amount of payments made to that payee during the calendar year. This information should be encrypted and submitted to OSC in an Excel file as soon as possible after the last payment made during the calendar year, but no later than the first business day of January of each year to [email protected]. Business Units that are unable to email an encrypted file should contact the OSC’s Federal Reporting Unit for alternate instructions, either by email or phone at (518) 486-4602.

  3. A Business Unit can journal voucher the funds from the sole custody account to the joint custody account. The Business Unit must then contact OSC with the lien information. Once the journal voucher has processed, the Business Unit must process a voucher payable from the joint account. OSC will distribute Form 1099 to payees and electronically file the information returns with the IRS.

Agencies must adhere to all IRS filing requirements, regardless of the method of filing. Specifically, agencies must provide the payee’s correct Taxpayer Identification Number (TIN) and name. The IRS requires that the payee’s TIN and name match the IRS’ records. An agency should obtain IRS Form W-9 from payees to obtain their name and TIN. Agencies may also wish to use the IRS’ TIN matching program to verify the information. Information about the TIN matching program can be found at the following website:

https://www.irs.gov/tax-professionals/taxpayer-identification-number-tin-matching

Questions relative to lien administration or federal reporting requirements should be directed to the Bureau of State Expenditures’ Customer Service Help Desk at (518) 474-4868, or by email addressed to [email protected].

Guide to Financial Operations

REV. 03/19/2012