8.0 FEDERAL INCOME TAX REPORTING, FORM 1099
The Comptroller's Office will report the following types of Form 1099's to the Internal Revenue Service at the end of each calendar year:
1099 - MISC: The Comptroller's Office will report payments made by state agencies for the payment of outside professional services, outside consulting services, and payments made for non-professional services to vendors that are not incorporated and on this form.
Attorney fees and medical service fees are reportable regardless of the vendor's corporate status.
Rents: The Comptroller's Office will report in the appropriate box on 1099 MISC form payments made to state agencies for rents paid to unincorporated entities, unless paid to a real estate agent or management company.
Any state agency processing payments to a vendor for the rent of real estate must submit a master list consisting of vendor name, FEIN/SSN and total dollar amount per calendar year. Please process this information to the Comptroller's Accounts Payable Division, Special Processing Section between January 1 and January 10. It is the responsibility of each state agency to comply with IRS regulations. Failure to do so may result in penalties and/or fines to the State.
1099 - S: (Proceeds from Real Estate Transactions) The Comptroller's Office will report payments made by state agencies for the purchase of land or real estate.
The Office of the State Comptroller has developed a reportability determination grid to simplify the classification of payments as reportable or non-reportable on Invoice/Voucher for Goods or Services, Form CO-17.
This is required to comply with the Internal Revenue Service regulations for accurate reporting of 1099 Miscellaneous Income paid for services rendered to State agencies.
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Listed below is a sample of some commonly used object codes and the reportability type as they relate to each business entity:
|02010 - Advertising||Y||Y||N|
|02220 - Sundry
|02230 - Fees for
|02240 - Fees for
|02390 - Attorney Fees **||Y||Y||Y|
* All medical services regardless of business entity must be charged to Object Code 02380 - and the reportable type must be "Y" (yes).
** All payments made to attorneys for legal services regardless of corporate status are reportable.
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8.1 Federal Employer Identification Number (FEIN) Social Security Number (SSN) Reporting
Proper federal reporting information must be included on each invoice for payment. Enter either the vendor's federal employer identification number (FEIN) or social security number (SSN) and check the proper block for incorporation.
A. The fact that an employer identification number is included on the vendor's own invoice has no direct relationship to the status of the entity. The following may help determine the vendor entity type:
B. Identification numbers on invoices from vendors doing business as a group of individuals should be consistent. Use the same identification number on all invoices. (i.e. husband and wife or several professionals doing business as a group of individuals).
C. Payments to Towns
Claims submitted for payment to any entity which requires a town code number as part of the expenditure coding must include such number on the CO-17. Enter the letter "T" in block 12, and make certain that the nine digit town code include the following conditions:
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D. Exemptions from Number Reporting:
An exception code must be established in the Comptroller's Vendor File for each exception code being used by your agency.
All claims exempt from FEIN/SSN number reporting must contain the appropriate pre-assigned number in block #13 on the CO-17 Invoice. Use the following list of numbers when submitting claims for the approved exempted categories:
Note: XXXX corresponds to your agency number.
|1. Student Grants||00003XXXX|
|2. U.S. Postal Service||00004XXXX|
|4. Pending Receipts||00005XXXX|
|5. Petty Cash||00008XXXX|
|7. State Governments||00011XXXX|
|8. Federal Agencies||00012XXXX|
|9. Foreign Mail||00013XXXX|
|* Requires Comptroller's approval|
Payments meeting both of the following tests must be reported:
Ownership - The payment is made to an individual, partnership or payments for medical services and attorney fees regardless of corporate status.
Payment Type - The payment is for services, commission, rents, fees, prizes, awards, or other income
E. Special Considerations in Form 1099 Reporting
Lump sum payments for labor and material
Payments for general repairs and motor vehicles repairs are reportable if the labor charges make up a significant portion of the invoice. The determination is left to agency personnel who should follow this general principle - "If in doubt report the payment." (Other examples include repairs to copier, fax machines, etc. where the labor charge exceeds the cost of parts installed.)
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Payment to Third Parties
Occasionally, payments are made to a third party for the benefit of an individual or partnership. The reporting test should be applied to the principals of the contract, lease, or agreement. If it is determined that the payment would be reportable as a direct payment, then it is also reportable if made to a third party. The Social Security Number (SSN) Federal Employer Identification Number (FEIN) of the payee is used for reporting purposes. An agency should exercise due diligence in determining the SSN or FEIN of a payee. Due diligence standards to be applied depend on the individual circumstances. Examples of such payments are:
a) Real estate leased from an individual with the rent being paid to a real estate agent. (Rental payments made to a management company are not reportable).
b) Payments to an attorney for a client.
c) Payments to a booking agent for musicians and entertainers
Candidates for a Degree:
- Amounts received as a qualified scholarship by an individual are not reportable, but are limited to tuition and fees required for enrollment or attendance, as well as for books, supplies and equipment required for courses of instruction.
- Amounts used for items such as room and board, and the value of contributed services.
- Payments for teaching, research or other services in the nature of part-time employment required as a condition to receiving the scholarship.
Non Candidate for a Degree:
- Amounts of any qualified tuition reduction to employees of education institution are non-reportable.
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- Amounts received for scholarships are reportable. However, $5250 per year may be excluded under employer provided educational assistance reimbursements to non degree candidates if certain requirements are met. (Refer to Internal Revenue Service Publication 508, Educational Expenses).
Payment to Non-Resident Aliens
Due to the complex nature in determining reportability to non-resident aliens agencies are advised to obtain Internal Revenue Service Publication 519, U.S. Tax Guide for Aliens, and apply the reportability determination based on individual analysis.
Payment from federal funds
The reporting rules for payments from federally financed projects are basically the same as those for State funds. Special rules apply to certain areas such as scholarship and research grants. These must be investigated on an individual basis to determine whether they are exempt or reportable.
Foster Care Payments
Amount paid to foster parents for qualified foster care are non-reportable. A qualified foster child is an individual who is less than 19 years old and is living in a foster family home in which he was placed by the state.
The Internal Revenue Service has ruled that payments for foster care are exempt from 1099 reporting.
Payments from Petty Cash
All reportable payments from the agency's petty cash account must be summarized annually and forwarded to the Comptroller's Accounts Payable Division, Special Processing Section. Please include the payee name, FEIN/SSN, complete mailing address and amount paid to each vendor during the calendar year. This information must be reported between January 1 through January 10 in order for the Comptroller to comply with IRS reporting requirements. It is each state agency's responsibility to comply with this requirement. Failure to properly report this information can subject the State to IRS penalties and fines.
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All payments for royalties are reportable and must be filed on a Invoice/ Voucher for Goods or Services, Form CO-17 to produce a 1099 MISC form at the end of the year.
F. Nonreportable Types - Exempt from 1099's
Commodities - Definition: a quantity of goods. Items purchased such as office supplies, tools, clothing, etc. are non-reportable, regardless of company ownership.
Ownership Exemptions - Corporations. The abbreviations Corp., Inc., Ltd., or P.C. included in a firm name are a definite indication of incorporation. However, payments to corporations for medical services and attorney fees are reportable. Firms using Company, Associates, Society, Group, etc., are not necessarily incorporated.
Federal, State, and Local Government Units
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Type of Payment Exemptions:
The following types of payments listed by object code are exempt from 1099 reporting:
|02030||Dues and subscriptions|
|02080||Freight and express charges for transportation of commodities in the normal course of agency operations|
|02100||Telephone and telegraph|
|02250||State owned motor vehicle rentals|
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8.2 Special Processing Requirements
Agencies making direct payments from special funds must apply to the Internal Revenue Service (IRS) for a separate Employer Identification Number (EIN). Such payments include but are not limited to payment of interest earned from patients'/clients' funds, reportable amounts paid from institutional activity and welfare funds, payments by workers' compensation to medical suppliers, etc. These reportable payments require reporting to IRS on Forms 1099, 1096, W-2, 941 and similar IRS forms. The new EIN should also be used by agencies submitting claims directly to IRS for reimbursement; (e.g., filing Form 843 for rebate of excise tax payments). EIN 06-6000798 is to be used by the Comptroller's Office only for reporting on payments processed at the Comptroller's Office.
When submitting reportable payments, agencies must comply with IRS regulations. Publications interpreting the IRS regulations are available through the Internal Revenue Service; examples include Publication 15, Publication 1220, and Publication 1281. Failure to comply with IRS reporting regulations may result in the assessment of an IRS penalty of $50.00 or more per form for forms incorrectly filed. This penalty, if levied, must be paid by the agency preparing the IRS reporting documentation, even if the agency incorrectly reported using the Comptroller's employer identification number (EIN). Agencies should note that IRS reporting requirements mandate the use of magnetic media for the reporting of 250 or more forms per EIN.
All payments to state employees except tuition reimbursements from 9916 fund are processed through the Payroll Services Division. (Refer to Section 16.5 for 9916 fund payments)
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9.0 DETERMINATION OF SPECIAL COMPENSATION AND EXPENSES
All claims for compensation submitted or electronically transmitted to the Comptroller's Accounts Payable Division, on Invoice/Voucher for Goods or Services, Form CO-17, for payment must make reference to the number of the state statute or special act prescribing the type and amount of compensation. If the compensation is determined and established by the Commissioner of Administrative Services, as provided for in Sections 4-40 and 4-40a of the General Statutes, designate the item number and the date of approval by the Office of Policy and Management. Those claims received by the State Comptroller without required reference are considered incomplete and will be returned to the agency.
9.1 Payments to Dual Employed State Employees
Effective January 1, 1990, all Personal Service Agreements (CO-802A) approved by DAS-Personnel as required by Section 5-208a of the Connecticut General Statutes must be processed to the Office of the State Comptroller based on the following criteria:
Failure in making a proper determination may result in the assessment of penalties by the Internal Revenue Service to the State.
9.2 State Officers, Boards, Commission Deputies, and Employees
The salaries, compensation, and wages of all state officers, boards, commissions, deputies and employees (except in the legislative and judicial departments of the State Government) shall be determined by the Commissioner of Administrative Services, subject to the approval of the Secretary of the Office of Policy and Management. (Sec 4-40 CGS)
9.3 Licensing Boards and Commissions
Members of the examining and licensing boards and commissions acting under Title 20 shall be compensated for their services at rates established by the Commissioner of Administrative Services, subject to the provisions of Section 4-40 of the General Statutes. (Sec 4-40a CGS).
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