1099-misc, 1099-nec, 1099-g irs reporting · 2021. 1. 7. · 12/15/2020 1 1099-misc, 1099-nec,...
TRANSCRIPT
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1099-MISC, 1099-NEC, 1099-G IRS Reporting
DOA – Daily Operations SectionStatewide Accounting Bureau
2020
Objectives
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Deadlines and dates
Important 1099-MISC/NEC information
Goods vs. services
Verifying the W-9
Reportable vs. non-reportable payments
Reporting classification
1099-G
Marking voucher for reporting
Verifying reporting using query results
Manual adjustments using adjust withholding screen
TIN matching & CP2100
Documentation
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1099-MISC/NEC
Deadlines and Dates
• January 11th 2021 Last day for payment cancellations/reissues
including ACH returns• January 13th 2021 Interfacing agencies submit 1099 file Last day for agencies to make 1099
adjustments using the adjust withholding function
• January 25th 2021 1099-MISC/NEC file sent to IRS
• January 29th 2021 1099-MISC/NEC forms mailed to payees
• February 1st 2021 Cancellations/reissues and ACH returns to
resume• March 1st 2021 Adjust withholding screen re-opened
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Important 1099 Information
State of Montana uses single supplier system
All payments made to a supplier will be combined
to create the total reported on the 1099-MISC/NEC
$600 combined minimum ($10 for royalties)
If your agency pays John Doe $10 for services and
another agency pays John Doe $591 for services, John
Doe gets a 1099-MISC/NEC
It is important to mark all services payments for
withholding as it is impossible to know if they have completed work for
other State agencies
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1099-MISC/NEC Reportable vs. Non-Reportable
Reportable Non-ReportableServices GovernmentsConsultants Tax-exempt entitiesExpert witness testimony Corporations – unless for medical, legal
services, or fish purchasesLegal services Purchases of goodsMedical services Insurance premiumsNon-employee compensation Legal damages – personal physical injury,
medical expense reimbursement, property damage claims
Rent Storage facilities, rent paid to a real-estate agent
Training
These are examples – if you have any doubt, mark the payment for withholding 5
Good vs. Service
The IRS instructs that, when making a payment for a combination of goods and services (or parts and labor), the
payer should report the entire amount of the payments if supplying the parts or materials was incidental
to providing the service
For example, report the total payments to an auto repair
shop under a repair contract
When invoiced for labor and parts, if furnishing parts was incidental to repairing the auto
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Good vs. Service
Report the full amount if furnishing the parts is incidental to providing
the service
Examples of incidental to providing the
service
Repairing the office printer, including copier
parts
Providing maintenance for the elevators,
including replacement control parts
Building a partition wall in the second-floor
conference room, includes materials for conference
room partition wall
In all three examples, the amount reported is the total bottom-line invoice/payment amount because you contracted for the service and the goods (parts, materials) were necessary to perform the service
The IRS Instructions for Form 1099-MISC/NEC provide
further explanation of when the full amount is reportable
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Good vs. Service• A supplier sells you equipment, and itemized
further down on the bill of sale is a charge for “operator training on-site”
• In this case, you should separate the amount for training services and report that dollar amount in Box 1 of Form 1099-NEC
Example of payment not incidental to providing the
service
The IRS Instructions for Form 1099-MISC/NEC provide further explanation of when the full amount is reportable
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Good vs. Service
Your organization purchases a dozen paintings from an art show• Treated as goods purchased• Not reportable
1Your organization hires an artist to create a dozen paintings for your offices•Treated as a payment for a service•Artwork is created specifically for you
according to your specifications•Reportable
•Form 1099-NEC Box 1
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Verifying a W-9
Instructions for the Requester of Form W-9
Form W-9 with Instructions for Supplier
Only accept current W-9 forms provided by the IRS
Make sure the supplier has provided either an SSN or EIN, not both
The supplier must choose one box on line 3
The address provided on the W-9 should always be where tax information (1099-MISC/NEC) is sent to
Sign and date under penalty of perjury
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Form W-9
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Form 1099-MISC
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Form 1099-NEC
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Reporting ClassificationsBox Reportable Non-ReportableMISC-1 Land, buildings, offices, conference rooms, equipment, rental
assistance payments to property owners, surface royaltiesCapital lease payments for interest reported on 1099-INT, payments for storage
MISC-2 Intellectual property
MISC-3 Services performed in course of business: punitive damages, non-physical injury, discrimination/defamation, prizes/awards, honorariums, medical research
Personal injury damages, physical sickness, property claims
MISC-4 Any amount of money withheld from payment during the year*
MISC-6 Doctors, dentists, counselors, assisted living workers, clinics, hospitals, nursing homes, medical billing
Health insurance premiums, prescription drugs, medical goods separate from services, scientific research without illness treatment
MISC-10 Proceeds paid to attorneys, fees, payment jointly payable to attorney and client
Personal injury damages, physical sickness, property claims
NEC-1 Bonuses, commissions, professional services, expert witness fees, legal fees to attorneys, purchases of fish for resale, repairs
Employee wages
14*The State of Montana rarely, if ever, uses this box
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Reporting Classifications1099-MISC Box 1 – Rental Payments
• Examples include land, buildings, offices, conference rooms, equipment, rental assistance payments to property owners
• Operating lease – considered as “rent” by IRS the rental is generally returned to lessor at end of lease
• Capital lease – considered as “purchase of goods” by IRS the rental is generally owned by lessee at the end of lease
• If capital lease payments include interest, the interest portion of the payment should be reported on form 1099-INT if more than $600 paid to a reportable entity
• Easements – more than 30 years is reported on 1099-S and less than 30 years on 1099-MISC
• MOM Policy 335 – Capital Assets defines operating vs. capital lease
1099-MISC issued if total is greater than $600
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Reporting Classifications
1099-MISC Box 2 – Gross Royalty Payments• Examples include copyrighted items: photographs,
novels/textbooks, performing a symphony or piece of music, or the use of music in a commercial endeavor
• Generally, payments for use of intellectual property
Royalties not recorded in Box 2
• Surface royalties (i.e. payments for the right to strip mine property owned by another) are reported in Box 1 as rent
• Oil or gas payments for a working interest are reported in Box 1 of the 1099-NEC as non-employee compensation
• Timber royalties made under a pay-as-cut contract are reported on the form 1099-S
• Proceeds from real estate transactions
1099-MISC issued if total is greater than $10
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Reporting Classifications1099-MISC Box 3 – Other Income
• Items not specifically reportable in other boxes• Reportable legal damages; punitive, non-physical injury,
discrimination/defamation• Fair market value of awards/prizes not for services performed• Honorariums
Other income not recorded in Box 3• Legal damages received due to personal physical injury or physical
sickness, damages that do not exceed the amount paid for medical care for emotional distress
• Property claims
1099-MISC issued if total is greater than $600 17
Reporting Classifications
1099-MISC Box 4 –Backup Withholding
Any amount of federal income tax that has been withheld from
payments during the year
Very rare due to state’s internal
processes
1099-MISC issued if total is greater than $018
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Reporting Classifications1099-MISC Box 6 –
Medical or Health Care Services
• Doctors/dentists• Counselors• Home health care workers• Clinics/hospitals/nursing
homes• Medical billing services• Corporate exemptions does
not apply
Medical or health care services not recorded in
Box 6
• Health insurance premiums
• Prescription drugs• Medical goods that are
separate from services• For “pure” scientific
research without providing any illness treatment
1099-MISC issued if total is greater than $600
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Reporting Classifications
1099-MISC Box 10 –Attorney Gross Proceeds•No corporate exemption•Includes amount paid for fees,
if cannot be separated from settlement
•If payment is jointly payable to attorney and client, report full amount to attorney in Box 10
1Reportable• Defamation• Discrimination• Emotional injuries not
arising from physical injuries
2Non-reportable• Payments for damages
received due to personal physical injury or physical sickness
• Property claims
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1099-MISC issued if total is greater than $60020
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1099-MISC Box 3 and Box 10
If attorney’s/law firm’s name is on the check,
report the total amount of the check in Box 10
If the legal damages payment to the claimant is
taxable, you must also report this amount to the
claimant in Box 3 – even if the claimant’s name is not on the check (because of
the assignment of income doctrine)
This means you may be issuing two (or more)
Form 1099-MISCs for a single check
For example, one to the attorney, reporting the amount in Box 10, and
one to the claimant, reporting the amount
in Box 3
Must manually add the second total in the
Adjust Withholding screen in SABHRS
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Legal Damages and Attorney Reporting
1099-NEC Box 1 – Did the attorney/law firm
perform services for your company/organization?
• If yes, report the amount in box 1 of the 1099-NEC
• No corporate exemption
1099-MISC Box 10 – Did the attorney/lawfirm
perform services for your company/organization?
• If no, and the attorney’s name is on the check, report the gross amount of the check in Box 10 of 1099-MISC
• No corporate exemption
1099-MISC Box 3 – Legal damages to claimant,
report if taxable
• Punitive damages are always taxable and reportable
• Reported in Box 3 of the 1099-MISC
At times, more than one 1099 is required
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Reporting Classifications
1099-NEC Box 1 – Nonemployee Compensation• Payments for services to nonemployees• Standard payee exemptions apply (Corps, tax-exempts,
govt. payees), except no corporate exemption for legal services payments
Examples• Attorneys/law firms providing legal services to your
organization (no corporate exemption)• Office cleaning• Plant care• Landscaping• Independent contractors• Consultants• Training• Printers and publishers• Transportation• Security services• Translators and interpreters• Auto repair
1099-NEC issued if total is greater than $600 23
1099-G IRS Reporting
• Used to report taxable grants in Box 6
• Certain CARES Act grant payments are subject to reporting
• SABHRS will have option to select 1099-G, Box 6 reporting in 2021
• Process for 2020 is manual and a combined effort of SAB, SABHRS, and agencies Reporting is limited to certain
grant payments made with CARES Act funds
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1099-G25
Recording Reportable Payments for a Supplier
• On the voucher at the time of payment (recommended)• Through the adjust withholding screen
• Main Menu>Suppliers>1099/Global Withholding>Maintain>Adjust Withholding
There are two ways to record a reportable payment for suppliers
• Main Menu>Reporting Tools>Query>Query Viewer
Queries for 1099 Information
• Run to Excel and sort by highlighting the column headings and pressing “alt,D,F,F”, or use a pivot table to refine your results
• Identify suppliers not marked and determine if they should have been• Make the required adjustments using the adjust withholding screen in SABHRS
Query name – MTAP_PAYMENT_DETAIL_REPORT
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Recording a Reportable Payment in a Voucher
When creating a voucher, find the
withholding link on the Invoice
Information tab
Click the blue link for withholding
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Recording a Reportable Payment in a Voucher
After clicking the withholding link, the withholding information will show
01Check the with Withholding Applicable box
02Click the magnifying glass to show the withholding options and select the correct one
03Return to the voucher by clicking Back to Invoice
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Partial Reporting
•This will allow you to select reporting information for each line
A voucher that needs partial reporting can have multiple invoice lines added
•One for the amount not subject to reporting•One for the amount to be reported on the corresponding 1099 form
Create two lines
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Partial Reporting
After creating two invoice lines in the voucher, click withholding link in the top right
1Select View All
2Once withholding selections are made, click Back to Invoice
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Verifying Reporting InformationThe query
MTAP_PAYMENT_DETAIL_REPORT will show all payments
made by the business unit entered and between the date
range selected
We suggest you run this query regardless of how
the suppliers get marked for 1099 reporting
This will reduce corrections and help
realize the volume of your agency’s 1099-MISC/NEC
reporting
Determining how often to run the query will likely be dictated by the volume of
payments made
Sort query results by supplier name to make it easy to see if all payments
made to a particular supplier have been marked
This will quickly determine if all but one or a few payments have been
marked for reporting
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Verifying Reporting Information
In the query results shown, you will notice the
variation in the withholding code
information
If Jim’s Tree Trimming was paid for the same
type of services for each payment, the withholding
information should be consistent
If you see a supplier with a business name that
clearly indicates a service provided, but is not
marked, you may want to investigate further
Business Unit
Voucher ID Name Remit Vndr
Vendor SetID
VchrLine Amt Line Descr
Withhold Code Amount
Payment Reference
Payment Date Reconciled
PymntSelect Status Stat/Actn
Bank Account
6101R 00001234 Jim's Tree Trimming 00001212 STATE 500 1 07 500CHK# 5/5/2016 5/8/2016 PAID CHK
6101R 00001235 Jim's Tree Trimming 00001212 STATE 100 1 07 100CHK# 5/30/2016 6/2/2016 PAID CHK
6101R 00001236 Jim's Tree Trimming 00001212 STATE 200 1 07 200CHK# 6/12/2016 6/16/2016 PAID CHK
6101R 00001237 Jim's Tree Trimming 00001212 STATE 75 1 07 75CHK# 6/30/2016 7/3/2016 PAID CHK
6101R 00001238 Jim's Tree Trimming 00001212 STATE 300 1 03 300CHK# 7/1/2016 7/5/2016 PAID CHK
6101R 00001239 Jim's Tree Trimming 00001212 STATE 25 1 25CHK# 7/30/2016 8/5/2016 PAID CHK
6101R 00001240 Jim's Tree Trimming 00001212 STATE 125 1 07 125CHK# 8/5/2016 8/15/2016 PAID CHK32
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Manually Adjust Supplier Information
Main Menu>Suppliers>1099/Global Withholding>Maintain>Adjust Withholding
Enter the Supplier ID and click search
If more than one location is shown, check all to make sure you are not missing information
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Manually Adjust Supplier Information
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Click the magnifying
glass next to the Type field
Select the appropriate
1099 form for your search
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Manually Adjust Supplier InformationEnter a date range and click search
Select View All to see the results, as it only populates the first two lines
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Manually Adjust Supplier InformationAdding an amount
•If there are no entries yet, enter your information in the original line•If there are existing entries, select the “+” on the right side of the last line in the series
•This will create a blank line to make your entry•Never use the “-” option
•Include the business unit that issued the payment, and it will auto-populate the full business unit which may need to be adjusted to match the voucher information
•Select the correct withholding classification in the “Class” column•Enter the payment amount•Select the original payment date•Include relevant information in the description regarding the original payment; i.e. reference ID,
the reason for the addition, initials, etc.
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Manually Adjust Supplier Information
Wrong amount
Wrong reporting
classificationWrong
business unit
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1. Date range must be entered; click search to view existing information2. Select “View All” to see all entries and expand window to see all fields including the description3. Select the “+” on the line you wish to change4. Do not use the “-” button as historical data must be preserved5. Mirror the information from the previous line to reverse the original entry
• Description should contain original reference ID (warrant number), the reason for the change, and your initials
6. Create a third line with the correct information• Description should contain original reference ID (warrant number), the reason for the change,
and your initials7. If you wish to only remove an amount, follow the first four steps only
Manually Adjust Supplier Information
• Use the “+” on the line you need to correct to create an additional entry line
• Completely back off the original entry for a net zero• Enter a third line with the correct information
Example – wrong amount
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Manually Adjust Supplier Information
• Use the “+” on the line you need to correct to create an additional entry line
• Completely back off the original entry for a net zero• Enter a third line with the correct reporting classification
Example – wrong reporting classification
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Manually Adjust Supplier Information
• Use the “+” on the line you need to correct to create an additional entry line
• Completely back off the original entry for net zero• Enter a third line with the correct business unit
Example – wrong business unit
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Manually Adjust Supplier Information
Wrong TIN –reporting
information has been recorded for
the wrong supplier
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1. Reverse the incorrect payment information in the adjust withholding screen
2. If there are multiple lines, you can sum them and make one total entry to back off the entire amount
3. Add comments; the original supplier account should reference the Supplier ID the amount was moved to• The corrected adjustment should
reference the Supplier ID that the total was originally reported under
4. Add the amount to the correct supplier• It’s best to break each of the entries
out by payment (individual lines) to preserve the information trail
• Use your best judgement; this will help you later if an issue arises
Correction/Duplicate Request
Used by agencies to request a duplicate copy of a 1099
or correction of a prior year after the deadline
Reporting deadline for calendar year 2020 is
January 13th, 2021
Navigate to ServiceNowand complete the 1099 Correction/Duplicate
request form
Upon completion, corrected form will be
submitted to the IRS and mailed to the payee
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Correction/Duplicate RequestImportant to verify information before submitting request
•Main Menu>Accounts Payable>Review Accounts Payable Info>Payments>MT Payment Inquiry• Remit SetID = STATE• Remit Supplier = Supplier ID• Payment Date = between 01/01/2020-12/31/2020 (or the year you are requesting the
adjustment for)• Click Search• Compare the results to the information in the adjust withholding screen
•Main Menu>Suppliers>1099/Global Withholding>Maintain>Adjust Withholding• The simplest way to sum a larger number of payments is to copy and paste into Excel
Navigate to MT Payment Inquiry in SABHRS
43Failure to report 1099-MISC/NEC to IRS = $280 penalty per 1099
Quarterly TIN Matching
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New suppliers’ name and TIN information submitted to IRS to verify accuracy
Mismatches are communicated with the paying agencies
Agencies work with suppliers to get updated W-9, which is then sent to DOS
Supplier is TIN matched again with new W-9 information
Mismatches are inactivated in SABHRS until a positive TIN match can be completed
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CP2100 & B-Notices
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IRS SENDS CP2100 REPORT IN THE
FALL AND SOMETIMES IN
THE SPRING
LISTS TIN MISMATCHES
FROM PREVIOUS YEAR’S 1099
FILING
DOS IS REQUIRED TO SEND B-NOTICES TO
SUPPLIERS TO GATHER UPDATED
W-9
SUPPLIERS HAVE 30 BUSINESS DAYS TO RESPOND TO B-
NOTICES
NO RESPONSE RESULTS IN
INACTIVATION OF SUPPLIER IN
SABHRS
B-Notice Example
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Review Questions
When do all 1099-MISC forms get uploaded to the IRS?
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Review Questions
In the following example, which amounts would be reportable?
An interior design company constructs several cubicles for your office area. Do you report the amount of the service/labor, the amount of the materials and
parts, or both?
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Review Questions
Your office purchases several photographs to hang around the building. Reportable or not?
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Review QuestionsAre the following items reportable or non-
reportable?• Consultants
• Medical services• Governments
• Non-employee compensation• Storage facilities
• Insurance premiums50
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Review Questions
Which SABHRS screen is used to make corrections to reportable amounts, business units, and reporting
classifications?
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Review Questions
What is the penalty for failure to report a 1099-MISC/NEC to the IRS?
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Review Questions
What is the only box that will be used for 1099-G reporting?
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Thank you for attending!
Direct additional questions to ServiceNow or call 406-444-3092
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