DFA Office of Accounting 1099 Training 1

DFA Office of Accounting 1099 Training 1

1099 Responsibilities DFA Office of Accounting Each Agency is responsible for the accuracy of its own reportable vendor payments DFA Office of Accounting is responsible for consolidating Agency reported vendor payment data and mailing, correcting, and filing 1099s with the IRS TSS Office of State Procurement is responsible for Vendor maintenance & W9 verification. 2

W9 Decision Making Process Vendor Needed No Use One-Time Vendor Yes Display Vendor AASIS Vendor Exists No Yes Vendor Master Tax Code Correct DFA Office of Accounting W9 Needed from Vendor Send W9 to OSP No OSP Vendor Update Yes Continue Creating Invoice 3

Payment Tax Code Decision Making Process Receive Invoice From Vendor Display Vendor Payment 1099 Reportable No Payment Tax Code 00 Yes Vendor 1099 Reportable No Payment Tax Code 00 Yes Master Tax Code Correct Yes DFA Office of Accounting Create Payment Invoice No Vendor Change Request to OSP Create Payment Invoice 4

Who is 1099 Reportable DFA Office of Accounting Individuals Sole Proprietors Partnerships Professional Associations Corporations for Medical Payment and Attorney Fees ONLY (Tax Codes 06 & 10) 5

Who is NOT 1099 Reportable (00) DFA Office of Accounting Corporations EXCEPT for Medical Payment and Attorney Fees ONLY (Tax Codes 06 & 10) Government Entities School Districts Colleges & Universities Foreign Vendors Non-Profit Organizations Employees (W9) One-time Vendors 6

What is 1099 Reportable DFA Office of Accounting Services Services commingled with goods Medical Payments Prizes & Awards Lawsuit Settlements Attorney Fees Rents and Leases of property paid directly to the landowner 7

1099 Nonemployee Compensation (NEC) Office ofDFA Accounting 1099 NEC - Box 1 – Nonemployee compensation Payment Tax Code 07 Architect Fees Attorney Fees Board & Commission Member Stipends Cleaning Services Consultants Daycare Lawn Service Maintenance & Repair where the part is incidental https://www.irs.gov/forms-pubs/about-form-1099-nec 8

1099 Miscellaneous (MISC) DFA Office of Accounting 1099 MISC - Block 1 – Rents Payment Tax Code 01 Includes rents and leases of property paid directly to the landowner https://www.irs.gov/forms-pubs/about-form-1099-misc 9

1099 Miscellaneous (MISC) DFA Office of Accounting 1099 MISC - Block 3 – Other Income Payment Tax Code 03 Prizes & Awards Lawsuits paid to anyone OTHER than Attorneys 10

1099 Miscellaneous (MISC) DFA Office of Accounting 1099 MISC - Block 6 – Medical Payments Payment Tax Code 06 Medical & Health Care services Corporations are NOT EXEMPT Pharmacies should NOT be included (You are buying goods, not services) 11

1099 Miscellaneous (MISC) DFA Office of Accounting 1099 MISC - Block 10 – Gross proceeds paid to an attorney Payment Tax Code 10 An attorney receives monies on behalf of a client, usually from a lawsuit settlement or through a Benefit Vendor Payment in processing Payroll It is unknown how much the client will receive and how much the attorney will retain 12

What is NOT 1099 Reportable DFA Office of Accounting Goods or Goods/Services where the Services are incidental to the purchase Reimbursement of Expenses Rents and Leases paid to another other that the landowner Loans and Advances that are required to be repaid 13

General 1099 Information DFA Office of Accounting The IRS regulations require the State of Arkansas to report the aforementioned payments if the consolidated amount by Tax ID is 600 or greater The State does not mail or report 1099s under this amount 14

General 1099 Information DFA Office of Accounting The Office of Accounting is required to issue 1099s for the State Agencies that use the Statewide Tax ID 71-0847443 for its Vendor payments The reportable vendors/payments made must be rolled up Statewide by the recipient vendor’s tax id or social security number. There are vendors that are issued both EXEMPT (00) and Non-Exempt payments (06 & 10) 15

Fines & Penalties DFA Office of Accounting The State of Arkansas is no longer exempt from IRS fines & penalties IRS fines & penalties resulting from Agency errors will be charged to that Agency 16