Understanding 1099 Reporting Guidelines and Systems
The article provides insights into the 1099 reporting process, including details about the Miscellaneous Income System (MINC), Form 1099 issuance, criteria for 1099 reporting, the Statement of Earnings System (EARN), and the Special Payroll Processing system (SPPS). It explains the responsibilities of taxpayers, the January deadlines for furnishing 1099s, and the types of transactions subject to reporting. The content highlights that taxpayers do not file 1099 forms with their taxes but are accountable for accurate tax reporting to the IRS based on criteria within these systems.
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1099 REPORTING 1099 REPORTING
1099 REPORTING 1099 REPORTINGa a The Miscellaneous Income System (MINC) is a USDA inquiry system that allows users to access history file records identifying individuals, partnerships, and corporations that are subject to 1099 reporting. Consolidation of transactions for all agencies by Tax Identification Number (TIN) occurs within MINC in January of the following year and 1099s are furnished to recipients on or before January 31stof each year. 1099s are issued if the consolidated amount is $600.00 or more for 1099 type/category per IRS guidelines. Unlike W-2 reporting, taxpayers do not file 1099 Forms with their taxes and taxpayers are ultimately responsible for accurate tax reporting to IRS. Criteria within the source system determines if a transaction will be selected for 1099 reporting. 2
1099 REPORTING 1099 REPORTING b b Form 1099, Statement For Recipients of (tax year) Miscellaneous (1099- MISC), Interest Income (1099-INT) or Taxable Grants (1099-G) is issued for transactions processed through EARN, SPPS, SmartPay (convenience check transactions only), and FMMI. 1099 s are furnished to recipients on or before January 31st of each year. 1099s are issued if the consolidated amount is $600.00 or more for 1099 type/category per IRS guidelines. Unlike W-2 reporting, taxpayers do not file 1099 Forms with their taxes and taxpayers are ultimately responsible for accurate tax reporting to IRS. Criteria within the source system determines if a transaction will be selected for 1099 reporting. 3
1099 1099 REPORTING REPORTINGc c The Statement of Earnings System (EARN) is a payroll system that records employee transactions associated with interest on back pay, settlements, and final salary payments for deceased employees. 1099 reportable EARN transactions are annually interfaced to the MINC system each January for the prior calendar year. An EARN report is provided for each of the 4-payroll databases, namely: CV05 (USDA employees) CV06 (Non-USDA employees) CV07 (Treasury employees) CV08 (Homeland Security) 4
1099 1099 REPORTING REPORTINGd d The Special Payroll Processing system (SPPS) is a payroll system that allows users to (1) add, change, query and update a quick payroll service request; (2) record indebtedness for a separated employee and process the final payment due to the employee; and (3) process and disburse payments to the estate of a deceased employee. 1099 reportable SPPS transactions are interfaced monthly to the MINC system. An SPPS report is provided for each of the 4-payroll databases, namely: CV05 (USDA employees) CV06 (Non-USDA employees) CV07 (Treasury employees) CV08 (Homeland Security) 5
1099 1099 REPORTING REPORTINGe e SmartPay purchase card convenience check transactions are processed in US Bank s AXIS system. Transactions that are connected to a non- employee TIN and a reportable Budget Object Code (BOC) are deemed tax reportable. On a quarterly basis, US Bank sends data files with 1099 reportable transactions that are interfaced to the MINC system. 6
1099 1099 REPORTING REPORTINGf f FMMI payment transactions are cross-referenced to various tables within FMMI and transactions must include the criteria listed below to be identified as 1099 reportable. FMMI: 1. Reportable Account Group 2. Reportable Industry Code 3. Reportable Document Type 4. Reportable Budget Object Code (BOC) (All 4 items must be reportable in order for transactions to be selected for transfer to MINC. If at least 1 item is not reportable, then the transaction is considered non-reportable and will not be sent to MINC.) 7
1099 1099 REPORTING REPORTINGg g 1099s are NOT issued for payment transactions associated with: Tax exempt or non-profit organizations Federal, state, local, government entities Educational institutions Foreign governments Vendors providing only goods, not services (SmartPay) Payments for telephones, freight, storage & utilities Employee wages, travel allowances, and expense reimbursements Per IRS regulations, as a federal entity, USDA is required to issue 1099 s to corporations 8
1099 1099 REPORTING REPORTINGh h Currently, only 3 types of 1099s are issued by USDA-OCFO-FMS: 1099-G - Certain Government Payments Taxable Grants) 1099-INT - Interest Income 1099-MISC - Miscellaneous Income Rents, Royalties, Other Income, Medical and Health Care, Non-employee Compensation The following forms are currently the responsibility of the Agency: 1099-C - Cancellation of Debt if not handled by NFC/Administrative Billings and Collection Branch (ABCO) 1042-S - Foreign Person s U.S. Source Income Subject to Withholding 9
1099 1099 REPORTING REPORTINGi i There are many reasons that a 1099 correction may be required, which include, but are not limited to: Incorrect Taxpayer Identification Number (TIN) Incorrect dollar amount Incorrect BOC Duplicate entries A 1099 was issued in error Processing of an original 1099 may be required if transactions were erroneously omitted from MINC. 10
1099 1099 REPORTING REPORTINGj j Requests for corrections can be submitted at any time. In general, corrections are processed based on inquiries received from agency representatives and vendors. For most actions, agencies must submit a 1099 Request form and all supporting details (SmartPay screens, W-9 forms, etc.) should be included as applicable. This authorizes PSB to make changes to dollar amounts, vendor names, etc. Vendors must submit W-9 forms when requesting a TIN and/or name change. Internal controls are in place to ensure corrective actions are performed completely and accurately. 11
1099 1099 REPORTING REPORTINGk k Corrections are handled differently depending on when the request for action is received: Prior to the January 1099 production run MINC is updated with the appropriate actions before the 1099 s are generated. This file is sent to the IRS by March 31st. After the January 1099 production run (Feb thru July) MINC is updated with the appropriate actions and a special run is initiated each week to generate 1099 s. This data is included in the Correction file due to the IRS by August 1st. After the January and August files have been sent to the IRS Manual 1099 s are prepared and the data is sent electronically to the IRS via our 1099 software and the IRS FIRE system. 12
1099 1099 REPORTING REPORTINGl l Agencies can ensure accuracy of 1099s by: Verifying that the budget object code used is valid for the transaction being processed (reportable vs non-reportable). Verifying that the correct FMMI vendor code is being used and confirming that the vendor name and TIN information is correct. Verifying TIN, legal name, and address when updating SmartPay convenience check transactions. SmartPay users should also utilize special TIN coding for government, non-profit and foreign entities. Processing FMMI standard voucher adjustments correctly for TIN or budget object code problems. Submitting the 1099 Request form with all required documentation when requesting a 1099 action. 13
1099 1099 REPORTING REPORTINGm m Agency assistance is requested when: A vendor reports a problem related to the 1099 issued or non-issuance of a 1099 and PSB is unable to verify via research & analysis. In these cases, a completed 1099 Request form is required as authorization for making the necessary updates. The 1099 Request form must be completed by the agency, not the vendor. A FMMI standard voucher is required to correct a Budget Object Code (BOC). A 1099 is returned for an invalid address. Multiple vendor names appear on SmartPay reports. 14
1099 1099 REPORTING REPORTINGn n Who to contact with 1099 questions: Email: 1-800 number: 1099HelpDesk@USDA.gov 1-800-421-0323, Select 1, then option 4 15
