Comptroller letterhead

To:      Legislative Leadership, Judicial Branch Administrators, Elected Officials, 
           Secretariats, Department Heads and Chief Fiscal Officers

From:  Thomas G. Shack III, Comptroller

Date:   December 18, 2015

Re:      Issuing and Filing IRS Forms 1099 For Tax Year 2015

Comptroller Memo FY#2016-14


Executive Summary

This memo confirms the actions that will occur for Federal Income Tax reporting to the Internal Revenue Service (IRS), Social Security Administration (SSA) and for State Income Tax reporting to the Department of Revenue (DOR) for all 1099 reportable payments made from MMARS.  This also serves as a reminder to departments that the Office of the Comptroller (CTR) is the Commonwealth’s Tax Clearinghouse.  

Please make sure the information in this memo is conveyed to relevant staff in your department.


The purpose of this memorandum is twofold:

  1. To remind departments that the Office of the Comptroller (CTR) is the official Commonwealth Clearinghouse for all matters involving tax identification number 04-6002284 related to Federal Income Tax reporting to the Internal Revenue Service (IRS), Social Security Administration (SSA) and State Income Tax reporting to the Department of Revenue (DOR) and to outside state agencies.
  2. To provide technical guidance to departments regarding their responsibilities pertaining to issuing and filing tax reporting information that is not captured at the detail level in the Massachusetts Management Accounting and Reporting System (MMARS).

Tax-form types, 1099G, 1099 MISC, 1099INT and/or 1099S, will be issued for each reportable entity if there is a reportable payment in MMARS. See number 2: “1099 Reportable Payees and Payments”, below for applicability of each form.

Processing reminders for departments:

  1. Returned Vendor checks in tax year 2015

The deadline for depositing returned vendor checks into the department sweep account is Thursday, December 31, 2015.  All timely deposits should have the appropriate transaction processed by Tuesday, January 5, 2016 to correctly report vendor payments on the Form 1099 for tax year 2015. After the check is deposited into the sweep account, departments should use the following chart to determine the appropriate scenario based on when the payment was issued and when it was subsequently returned to process the appropriate transaction: 

Payment Issued Tax Year

Payment Issued Fiscal Year

Payment Returned Fiscal Year

Appropriations

Transactions

MMARS Document Required

TY2015

FY2015

(JAN-JUN)

FY2015

(JAN-JUN)

All

The department must enter a two-line Expenditure Refund (ER) transaction to reduce the sweep account and put the funds back into the appropriation.  After the Expenditure Refund (ER) transaction is in final, an Encumbrance Correction (CEC or GAEC) transaction should be processed. 

ER

TY2015

FY2015

(JAN-JUN)

FY2016

(JUL-DEC)

1CS, 1CN, 1RS, 1RN, 1IN

For budgetary appropriations (1CS, 1CN, 1RS, 1RN, 1IN) the department must process the return as miscellaneous revenue (CR) in the current fiscal year and in order to issue the correct tax reporting, departments are required to input the correct vendor customer code and name in the Document Comments section on all CR transactions that reflect prior year refunds from a vendor.

CR

TY2015

FY2015

(JAN-JUN)

FY2016

(JUL-DEC)

Capital, Trust or Federal appropriations

For capital, trust or federal appropriations, the department must enter a two-line Expenditure Refund (ER) transaction to reduce the sweep account and put the funds back into the appropriation.

ER

TY2015

FY2016

(JUL-DEC)

FY2016

(JUL-DEC)

All

The department must enter a two-line Expenditure Refund (ER) transaction to reduce the sweep account and put the funds back into the appropriation.  After the Expenditure Refund (ER) transaction is in final, an Encumbrance Correction (CEC or GAEC) transaction should be processed. 

ER

If a returned check is not deposited into the sweep account or a transaction is not processed by the deadline, the vendor payment will be included in the Form 1099 for tax year 2015.  The department will then be responsible to submit a Form 1099 correction request.  Corrected Forms 1099 will need to be issued to the vendor(s).  If a corrected form needs to be issued, departments must take the following steps to ensure appropriate tax reporting of these payments:

    1. Submit a letter, signed by a department authorized signatory, to Donna Roux substantiating the correct reportable amount and reason for the correction.
    2. Attach a copy of the Form 1099 that will require a correction.  CTR will then issue the corrected Form 1099.

NOTE:  As soon as a Cash Receipt (CR) transaction is processed for a returned Tax Year 2015 vendor payment, the department should contact the Accounts Payable Bureau at CTR to correct the vendor’s taxable income information prior to the printing and issuance of the 1099.  Refunds processed through the CR transaction require manual adjustments by CTR to report the correct amount on the 1099 Form.  This is required because the CR transaction does not contain the VC number and does not update the vendor’s tax reporting information in MMARS. 

  1. 1099 Reportable Payees and Payments

Consistent with the IRS tax reporting requirement, the following criteria are used by the Office of the Comptroller to determine reportable payees and reportable payments.

FORM 1099 G will report a minimum amount of $600.00 or more.

 Reportable Payees:Reportable Payment:
 Individuals (non-employees), Sole Proprietorships, Partnerships, TrustsTaxable Grants

 

FORM 1099MISC will report a minimum combined amount of $600.00 or more for boxes 1, 3, 6, 7 and 14.

 Reportable Payees:Reportable Payment:

 

Individuals (non-employees), Sole Proprietorships, Partnerships, TrustsRents (office space and equipment rentals), Medical and Health    Care Payments, Non-Employee Compensation (independent contractors), other income (ex. teacher incentives)

 

CorporationsLegal Service, Medical & Health Care Payments

 

FORM 1099S will report any amount.

 Reportable Payees:Reportable Payment:
 Individuals (non-employees), Sole Proprietorships, Corporations, Partnerships, TrustsProceeds from real estate transactions, to report the sale or exchange of real estate

 

FORM 1099 INT will report a minimum amount of $10.00 or more.

 Reportable Payees:Reportable Payment:
 Individuals (non-employees), Sole Proprietorships, Partnerships, TrustsInterest Payments

The table below provides the cut off dates for the transactions that impact 1099 reportable amounts for Forms 1099 G, 1099 MISC, 1099 INT and 1099S:

MMARS Transaction Code

From Date

To Date

ER

1/7/2015

1/5/2016

CR

1/7/2015

1/5/2016

EX

1/7/2015

1/5/2016

EA

1/7/2015

1/5/2016

AD

12/30/2014

12/28/2015

EFT

12/30/2014

12/28/2015

NT1

12/30/2014

12/28/2015

IT

12/30/2014

12/28/2015

WR

12/31/2014

12/29/2015

Reportable object codes are identified in in the Commonwealth’s Expenditure Classification Handbook and in the MMARS Object Code table search by page code OBJ, in the “General Options” section in the “1099 Income Code and Income Type” field.

Additional Guidelines:

The balance of this memo does not pertain to your department if you process all payments through MMARS using vendor-specific VCUST codes on all payment request transactions and your department pays all employees using the HR/CMS or UMS payroll systems.

  1. Payee Tax Identification Number

All tax documents must include the payee’s TIN.  The Form W-9,”Commonwealth of Massachusetts - Request for Verification of Taxation Reporting Information,” is the mandated form each vendor must complete and submit to the department for registration in MMARS.  IRS regulations require backup withholding of 28% at the time a payment is issued for any payments made for which the payer has no TIN on file or has been notified through the B-Notice process that an incorrect TIN is on file. 

  1. Tax Form Filing 

The Office of the Comptroller is the designated department for the generation and distribution of all Forms W-2 and 1099 when the Commonwealth of Massachusetts tax identification number (TIN) 04-6002284 is used.  A department may receive CTR approval to file their Form 1099 or Form W-2 payments to the IRS and SSA electronically.  Therefore whenever a department transmits an original or a corrected W-2 or 1099 transmission file (electronic or paper), using the Commonwealth’s tax identification number, they must send a summary report to CTR using the CTR provided template (available from the Tax Clearinghouse).  These reports are used to reconcile all tax year activity by all departments with the IRS, SSA or DOR.  The summary report shall include the total number of records filed by form type, box number and amount.  The department should send this report to the Commonwealth Tax Clearinghouse (Attention:  Jim Box).  Departments should do this only after the IRS, SSA or DOR acknowledges receipt of their electronic file.  The file name assigned by the IRS, SSA or DOR and the transmission date must also be included in the Summary Report.

    1. All tax forms or letters referencing the Commonwealth’s TIN must be issued in the name of “Commonwealth of Massachusetts”.  When a department files forms 1099 electronically, it is important to enter the MMARS department code on the Payee “B” record in the Payer’s Office Code at field positions 41-44.  This will allow our office to follow up with the appropriate department if there are any IRS questions.
    2. When a department provides tax forms to recipients using paper (10 forms or less), CTR must receive a copy of these paper forms by Tuesday, February 2, 2016.  The data from these paper forms will be incorporated into the appropriate CTR transmission file(s).
    3. Those departments using campus or other non-state appropriated funds and making tax reportable payments are required to use their own TIN and not the Commonwealth TIN (04-6002284).  Departments should file these tax forms (i.e. 1099, 1042-S, 1098T) directly with the IRS, SSA and DOR, as appropriate, and not through the Commonwealth’s Tax Clearinghouse at CTR.
    4. When a department makes a reportable payment to a reportable vendor and does not use a MMARS vendor-specific vendor code, (ex.  Payments made on a summary transaction GX9), the department must issue the appropriate income tax form(s) to the payee, with copies sent to the Comptroller’s Tax Clearinghouse for filing with the IRS.  

NOTE:  Periodically, CTR receives requests for taxpayer information, most often from the IRS.  Departments that receive CTR approval to file their forms independently send CTR a summary report.  When the request requires more information, CTR will need the appropriate department(s) to supply the detail in a timely manner to avoid penalties for noncompliance.  In these instances, CTR will create a secure communication link to protect the Personally Identifiable Information (PII).

  1. Combined Fed/State Filing Program 

In accordance with IRS Publication 1220, the Commonwealth of Massachusetts has been participating in the Combined Federal/State Filing Program.  Participation in the Combined Federal/State Filing Program eliminates the requirement to send certain types of 1099’s to DOR.

Ten types of Form 1099 may be filed under the Combined Federal/State Filing Program.  The Combined Federal/State Filing (CF/SF) Program was established to simplify information returns for the:1099B, 1099DIV, 1099G, 1099INT, 1099K, 1099MISC, 1099OID, 1099PATR, 1099R and 5498.  The Commonwealth currently does not have business requiring filings for 1099DIV, 1099OID, 1099PATRand 5498.  Forms 1099S must be reported to the IRS but need not be filed with DOR.  To request approval to participate, an electronic test file coded for this program must be submitted to IRS/IRB by Friday, February 19, 2016.  While a test file is only required the first year when a filer applies to participate in the Program, this office sends a test file every year. 

  1. Contacts and References

Any questions concerning the contents of this memorandum should be directed to Donna Roux, Office of the Comptroller, (617) 973-2314.  General filing information for all form types can be found in IRS Publication 1220. http://www.irs.gov/pub/irs-pdf/p1220.pdf.

Cc:  
MMARS Liaisons
Payroll Directors
General Counsels
Internal Distribution