|To:||Legislative Leadership, Judicial Branch Administrators, Elected Officials, Secretariats, Department Heads and Chief Fiscal Officers|
|From:||Martin J. Benison, Comptroller|
|Date:||December 21, 2010|
|Re:||Issuing and Filing IRS Forms 1099 for Tax Year 2010||Comptroller Memo|
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:
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.
Processing reminders for departments:
* When a CR is processed for a returned vendor payment, the department will need to contact CTR in order to correct the 1099 issued from MMARS. CRs currently do not update the 1099 vendor information in MMARS, since vendor code is not captured on the CR transaction. CTR is currently working on a solution to address this issue for tax year 2011.
To be consistent in our replies to vendors' questions, we are providing a table with the selection dates for the transactions that comprise the 1099 tax reportable amounts. Reportable transactions and selection dates for Forms 1099 G, 1099 MISC, 1099 INT and 1099S are as follows:
The balance of this memo does not pertain to your department if you process all payments through MMARS and use vendor-specific VCUST codes on all payment request transactions and your department pays all employees using HR/CMS or e-MPAC.
I. Forms 1099
When a department makes a reportable payment to a reportable payee and does not use a MMARS vendor-specific vendor code, the department is responsible for issuing the appropriate federal income tax form directly to the payee, with copies sent to the Comptroller's Tax Clearinghouse for filing to the IRS. Situations which may require a department to issue tax-reporting information for payments to non-employees on Form 1099, include:
For those departments issuing 10 or fewer tax documents in paper form, CTR must receive these paper forms by February 2, 2011. For those departments issuing more than 10 tax documents, filing must be via electronic file. CTR must receive the electronic file by February 18, 2011.
II. Commonwealth of Massachusetts Tax Identification Number (TIN)
The Tax Identification Number of the Commonwealth (04-6002284) must always be associated with the name "Commonwealth of Massachusetts". Certain departments have incorrectly changed the name of the Commonwealth by inserting their name when reporting taxes. This has caused a mismatch with the IRS. All tax forms or letters referencing the Commonwealth's TIN must be copied to the Comptroller when issued. Fax copies are accepted, please use 617.973.2500.
III. Payee Tax Identification Number
All tax documents must include the payee TIN. No tax reportable payment should be made without a Form W-9 confirming that the TIN is on file. (Form W-9 - Commonwealth of Massachusetts - Request for Verification of Taxation Reporting Information). IRS regulations require backup withholding of 28%, at the time a payment is issued, for any tax reportable payment 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.
IV. Tax Form Filing
The IRS recognizes the Office of the Comptroller as the clearinghouse for all W-2 and 1099 reporting when the Commonwealth of Massachusetts tax identification number (TIN) 04-6002284 is used. Departments issuing Forms W-2 and/or 1099 must file directly with CTR who will in turn file with the IRS, DOR and SSA as appropriate. CTR, on behalf of the Commonwealth, is required to file information returns electronically (FIRE). Departments issuing Forms W-2 and/or 1099 must submit an electronic file to CTR. CTR will convert to electronic file any paper returns to avoid the IRS penalties for each return not submitted electronically.
In accordance with IRS Publication 1220 for Tax Year 2010 (Specification for Filing Forms 1098, 1099, 5498, and W-2G), the Commonwealth of Massachusetts is participating in the Combined Federal/State Filing Program. Participation in the Combined Federal/State Filing Program eliminates the requirement to file certain types of Form 1099 to DOR.
Eight types of Form 1099 may be filed under the Combined Federal/State Filing Program. They are: 1099MISC, 1099INT, 1099R, 1099G, 5498, 1099DIV, 1099OID, 1099PATR.
Forms 1099B, which are not part of the Combined Federal/State Filing Program, will still need to be filed electronically to DOR. Forms 1099S must be reported to the IRS but need not be filed with DOR.
V. Reportable Payees and Payments
The following are the criteria used by the Office of the Comptroller for determining reportable payees and reportable payments.
FORM 1099 G
FORM 1099 INT
Reportable object codes are identified in MMARS in the Object Code table, searchable by page code OBJ, in the section labeled "General Options" in the fields, "1099 Income Code and Income Type" and in the Commonwealth's Expenditure Classification Handbook.
VI. Form 1042-S
Before making a payment to a foreign person, the Commonwealth must obtain the appropriate IRS Form W-8 from the IRS series: W-8 BEN, W-8 ECI, W-8-EXP and W8-IMY. Departments may also accept W-7 Application for IRS Individual Taxpayer Identification Number (ITIN) for individuals who are required for U.S tax purposes to have U.S taxpayer ID number but who do not have and are not eligible to get a social security number (SSN). For more information please refer to the 2010 Instructions for Form W-7 posted on the IRS web page.
Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of:
If applicable, a foreign person can claim a reduced rate of an exemption from withholding as a resident of a foreign country with which the United States has an income treaty.
If a department payer fails to obtain a Form W-8 and fails to withhold when withholding is required, the payer may be assessed the tax that should have been withheld at 30% as well as interest and penalties for lack of compliance.
Generally there are two ways to determine when a payment is not subject to withholding when paid to a foreign person.
For year end tax reporting complete Form 1042-S to report income subject to withholding paid to nonresident aliens, foreign partnerships, foreign corporations, or nonresident alien or foreign fiduciaries of estates or trusts.
VII. Contacts and References
Any questions concerning the contents of this memorandum should be directed to Michael Weld Eyob, Office of the Comptroller, (617) 973-2310. General filing information for all form types can be found in the "2010 General Instructions For Forms 1099, 1098, 5498 and W-2G" on pages Gen 16, Gen, 17 and Gen 18 which is referenced in IRS Publication 1220. http://www.irs.gov/pub/irs-pdf/p1220.pdf.