M E M O R A N D U M

 

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

From: Martin J. Benison, Comptroller

Date:  December 23, 2013

Re:     Issuing and Filing IRS Forms 1099 For Tax Year 2013 

Comptroller Memo FY#2014-16


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:

  • 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.
  • 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 Section V for applicability of each form.

Processing reminders for departments:

  1. Returned Vendor checks in tax year 2013

The deadline for depositing returned vendor checks into the department sweep account is Friday, December 27, 2013.  All timely deposits should have the appropriate Expenditure Refund (ER) transaction processed by Thursday, January 2, 2014 to correctly report vendor payments on the Form 1099 for tax year 2013.  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 2014.  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).  CTR will work with your department to ensure appropriate tax reporting of these payments.

    1. Tax Year 2013 FY 2014 check returns - After the check is deposited into the sweep account, 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, a Contract Back Out (CEC or GAEC) transaction needs to be processed.  
    2. Tax Year 2013 FY 2013 check returns- After the check is deposited into the sweep account, the department must determine the account type.
      • For budgetary appropriations (1CS, 1CN, 1RS, 1RN, 1IN), process a two-line Cash Receipt (CR) transaction to reduce the sweep account and put the funds back into the appropriation.
      • 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.

NOTE:   As soon as a Cash Receipt (CR) transaction is processed for a returned vendor payment, the department should contact CTR, see Step 2 below, to correct the vendor’s taxable income information prior to the printing and issuance of the 1099.  Refunds processed through the Cash Receipt (CR) transaction require manual adjustments by CTR to report the correct amount on the 1099 Form.  This is required because the Cash Receipt (CR) transaction does not contain the VC number and does not update the vendor’s tax reporting information in MMARS.   

  1. If  a Form 1099 issued from MMARS requires a correction, the department must take the following steps:
    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.
  1. For Tax Year 2013, CTR will issue Forms 1099 as indicated below:
    1. 1099 G will report a minimum amount of $600.00
    2. 1099 MISC will report a minimum combined amount of $600.00 or more for boxes 1, 3, 6, 7 and 14.
    3. 1099 INT will report a minimum amount of $10.00 or more.
    4. 1099S will report any amount.

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

01/04/2013

01/03/2014

CR

01/04/2013

01/03/2014

EX

01/04/2013

01/03/2014

DC

01/04/2013

01/03/2014

EA

01/04/2013

01/03/2014

AD

12/27/2012

12/26/2013

EFT

12/27/2012

12/26/2013

IT

12/27/2012

12/26/2013

WR

12/28/2012

12/27/2013

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 HR/CMS or e-MPAC.

I.     Forms 1099

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.  

For those departments issuing 10 or fewer tax documents in paper form, CTR must receive these paper forms by Monday, February 3, 2014.  For those departments issuing more than 10 tax documents, filing must be electronic. CTR must receive the electronic file by Friday, February 14, 2014.

II.     Commonwealth of Massachusetts Tax Identification Number (TIN)

The Tax Identification Number of the Commonwealth (04-6002284) must always be used with the name “Commonwealth of Massachusetts”. Certain departments have incorrectly changed the name of the Commonwealth by inserting their name when reporting taxes. This causes a mismatch with the IRS and may result in an audit finding.  All tax forms or letters referencing the Commonwealth’s TIN must be issued in the name of “Commonwealth Of Massachusetts” and copies must be sent to the Comptroller when issued.  Fax copies are accepted. Please use fax # 617-973-2500.

III.      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. 

IV.     Tax Form Filing

The Office of the Comptroller is the designated department for the generation and distribution of Forms W-2 and 1099 when the Commonwealth of Massachusetts tax identification number (TIN) 04-6002284 is used. Departments issuing W-2’s and/or 1099’s must file directly with CTR which files electronically with the IRS, DOR and SSA as appropriate, on behalf of all Commonwealth agencies. 

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.

Nine 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: 1099MISC, 1099INT, 1099R, 1099G, 1099K, 5498, 1099DIV, 1099OID and 1099PATR. The Commonwealth currently does not have business requiring filings for 5498, 1099DIV, 1099OID and 1099PATR.  Forms 1099B, which are not part of the Combined Federal/State Filing Program, still need to be filed electronically with DOR.  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 between Thursday, November 12, 2013, and Friday, February 28, 2014.  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. A department may receive CTR approval to file their Form 1099 or Form W-2 payments to the IRS and SSA electronically.  The department must submit a Summary Report with the total records filed by form type, box number and dollars reported to CTR, Attn: James Box.  Departments should do this only after 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 on the Summary Report.
  2. When a department files Forms 1099 electronically, it is important to enter your MMARS Department Code on the payee “B” record in the Payer’s Office Code at field positions 41, 42 and 43.  This will allow our office to follow up with the appropriate department if there are any IRS questions.
  3. Those using campus or other non-state 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 (1099, W-2, 1042-S, 1098T) directly with IRS, SSA and DOR, as appropriate, and not through the Commonwealth’s Tax Clearinghouse at CTR.

V.     1099 Reportable Payees and Payments

  1. A department may receive CTR approval to file their Form 1099 or Form W-2 payments to the IRS and SSA electronically.  The department must submit a Summary Report with the total records filed by form type, box number and dollars reported to CTR, Attn: James Box.  Departments should do this only after 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 on the Summary Report. 
  2. When a department files Forms 1099 electronically, it is important to enter your MMARS Department Code on the payee “B” record in the Payer’s Office Code at field positions 41, 42 and 43.  This will allow our office to follow up with the appropriate department if there are any IRS questions. 
  3. Those using campus or other non-state 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 (1099, W-2, 1042-S, 1098T) directly with IRS, SSA and DOR, as appropriate, and not through the Commonwealth’s Tax Clearinghouse at CTR.

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

 Reportable Payees:Reportable Payment:
 Individuals (non-employees), Sole Proprietorships, Partnerships, TrustsTaxable Grants
FORM 1099MISC
 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)

 

Individuals (non-employees), Sole Proprietorships, Partnerships, Trusts CorporationsLegal Service, Medical & Health Care Payments
FORM 1099S
 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
 Reportable Payees:Reportable Payment:
 Individuals (non-employees), Sole Proprietorships, Partnerships, TrustsInterest Payments

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.     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