Department of Administration Division of Finance Phillip Subeldia – Presenter Susetta Beattie Contact Tina Martin Contact Prepared by Tina Martin

Assist agencies to understand 1099 reporting from a high-level perspective. How does 1099 reporting affect you? 2

Vendor Records & 1099 Reporting Reference Material Your Role in 1099 Reporting 1099 Timeline Stats – 1099 MISC Common Account Code Errors Contacts Whats New for Tax Year 2011 Question & Answer Session Evaluation 3

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Two factors determine whether a payment must be reported to the IRS (i.e., 1099 reportable). 1. The vendors business type. 2. The type of payment to the vendor. 5

1. Reportable Business Types: Partnership, Sole Proprietor, Non Employee, Legal & Medical Svcs Corporations, Limited Liability Companies (LLC). 2. Payment Types: Rents, services (including parts & materials), other income payments, medical and health care payments, and gross proceeds to an attorney. 6

1. Business Type Example: LLC AKSAS – IV Vendor Inquiry 7

2. Payment Type Example: AC AKSAS – IE Entity and CC/LC Inquiry 8

The two factors together determine if the payment is 1099 reportable: If Vendor Record 1099 Status is: And Account Code 1099 Status is: Then Payment is: NNN=Not reported on 1099-MISC NY YN YY Y*=Reported on 1099-MISC *When the State of Alaska has paid a vendor a cumulative (statewide) taxable amount of $600 or more, a 1099-MISC is then issued by January 31st. 9

1099-MISC Example: 10

APM Section 14 Exhibit 14.A: 1099 Misc Tax Code Table 11

Accounting Procedures Manual (APM): Section 14. Special Processes: 1099 Tax Reporting 12

a) Overview – Everyone should read. b) Users with trans code (i.e., 1099 Override Data) on their RD code have access to the Tax Reporting Subsystem (TR) and should read the remaining sections. 13

Sections i-iv pertain to the TR screens. 14

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Keep a Pending File: In January of each year, make a pending file for 1099 corrections. In December, make sure your 1099 department contact is aware of the corrections. Departments are responsible for accurate 1099 reporting. 16

Examples of Pending File Documentation: 1. AJEs that adjust account codes across 1099 tax types or reportable status. 2. Payments needing PVN corrections. 3. Payments mailed to third parties. 4. Abatement of a reportable payment. 17

Know Your Agency Specific Issues 1. Grant reporting. 2. Program system that interfaces with AKSAS. 3. Agencies that use zero-net field warrants to include payments issued from sub-systems in 1099 reporting. 18

Educate Agency Staff: 1. Staff coding invoices/TAs for payment. 2. Staff entering payment transactions in AKSAS. 3. Staff certifying payments in AKSAS. 19

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Current Calendar Year: January thru December–Keep pending file. December 1 st –TR system open for corrections and review by users with capability. 21

Next Calendar Year: By the beginning of January - Process all prior calendar year transactions in AKSAS, so they can be picked up by TR. End of 1 st week of January–TR closed for agency corrections. After TR closes to agencies any corrections are done through Finance. Middle of January – 1099-MISC forms are printed. Jan 31 st - Vendors receive 1099-MISC forms by mail. January to June 30 th – TR is available for previous calendar year (view only for research). 22

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YearOriginals PrintedOriginals AddedCorrections Printed Included in corrected count Included in corrected count Original 1099-MISC Forms vs. Corrections After Forms Mailed 24

PercentageCorrection Description 8%Payment Retuned/Refunded 16%Posted to Wrong PVN 20%Incorrect TIN/Legal Name 56%Wrong Account Code Other Exp Reimbursement = 2% Travel Reimbursement = 8% Misc Wrong Acct Code = 46% 2010 Form Corrections 25

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Travel reimbursement for board members and other non-employees. Reimbursements should be posted to NONTAX REIMBURSEMENT account codes. Exception: When travel reimbursement terms fall under a professional service contract and differ from AAM AAM

Prepaid account codes: AC – PREPAID RENT reports as TT01-Rents. AC – PREPAID EXPENSE reports as TT07 – Non-employee Compensation. 28

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Department Contacts and/or Department Finance Officer 1099 Department Contacts Department Finance Officer 2. DOA-Finance 1099 Support Team Susetta Beattie Tina Martin Phillip Subeldia 30

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New 1099 reporting rule: One Card payments will not be reported by the state. Instead, banks and merchant services will report annual gross payments processed by credit or debit cards to the IRS and to merchants. 32

Vendor Records & 1099 Reporting Reference Material Your Role in 1099 Reporting 1099 Timeline Stats – 1099 MISC Common Account Code Errors Contacts Whats New for Tax Year

Please fill out the blank evaluation form Your comments and suggestions help us to better serve you. Department of Administration, Division of Finance. THANK YOU! 34