1099-MISC and 1042-S Accounts Payable Monitoring

Purpose

Information contained in reports and year-end tax statements is collected from the data stored in the Oracle business system. If data is missing or inaccurate, tax statements will be missing or inaccurate. Correcting tax statements after they have been created and distributed is both an administrative burden for operating locations and central office and an inconvenience to the person receiving the tax statement from the Research Foundation (RF). Operating locations should have a procedure in place for monitoring and reviewing input into Oracle so that accurate data is maintained throughout the year.

1099-MISC Activity

IRS 1099-MISC tax statements must be issued to U.S. citizens and resident aliens who are independent contractors, royalty recipients, rent recipients, and participant stipend recipients. To provide correct year-end reporting information, corrections and updates may be required to Accounts Payable (AP) data in the Supplier File and/or modifications may be required to AP Invoices. All necessary invoice changes must be made by December 31 of the current tax year in order to issue accurate 1099-MISC statements.

The following table describes the steps to take to monitor 1099-MISC activity:

Step

Action

Guidance

1

Become familiar with miscellaneous income payments. To ensure correct year-end reporting, Oracle records must be input correctly from the paper documentation.

Review these AP Procedure and Guidance documents:

 

Overview of Miscellaneous Income Payments

 

Miscellaneous Income Payments to U.S. Citizens and Resident Aliens

 

Classification of Aliens as Residents or Nonresidents for Tax Purposes

2

Run the monitoring report RF 1099 Payment Report.

Review RF 1099 Payment Report.

3

Review the RF custom report to ensure that (1) all applicable records or payment details are included in the report and (2) records or payment details that should not be on the report are not present.

The RF custom report will list 1099-MISC activity only (1) for those suppliers who are set up as a 1099-MISC supplier type in the Suppliers (RF) (Tax Reporting) window of the Supplier File, and (2) if the invoice distribution has the proper 1099-MISC code.

Refer to the AP course Maintain Supplier Information if you need to modify the supplier file. Refer to the AP course Modifying Invoices and Special Processes if you need to modify an invoice.

4

Review the RF custom report to identify the supplier and ensure a valid Taxpayer Identification Number (TIN) is in the system.

An Individual Tax Identification Number (ITIN) begins with a 9. A Social Security Number (SSN) may not begin with a 9 or 000. The SSN cannot be all the same number (e.g., 111111111), cannot be a run of numbers (e.g., 123456789), nor can it contain hyphens.

Refer to the AP Procedure and Guidance document Notification of Invalid Taxpayer Identification Numbers Process.

5

Review the RF custom report to ensure that the recipient's address is correct.

The street address (i.e., address not including city, state, and zip code) cannot be more than 30 characters. If a tax statement is undeliverable by the postal service, it will be returned to central office. Central office will forward the statement to the operating location for further distribution.

Refer to the AP Procedure and Guidance document Supplier File Naming Standards.

6

Review the RF custom report to ensure that the Income Tax Types correspond to 1099-MISC boxes checked.

Income Tax Types in the Suppliers (RF) (Tax Reporting) window of the Supplier File correspond accordingly: MISC1 for rent (Box 1), MISC2 for royalties (Box 2), MISC3 for other income (Box 3), and MISC7 (Box 7) for nonemployee compensation.

Refer to the AP work instruction Create a Supplier Record and the Threshold for Reporting section of the AP Procedure and Guidance document Overview of Miscellaneous Income Payments.

7

Review the RF 1099 Payment Report and the RF 1042 Payments Report to ensure that a supplier is listed only on one report.

If the supplier is a NRA supplier type, Tax Reporting cannot be 1099-MISC.

Refer to the AP course Maintain Supplier Information if you need to modify the supplier file.

8

Run any additional reports available in order to assist your review and corrections of errors, if applicable.

Review the standard Oracle reports 1099 Invoice Exceptions Report and 1099 Supplier Exceptions Report, described in the AP Reports Resource area in EPSS.

9

Continue to run and re-run the monitoring report RF 1099 Payment Report.

Ensure that the changes made to the Supplier File and/or AP invoices are reflected in the monitoring report.

10

Maintain accurate Oracle data and monitor throughout the year.

To ensure that IRS 1099-MISC reports are correct, make necessary modifications to AP invoices and Supplier File records by December 31 each year.

1042-S Activity

IRS 1042-S tax statements must be issued to nonresident alien independent contractors, royalty recipients, rent recipients, and participant stipend recipients. Exceptions to 1042-S reporting include suppliers determined to meet IRS "foreign source" rules, and nonconsultant service expenditures for NRA independent contractors (i.e., travel).To provide correct year-end reporting information, corrections and updates may be required to Accounts Payable (AP) data in the Supplier File and/or modifications may be required to AP Invoices. All necessary invoice changes must be made by December 31 of the current tax year in order to issue accurate 1042-S statements.

The following table describes the steps to take to monitor 1042-S activity:

Step

Action

Guidance

1

Become familiar with miscellaneous income payments. To ensure correct year-end reporting, Oracle records must be input correctly from the paper documentation.

Review these AP Procedure and Guidance documents:

 

Overview of Miscellaneous Income Payments

 

Overview of Miscellaneous Income Payments to Nonresident Aliens

 

Classification of Aliens as Residents or Nonresidents for Tax Purposes

2

Run the RF NRA Payment Review Report.

Review RF NRA Payment Review Report.

3

Review the RF custom report to ensure that (1) all applicable records or payment details are included in the report and (2) records or payment details that should not be on the report are not present.

The RF custom report will list 1042-S activity only for those nonresident aliens who are set up with a "Non Citizen-Individual" supplier type and the appropriate 1042 value is entered in each invoice distribution flex field (DFF). Refer to the AP course Maintain Supplier Information.

Note: If the supplier is a "Non Citizen-Individual" supplier type, Tax Reporting cannot be 1099-MISC.

4

Review the RF custom report to ensure that the recipient has a valid Tax Identification Number (TIN).

An Individual Tax Identification Number (ITIN) begins with a 9. A Social Security Number (SSN) may not begin with a 9 or 000. The SSN cannot be all the same number (e.g., 111-11-1111) nor can it be a run of numbers (e.g., 123-45-6789).

5

Review the RF custom report to ensure that the recipient's address is correct.

The street address (i.e., address not including city, state, and zip code) cannot be more than 30 characters. If a tax statement is undeliverable by the postal service, it will be returned to central office. Central office will forward the statement to the operating location for further distribution.

Refer to the AP Procedure and Guidance document Supplier File Naming Standards.

6

Review the RF custom report to ensure that withholdings are applicable and correct for nonresident alien payments.

Certain NRA supplier types must also be assigned an appropriate Withholding Group. In general, NRA payments are taxable at the rate of 30% unless there is proof of partial or whole exemption on file.

Refer to the AP Procedure and Guidance document Overview of Miscellaneous Income Payments to Nonresident Aliens. Also refer to the Oracle field definitions Supplier Type and Withholding Tax Group.

7

Review the RF 1099 Payment Report and the RF NRA Payment Review Report to ensure that a supplier is listed only on one report.

If the supplier is a "Non Citizen-Individual" supplier type, Tax Reporting cannot be 1099-MISC. If a record has both a "Non Citizen-Individual" supplier type and has 1099-MISC in the tax reporting field, the record will appear on both custom reports. If a record appears on both reports, information will be reported twice to the IRS and the taxpayer erroneously will receive both a 1099-MISC and 1042-S.

Refer to the AP course Maintain Supplier Information if you need to modify the supplier file.

8

Continue to run and re-run the monitoring report RF NRA Payment Review Report.

Ensure that the changes made to the Supplier File and/or AP invoices are reflected in the monitoring report.

9

Maintain accurate Oracle data and monitor throughout the year.

To ensure that IRS 1042-S reports are correct, make necessary modifications to AP invoices and Supplier File records by December 31 each year.

 

 

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