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

Before You Begin

The information in this document is designed for the reader who is familiar with miscellaneous income payments and the tax reporting information in the Supplier File, and who has already determined that a miscellaneous income payment will be made to a U.S. citizen or resident alien.

Readers who do not have this knowledge should refer to the following documents for more information before reading this procedure:

IRS Requirements

Miscellaneous income payments to U.S. citizens and resident aliens that meet certain dollar limits must be reported annually to the IRS using IRS Form 1099-MISC, "Statement for Recipients of Miscellaneous Income." Refer to the IRS website for a copy of the form.

Dollar Limits Requiring 1099 Reporting

Reporting is required when a person or other tax reporting entity has received within one calendar year:

Taxation Requirements

Payments for royalties, rent, participant stipends, and nonemployee compensation made to U.S. citizens or resident aliens are not subject to income tax withholding when the payment is made. Individuals, sole proprietors, and partnerships are responsible for any tax liability when they file their tax return.

Documentation of Taxpayer Identification Numbers (TINs)

The IRS requires that operating locations solicit TINs from people receiving miscellaneous income payments before the payment is processed. Locations should have written documentation on file that contains the person's appropriate TIN. The following types of documentation can be used:

What Determinations Must Be Made

Operating locations should check for the following before encumbering funds for or processing a miscellaneous income payment to a U.S. citizen or resident alien:

Corporations and Other Exempt Organizations

Corporations are usually identified by the inclusion of "Inc.," "Incorporated," "Corporation," or "Corp." in the name of the vendor.

Generally, miscellaneous income payments to corporations do not have to be reported to the IRS unless the payment is made for medical or health care services. Payments for medical services also include payments made to corporations for medical laboratory services. When processing a medical services payment, the invoice entered into the Accounts Payable module should be coded with an Income Tax Type , Misc 6 so the payment is recorded on the Medical and Health Care Payments line (line 6) of the Miscellaneous Income Statement (1099-MISC).

Other Exempt Organizations

Miscellaneous income payments to exempt organizations such as associations; clubs; religious, charitable, or educational organizations; and federal, state, or local government agencies do not have to be reported.

Documentation of Exclusion

Since the business names of partnerships and sole proprietors are sometimes mistaken as corporations, documentation identifying the reason for exclusion from 1099 tax reporting must be obtained if one of the identifiers listed for corporations is not part of the supplier's name or if it is not evident that the organization is tax exempt.

An IRS W-9 Form, "Request for Taxpayer Identification Number and Certification," or a "Substitute W-9 Form" should be obtained if this is the case. Refer to the IRS website for instructions on creating a substitute W-9 form.

Reimbursement for Travel Expenses

Payments to reimburse an independent contractor for travel expenses do not have to be reported if the contractor submits adequate documentation of the expenses to the Research Foundation.

Adequate documentation consists of:

Processing Payments

Miscellaneous income payments are processed through the standard invoice and payment transactions in the Accounts Payable module and are identified by the appropriate coding in the Supplier File. Refer to "Processing Invoices and Payments" for additional information.

Change History

 

 

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