David Prebeck:  This session we will discuss Form 1099 requirements for state and local governments.  You will find a link to the information about us on this Web page.  You will also find a link to a PDF file of this presentation in case you would like to download or print a copy. 

Raelane Hoff:  This program is being recorded and will be maintained in accordance with Federal recordkeeping laws.  Before we begin, I need to review some administrative items.  First, tax professionals may receive a Certificate of Completion that can be used to request a continuing professional education credit if the event meets your organization or state CPE requirements.  To receive the Certificate of Completion, you must have registered for today's program by entering your e‑mail address on the registration page and use the same e‑mail address to attend so we can verify your participation. 

David Prebeck:  Second, this program will be archived on our website, www.irs.gov, for later viewing.  However, only those attending today's session, March 30th, will be able to receive a Certificate of Completion.  Those entitled to the certificates will receive them by e‑mail approximately one week following this webinar. 

Please let us know of future topics you'd be interested in by contacting us at tege.fslg.feedback@irs.gov.

Raelane Hoff:  The Office of Federal, State and Local Governments, FSLG, is new within the Internal Revenue Service since the year of 2000.  We are under Tax‑Exempt and Government Entities Operating Division.  Our mission is to provide government entities top quality customer service by helping them understand and comply with their tax responsibilities with integrity and fairness to all. 

We primarily address employment taxes and information return reporting. 

David Prebeck:  Today we'll be talking about your responsibilities for filing Form 1099‑MISC and the corresponding Form W‑9.  We will be discussing reporting of rents, nonemployee compensation, royalties, other income and gross proceeds to attorneys.

After the main presentation, we will provide you with resources for finding more information on this topic, and we will go over common questions and answers. 

Slide 4 shows two summary sheets.  These sheets have been provided as handouts, and you can link to them on this event page to print them.  The information we are going to talk about today is summarized in these handouts.  You might want to have these available during the presentation to refer back to. 

Raelane Hoff:  Now, let's get into the mechanics of whom must file Form 1099‑MISC.  Let's look at slide 5.  First of all, entities who have paid in their course of their trade or business $10 or more in royalties or dividends or $600 or more for rents, services, prizes or awards, medical or healthcare payments, gross proceeds to an attorney, and certain other payments would be required to report these types of payments on a Form 1099‑MISC. 

Some examples of the types of payments that must be reported include payments to individuals or partnerships, and certain payments to corporations, like gross proceeds to attorneys in Box 14.  And attorneys' fees in Box 7, on slide 6. 

We also have another exception for payments to corporations and those payments are for medical or healthcare services.  Payments for medical services should be reported in Box 6 of the Form 1099‑MISC.  There are some general exceptions to filing Form 1099‑MISC, payments to a corporation are an exception, unless the payments are made for legal or medical services. 

Payments for only merchandise, such as office or cleaning supplies, and payments of rent to real estate agents, wages paid to employees and business travel allowances paid to employees. 

The Form 1099‑MISC instructions are a good source for additional exceptions to filing the Form 1099‑MISC. 

David Prebeck:  Do you know what an LLC is?  I'm sure most of you are saying limited liability corporation.  Well, in reality, it means limited liability company.  A limited liability company may be taxed as a sole proprietorship, a partnership, or a corporation. 

Taxation depends on state law.  Therefore, what you need to do is obtain a Form W‑9 from the vendor in order to determine their tax status.  We will be discussing Form W‑9 later in this presentation. 

Depending on the vendor's tax status, you will report the payments primarily on Form 1099‑MISC Box 7.  Additional information on limited liability company entities can be found in Publication 3402, Tax Issues for Limited Liability Companies. 

Raelane Hoff:  Okay.  Now let us discuss what is reported in Box 1, Rents, Form 1099‑MISC.  Enter all payments for real estate rentals unless the payments are made to a real estate agent. 

Remember to include those rental payments for equipment, such as copy machine rentals.  In addition, housing authorities are required to include the rental assistance payments made on behalf of their clients to their property owners or management companies. 

These would include such payments as Section 8 payments or relief payments.  However, corporations would not receive the Form 1099‑MISC.  Slide 10 reminds you that in Box 2 of the Form 1099‑MISC you would include royalty payments.  The most common are payments of oil and gas royalties.  You would report payments of $10 or more in Box 2.  Another example of royalties would be those paid for musical scores used in school plays and musicals. 

Box 3 of the Form 1099‑MISC is used to report other income such as prizes and awards that are not for services performed.  In addition, various damage payments that are not considered wages are reported in Box 3. 

A common entry for government entities is the excess mileage reimbursement over 14 cents per mile for volunteer drivers.  For other examples of income reportable in Box 3 of Form 1099‑MISC, refer to the instructions that are available on our website at www.irs.gov and click on the Forms and Publications bar.

David Prebeck:  Please see slide 12.  We are going to discuss medical and healthcare payments that are entered in Box 6 of Form 1099‑MISC.  You are required to report payments to individuals, partnerships and corporations for medical services.  So what types of expenses are considered for medical payments? 

Payments include those for doctor fees, drug testing, lab fees and physical therapy.  These are just some examples of the types of services that a government entity could be making medical payments for.  These payments will not include payments for medical insurance or payments to pharmacies or tax‑exempt hospitals. 

Now we are going to talk about Box 7, Nonemployee Compensation.  This is the most often used box on the Form 1099‑MISC.  Generally, income entered in the box is subject to self‑employment tax.  Payments made to services of people who are not your employees are entered in this box. 

You will not see this too often, however.  Split fees between professionals are also entered in Box 7.  Some examples of payments to enter in Box 7 are professional service fees, such as attorneys, including corporations, architects, accountants, garbage collection service and cleaning services.  You also include payments for services that are in the form of prizes or awards that you make to vendors who are not your employees. 

Raelane Hoff:  We just mentioned nonemployee compensation on the previous slide.  Now, I am sure some of you are thinking:  How do I determine if I have an employee or an independent contractor? 

The control factors, behavioral, financial and relationship of the parties, are briefly discussed in Publication 1779, Independent Contractor or Employee. 

Form SS‑8 develops each control factor in detail through a question‑and‑answer format.  Form SS‑8 can be prepared and sent into the Internal Revenue Service by either the governmental entity or the worker to determine the status of the relationship. 

Publication 15‑A, Employer Supplemental Tax Guide, can also be reviewed for the control factors.  I would like to mention here, however, that for governmental entities, elected and appointed officials are usually considered employees.

Just to give you a very quick overview of the independent contractor or employee, here are some factors that may indicate workers are employees.  They're required to wear uniforms, or you have a dress code that must be followed. 

You require the worker to be present during certain hours.  The worker does not advertise for customers.  You, as the governmental agency, provide the training and you provide the office space, training room and general supplies and materials. 

One of the other factors that falls under the financial control is that the worker stands no risk of loss.  This means that they are not investing their own resources in the business and could generate a loss. 

Please go to slide 16.  Even though you're a government entity, the Internal Revenue Service will still apply the basic common law standard.  During an audit, we will be looking at who has the right to direct and control the worker who is performing the services. 

Keep in mind that when you do have an employer/employee relationship, payments and benefits the employer provides to the employee are compensation and taxable as wages, unless specifically excluded by law. 

On to attorneys.  The next five slides are going to discuss payments to attorneys.  As agents, we get a lot of questions on these type of payments. 

The proposed regulation codified the requirement to report payments to attorneys whether or not they're individuals, partnerships or corporations.  This change became effective for 1998 and subsequent years. 

We will need to define gross proceeds and payments for services.  First, let's talk about defining gross proceeds.  Now, what are gross proceeds?  Well, gross proceeds are the payments made to an attorney as part of the legal settlement or court order. 

The gross proceeds may be issued in the names of the attorney and the client and they may include an amount for the attorney's services. 

Once you determine your gross proceeds, you then need to determine if the gross proceeds include an amount for the attorney's services.  If you can separate the amounts, you would report the amount for payment of services in Box 7 and nothing in Box 14.  However, if you cannot determine the amount of the attorney's fee, then report all of the gross proceeds in Box 14.  The format you would use to enter the dollar amount is without any comma.  Like shown here on the slide. 

The last thing to remember about attorneys is that if the attorney is not an employee, they receive a 1099‑MISC for legal services regardless if they're a sole proprietor, partnership or corporation.

In addition, attorneys receiving a Form 1099‑MISC should not be in your sponsored pension plan. 

David Prebeck:  Starting on slide 23, the last boxes we would like to cover are Boxes 16 through 18.  These boxes are used to report the state information.  You enter in Box 16 state income tax withheld.  Box 17 is used to enter the payer state identification number and the abbreviated name of the state.  Box 18 is for entering the state payment amount. 

When you finish your Form 1099‑MISC, Copy 1 is sent to the state tax department and Copy 2 to the recipient. 

Some payments should not be reported on Form 1099‑MISC.  Payments to employees such as fringe benefits or taxable travel reimbursements that are not part of an accountable plan should always be included as wages and reported on the Form W‑2.  Generally, payments to corporations are not reportable on the Form 1099‑MISC. 

We receive a lot of inquiries from customers who made a mistake while typing or printing their Form 1099‑MISC.  The question is:  What do I do?  Well, don't panic.  The Form 1099‑MISC can be voided by entering an X in the Void box at the top of the form.  You then go to the next form on the page or the next page and type the correct information. 

You do not mark "corrected" in the box.  Then, when you're done, you submit the entire page even if only one of the forms on the page is completed correctly. 

The other types of calls and questions we get are directed at the Form 1099‑MISC that were submitted and are incorrect.  Corrected Form 1099‑MISCs should be prepared if the original information return showed an incorrect money amount, an incorrect Taxpayer Identification Number, or a return was filed when one should not have been. 

So how do you correct these forms?  It is very easy.  All you need to do is enter an X in the corrected box.  Please refer to pages 6 and 7 of the General 1099 Instructions for additional information.

There's a step‑by‑step chart on page 7 for filing corrected returns on paper.  And you can file up to 249 corrected forms on paper. 

Raelane Hoff:  Once you have completed the Form 1099‑MISC, you are to provide Copy B and Copy 2 to the recipients by January 31st of each year.  If you are filing paper Form 1099s, you must file Copy A with the IRS by February 28th, along with Form 1096.  That is the annual summary and transmittal of U.S. information returns. 

If you are filing electronically, the due date to IRS is March 31st.  Remember, you can order paper 1099s and 1096s from the IRS at 1‑800‑829‑3676.  Downloaded copies cannot be submitted.  Additional information can be found in the general instructions of Form 1099 at www.irs.gov and click on the Forms and Publications bar. 

We just mentioned on the previous slide, slide 27, that if you filed electronically, you have until March 31st to submit your 1099s.  Some entities are required to file electronically. 

You're required to file electronically if you have 250 or more 1099s to submit.  The electronic filing requirement applies separately to each type of 1099 submitted.  The same filing requirement also applies separately to original 1099s and corrected documents. 

You can always choose electronic filing, even if you're not required to file electronically. 

Now, we have already mentioned that a 1096 form is required when transmitting the 1099s.  Remember that you must submit a separate Form 1096 with each type of 1099 form you file by paper. 

For example, if you file Forms 1098, 1099‑A and 1099‑MISC, you will complete one Form 1096 to transmit with each type of document.

David Prebeck:  Well, now it's time for the bad cop.  If a governmental entity is not in compliance with filing information returns, they could be subject to the failure to file timely and failure to furnish to payee timely penalties. 

Internal Revenue Code Section 6721 provides for a penalty for failure to file by the due date of return.  The penalty is assessed in graduated tiers.  If the Form 1099s are filed correctly by March 30th but after February 28th, the penalty is $15 per return.  The penalty is $30 per return if you file them after March 30th but before August 1st.  And, finally, if you either file after August 1st or later, the penalty assessment is $50 per return. 

The maximum penalty per entity will be assessed for failure to file an information return is $250,000.  However, if there's an intentional disregard for the reporting requirement, the penalty imposed is $100 per failure with no maximum penalty. 

There's also a penalty for failure to furnish a 1099 timely to the payee.  This penalty is assessed under Internal Revenue Code Section 6722.  The penalty is $50 per statement. 

Now I'm going to turn it back over to the good cop, Raelane.

Raelane Hoff:  Thanks, Dave.  Now starting on slide 33, we're going to talk about Taxpayer Identification Numbers, TINs, and the certification process, Form W‑9. 

The Form W‑9 is used to help you prepare a Form 1099.  First, let us review which type of Taxpayer Identification Number you'll be securing.  A sole proprietor uses a Social Security Number, SSN.  Corporations, partnerships and estates use an Employer Identification Number, EIN. 

Then we have limited liability company entities.  The name of the limited liability company must match either the Social Security Number or the Employer Identification Number.  Why use a Form W‑9?  Well, the Form W‑9 certifies the Taxpayer Identification Number is correct.  In addition, the payee certifies he or she is not subject to backup withholding, or they're exempt because they're a charitable organization or government entity. 

We get many questions from our governmental entities asking if the sole proprietor can use their Social Security Number for a business.  The answer is yes, unless the sole proprietor has a Keogh plan or must file excise or employment tax returns.  In those situations, the sole proprietor would have to use an Employer Identification Number. 

We also have a Taxpayer Identification Number, TIN, matching program.  Why would you want to use this process?  Well, you will be able to match Taxpayer Identification Numbers received against IRS records.  It is always good to match before filing.  By matching first, it will help prevent receiving notices from the IRS where the name and the Taxpayer Identification Number don't match. 

Now, let me turn it over to Dave to talk about the two different TIN matching programs. 

David Prebeck:  Thanks, Raelane.  Now I'm the good cop.  Internal Revenue Service Taxpayer Matching Service is available 24 hours a day seven days a week.  You can get access to the Internal Revenue Service Taxpayer Identification Matching by visiting E‑Services at www.irs.gov.  You're required to register to use this system.  If you prefer to call E‑Services, Customer Service is available at 1‑866‑255‑0654 from 7:30 a.m. to 7:00 p.m. Eastern Standard Time Monday through Friday. 

This information is also shown on slide 36.  So there's no need to write it down if you save a copy.  You may also verify Social Security Numbers by contacting the Social Security Administration.  You may verify up to five Social Security Numbers by calling the Social Security Administration at 1‑800‑772‑6270 weekdays from 7:00 a.m. to 7:00 p.m. Eastern Standard Time.  The Social Security Administration will also verify up to 50 numbers by writing to the local Social Security office.  You can check the Social Security website at www.ssa.gov/employer/ssnv. 

Raelane Hoff:  Let us talk about Form W‑9 in more detail.  Please see slide 38.  The Form W‑9 is used to request the Taxpayer's Identification Number and certification that they're not subject to backup withholding.  You should obtain the Form W‑9 prior to making any payments to the vendor. 

Provide a W‑9 to every vendor who performs services for your entity.  They will provide you with their identifying number and type of business entity they operate as, such as limited liability company, sole proprietor, partnership or corporation. 

If you are not familiar with the W‑9, here's a view of the form on slide 39.  You can order the Form W‑9 through the IRS website at www.irs.gov, or by calling our toll free number at 1‑800‑829‑3676. 

David Prebeck:  We're now going to talk about backup withholding.  We are on slide 40.  But I wanted to remind you that you do have a handout that summarizes the requirements and examples that you can link to through this webinar. 

I'm sure some of you are asking what is backup withholding, and why would I be required to do it? 

The general rule is:  If you make reportable payments to persons or corporations who have not furnished their valid identifying number prior to making a payment to them, you are required to withhold 28% of that payment.  I just gave you a general statement about backup withholding.  So let's take a look at slide 41 and talk about the types of payments. 

Backup withholding applies to many payments reported on the Form 1099‑MISC.  Some are rents reportable in Box 1, royalties reported in Box 2, and the non‑employee compensation payments entered in Box 7. 

Another time you're required to begin backup withholding is when the Internal Revenue Service notifies you that you have to impose backup withholding because a payee furnished an incorrect identifying number. 

Okay.  Slide 42.  Now that you've determined you are subject to backup withholding and on which type of payments, the next question is:  When do I begin to back up withhold?  You begin backup withholding when the aggregate payments for the calendar year equal or exceed $600, or immediately if the vendor was paid greater than $600 in the prior year and an information return was issued, or the vendor was subject to backup withholding in the prior year. 

Raelane Hoff:  Now you've withheld the 28%, so how do you report backup withholding?  You report to the vendor in Box 4 of the Form 1099‑MISC the amount of the tax withheld.  If you had to do backup withholding on the vendor, you'll be required to issue the Form 1099‑MISC, even if the amount paid was below the threshold amount for filing. 

Remember to send Copy A of all paper Forms 1099 to the IRS with Form 1096 transmittal.  We all know that once you withhold money, you have to somehow send it into the IRS, right?  Okay.  Backup withholding is reported and deposited on a Form 945, Annual Return of Withheld Federal Income Tax.  This return is due by January 31st of the following year.  Even though this is an annual return, the ordinary deposit rules apply.  We encourage you to see the instructions for Form 945 on depositing.  In addition, we would like to remind you to make the deposits for Form 945 separate from Form 941.

David Prebeck:  So the next question is:  When do you end backup withholding?  Let's look at slide 45.  First, if the vendor failed to furnish the identifying number, you will stop the backup withholding only when the Taxpayer Identification Number is finally furnished. 

What if you had received a notice from the Internal Revenue Service to start backup withholding?  You will then only stop the backup withholding 30 days after you receive a certified Form W‑9.  Part 2 of the Form W‑9 certification must be completed once a notice has been received from the Internal Revenue Service that the Taxpayer Identification Number provided is incorrect.  When signed, in the signature section of part 2 certification, the Form W‑9 will be considered certified.

Raelane Hoff:  Slide 46 and 47 cover some common errors.  Common errors that we find include:  Failure to obtain the identifying information before making payments.  So that's why you want to get your W‑9 up front.  Another error, failure to aggregate all the payments to one vendor from all expense categories.  So be sure to use all of your vendor files to come up with the total payments made. 

Also, assuming a payee is a corporation because their name has Company or Associates.  Another common error is to assume an entity is a corporation just because they furnished an Employer Identification Number. 

Remember, some sole proprietors will also have Employer Identification Numbers because they file employment or excise tax returns.  Other common errors include excluding corporations you made payments to for legal or medical services.  Remember, these entities are required to receive a Form 1099‑MISC.  In addition, when you receive a invoice where materials and services are combined, ensure you make a proper allocation for materials per the Treasury regulation. 

Let me give you an example.  You have an invoice for a thousand dollars and no breakdown for materials and labor.  In that instance, your Form 1099 would be issued for a thousand dollars.  If there are separate line items for labor and materials and the labor is less than 600, you would not have to issue a Form 1099‑MISC.

David Prebeck:  To wrap up the backup withholding topic, the most important thing to remember is if you do not have a W‑9 information that includes a taxpayer identifying number, you are required to backup withhold at 28%.  A good policy is not to issue the check until you receive the W‑9.  If for some reason you do not receive the W‑9, backup withhold at 28%. 

When we audit our entities, we always remind them to get the W‑9 information before the job is awarded.  I'm sure you who are participating would not want your entity to be assessed the 28% during an examination or audit. 

Let's take a look at slides 49 and 50.  Additional resources can be found by referring to the Form 1099 general instructions and the 1099‑MISC instructions.  Publication 1281 is also an excellent resource for backup withholding issues. 

The instructions for Form 945 and Publication 1779, Independent Contractor or Employee, are also good resources for information reporting. 

Raelane Hoff:  We have several other resources that can be found on the website at www.irs.gov and click on the Forms and Publications. 

Our Federal State and Local Government website also has educational materials and resources for government entities, at www.irs.gov/govt/fslg. 

At this time, we will do a question‑and‑answer session based on questions we've received as agents.  The following scenarios will help you to apply the information we've discussed during our presentation.

David Prebeck:  Raelane, I get this question quite often from our customers:  Can an employee receive both a W‑2 and Form 1099?  They operate a separate business and are paid for their services as part of the other business.

Raelane Hoff:  Yes, Dave, they can.  A Form W‑2 will be issued to the person for the services as an employee and the Form 1099‑MISC is issued for the services performed as an independent contractor. 

It is important that the services they perform as an independent contractor do meet the common law rules as discussed in Publication 1779, Independent Contractor or Employee.  A Form 1099‑MISC should not be issued to an employee for services they performed for you that you had the right to control. 

Payment for those services belong on the Form W‑2 and should have all appropriate employment taxes withheld. 

Dave, another question we get is:  If a payment to an individual includes both parts and labor, how should the payment be reported?  And what if the parts and labor are separately stated and paid together? 

David Prebeck:  Yes, we do get this question asked a lot.  Let's review what we said during the presentation.  If a vendor bills the government entity for a thousand dollars and the invoice includes both labor and materials, the costs are not shown separately, a 1099‑MISC would be issued for the total amount of $1,000. 

If the vendor separately stated $500 materials and $500 labor, and this is the only payment to the vendor this year, then no 1099‑MISC would be required. 

It is not necessary to track the vendor down to separate the charges if they totaled them together.  The vendor will adjust his own tax return under cost of goods sold. 

Raelane, I have another question for you.  If an individual supplies a W‑9 as a sole proprietor, how should the Form 1099 be completed? 

Raelane Hoff:  Well, Dave, it depends whether the vendor provided a Social Security Number or an Employer Identification Number.  Let's run through an example with the Social Security Number first. 

You would enter John Doe on the first line and in the Taxpayer Identification Number box, you would enter their Social Security Number.  If you wanted to include the business name, you would complete it like this:  Viewers can see slide 55 for our example.  John Doe, on the first line, and Doing Business as John Doe Services on the second line.  Remember, do not list the business name only.  Be sure to put the sole proprietor name on the first line. 

One other thing, the Internal Revenue Service encourages you to use the Social Security Number when reporting for sole proprietors.  If the vendor marks their W‑9 that they're a sole proprietor and they provide an Employer Identification Number, then you list the Employer Identification Number in the Taxpayer Identification Number box and enter the name of the business as shown on the W‑9 form. 

Dave, I've had this question before:  Are deceased employee wages reported on a Form 1099 or W‑2? 

David Prebeck:  When an employee dies during the year, you must report the accrued wages, vacation pay and other compensation paid after the date of death.  If the payments are made during the year of death, the amounts paid are taxable for both Social Security and Medicare.  The amounts paid are reported on the Form W‑2 as Social Security and Medicare wages. 

If the amounts are paid after the year of death, do not report the amounts on Form W‑2 and do not withhold any Social Security or Medicare taxes.  Whether the payment is made in the year of death or after the year of death, you must report the payments made to the estate or beneficiary on Form 1099‑MISC in Box 3. 

A good example of reporting of payments made to a deceased employee can be found in the instructions for Form 1099‑MISC.

Raelane if, I hire a contractor and the fees include reimbursement for travel, how are they reported on the Form 1099? 

Raelane Hoff:  Well, Dave, if the contractor accounts to you for the expenses under the Accountable Plan Rules, then you would not include the reimbursements in the Form 1099‑MISC.  However, if there is no accounting to you for the expenses, these reimbursements would be reported on the Form 1099‑MISC.

David Prebeck:  Raelane, if you have withheld the 28% backup withholding from a vendor's payment, is it okay to refund the money back when the vendor provides their Taxpayer Identification Number? 

Raelane Hoff:  Dave, even though the vendor will ask for their money back, you can't refund it.  You are required to deposit it and file a Form 945.  The vendor will get credit for the withholding in Box 4 of the Form 1099‑MISC. 

Dave, do you get a lot of questions from our customers asking:  What do I do when the Form W‑9 is received back and the customer has checked "exempt payee"? 

David Prebeck:  If the entity has checked that they are an exempt payee, you might have to get further clarification.  If the type of payment is for legal or medical services, they should not have checked the exempt payee box and you will have to issue the Form 1099‑MISC. 

I would notify the customer that they are not considered an exempt payee and return the W‑9 and have them complete a new form. 

If the payments were to a county hospital, which is exempt from filing income tax returns, then it is okay that the exempt payee box was checked, and you would not be required to issue a 1099‑MISC. 

The exempt payee box is only to be checked when the entity is exempt from backup withholding, because they are a government entity or a charitable organization. 

Raelane, are government entities required to file any other types of Form 1099s? 

Raelane Hoff:  Yes, they are, Dave.  An example would be where a government entity makes a payment for an easement of your property.  This type of payment would be reported on a Form 1099‑S.  There is no dollar threshold for these types of payments.  Another example would be if the government entity paid $600 or more in interest.  They would be required to issue a Form 1099‑INT. 

Dave, how about payments made to election workers?  I have customers who have been filing 1099‑MISC for these types of payments. 

David Prebeck:  Well, the payment itself should not be reported on a Form 1099‑MISC., neither in Box 7, nor Box 3.  Revenue Ruling 2000‑6 contains several good examples of how to report election worker payments on a Form W‑2.  Publication 15, Section 15, Special Rules for Various Types of Services and Payments, also explains how to report payments to election workers. 

I have one last question, Raelane.  What if you receive a W‑9 and they check the box for "limited liability company" and indicate they are a "disregarded entity"?  Do they still need a Form 1099‑MISC.

Raelane Hoff:  What this means is they're a limited liability company who files their taxes as a sole proprietor.  The W‑9 should have the sole proprietor's name and their Social Security Number provided.  However, sometimes entities think that when they check "disregarded entity" it means they don't have to receive a 1099‑MISC.  A good reference for this issue is Publication 3402, Tax Issues for Limited Liability Companies. 

Now we're going to go back and recap some of the highlights of today's presentation, starting with slide 63. 

David Prebeck:  Some of the highlights of our presentation included a discussion on the responsibilities of a government entity to file Form 1099‑MISC. 

We also reviewed the Form W‑9 process that is used to secure Taxpayer Identification Numbers.  And we remind everyone that backup withholding at a rate of 28% is required if you haven't secured a Taxpayer Identification Number prior to making a payment to the vendor. 

Raelane Hoff:  Recapping who must file a Form 1099‑MISC reminds us that government entities who have paid $10 or more in royalties or dividends or $600 or more for rents, services, prizes or awards, medical or healthcare payments, gross proceeds to an attorney, and certain other payments, would be required to report these types of payments on a 1099‑MISC.

We want to remind you that the Form W‑9 is used to request the Taxpayer's Identification Number and certification that they are not subject to backup withholding.  You should obtain the W‑9 prior to making any payments to the vendor.  Provide a W‑9 to every vendor who performs services for your entity. 

They will provide you with their identifying number and type of business entity they operate as, such as limited liability company, sole proprietor, partnership or corporation. 

David Prebeck:  Recapping backup withholding.  Remember that you do have a handout that summarizes the requirements and examples.  You can link to it through this webinar.  All of you should now understand the general rule.  If you make reportable payments to persons or certain corporations who have not furnished their valid identification number prior to you making a payment to them, you are required to withhold at 28% of that payment. 

The most important thing to remember is if you do not have the W‑9 information that includes a Taxpayer Identification Number, you are required to back‑up withhold at 28%.  A good policy is not to issue the check until you receive the W‑9. 

If for some reason you do not receive the W‑9, back‑up withhold at 28%.  As a reminder, when we audit our entities, we always remind them to get the W‑9 information before the job is awarded. 

I'm sure those of you who are participating today would not want your entity to be assessed the 28% during an examination or audit. 

Raelane Hoff:  We've also recapped some of the important websites on slide 68 for you that show where you can download fillable forms and obtain additional education materials.  Be sure to visit our Federal State and Local Governments website at www.irs.gov/govt/fslg. 

We have also used several resources that you will see here on slide 69.  Publication 15‑A is an excellent resource, and it is downloadable on our website, www.irs.gov. 

The Publication 1281 is very useful when you're looking up information on backup withholding.  This publication also contains a copy of the B Notice that is referenced in the Internal Revenue Service Notice CP 2100 you receive from us when your Taxpayer Identification Numbers and names don't match.  We would also like to call your attention to the general instructions for Form 1099. 

As we mentioned before, the instructions for how to correct or void any type of 1099 is contained in this set of instructions. 

Some additional resources are the Form 945 instructions and separate instructions for the 1099‑MISC. 

When you have questions on what type of entry is made in a specific box on the Form 1099‑MISC, the 1099‑MISC instructions are very useful. 

We provide our customers with copies of the Publication 1779 and Form SS‑8 when questions arise making a determination on whether you are paying an employee or an independent contractor. 

Remember, however, as we stated during an earlier part of our presentation, elected and appointed officials are considered employees. 

Throughout our presentation, we referenced several telephone numbers that you can call for assistance.  Slide 71 lists some additional numbers that are toll free and that you can obtain assistance from. 

In summary, we would like to say that we value your comments and would appreciate your feedback on this webinar.  Please send your comments to tege.fslg.feedback@irs.gov. 

If you have federal tax topics for government entities that you would like to hear about on future webinars, please provide your comments at the above e‑mail address. 

Participants, we hope you've enjoyed today's presentation and invite you to join us for future events.  Visit our website, www.irs.gov, and type Webinars in the search box.  On behalf of the Internal Revenue Service, this is Raelane Hoff.  Thank you for being with us, and enjoy the rest of your day.