This bulletin provides agencies with voucher preparation guidelines to facilitate accurate federal reporting by New York State for payments.

Agencies process payments for services provided by entities on vouchers using the Central Accounting System (CAS). Annually, the New York State Comptroller’s Office (OSC) reports the total amount paid on CAS to entities using Internal Revenue Service Form 1099 (1099). Entities use the information on the 1099 to file and pay the appropriate State and Federal taxes. To comply with federal reporting requirements, agencies must be certain information entered on vouchers is correct.

When processing the voucher, it is important the agency know the entity’s correct tax ID number, legal name and business type. The type of business determines whether or not a 1099 is issued. Best practice for an agency to obtain this information is to request an IRS Form W-9 (Request for Taxpayer Identification Number and Certification) from the entity.

Note: If the entity does not have a tax ID number, the agency should instruct the contractor to file Form SS4 (Application for Employer Identification Number) with the IRS to obtain a number.

Payments made to business entity types such as individuals, sole proprietorships, partnerships, limited liability companies (LLC), and associations are subject to federal reporting. Corporations, including professional corporations (PCs), tax exempt entities (e.g. 501(C) (3) and Industries for the Disabled), and governmental entities, such as Corcraft, are generally exempt from federal reporting. However, payments to corporations for legal, medical and health services (including veterinary services) are reportable.

Prior to making payment to an entity the agency must determine if the entity is an employee or an independent contractor. If the entity is determined to be an independent contractor, payment is made through CAS and is subject to 1099 reporting standards. The agency issues employees payment through the New York State Payroll System and reports their wages on the IRS Form W-2 (Wage and Tax Statement). G-Bulletin 233 provides guidelines to determine whether a worker is an employee or an independent contractor.

When processing a payment to an entity through CAS, the agency must use a New York State voucher.

Each voucher contains an “IRS Code” field. OSC uses the information in this field to assist in the 1099 process at the end of the calendar year.

In the redesign of the Central Accounting System, the “IRS Code” field must contain a variable, regardless of whether the payment is subject to 1099 federal reporting standards. If the payment is NOT subject to 1099 federal reporting standards, enter a “B” in the “IRS Code” field, instead of leaving the field blank.

The table below lists different types of payments and the IRS Codes that correspond to these payments for use on a New York State Voucher.

See Attachment A for an alphabetical listing of additional payee types and their related IRS Codes.

Include the appropriate IRS Code in the IRS Code field on the New York State voucher.

Inaccurate IRS Codes could result in underreported income to the IRS. New York State will be fined $50 for each inaccurately reported transaction. If the IRS issues a fine for inaccurate reporting, the responsible agency will be liable for paying the fine.

Document worker classifications. The documentation must clearly indicate the agency’s determination to classify an individual as an employee or an independent contractor. Worker classification documentation must be readily available in the event of an IRS audit or an OSC examination. (Refer to G 233).