Kansas Department of Administration, Office of General Services
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General Accounting

1099 & Vendor file problems - Quick Hit list

  1. Lowest numbered suffix - usually '00' - The 1099 programs accumulate all data from all the suffixes for each vendor number in preparing 1099's. The 1099 form is sent to the address listed on the lowest numbered suffix. If this suffix is currently inactive the 1099 will still be sent to this address.
  2. Bad Address - Anytime an address changes the agency needs to correct the existing vendor file information. Don't just add another suffix. If the vendor file information does not agree with your information, verify what the correct address is and correct either your information or the vendor file, whichever needs it.
  3. Multiple persons with same name - We've had cases in the past where there were two people in different cities with the same name. One person gets the payments, the other person gets the 1099. This happens when an agency goes to make a payment, they look the payee up in the vendor file. The person is there but the address and city are wrong. Instead of verifying if this is the correct individual, and the correct ID number, they add another suffix so the payment goes to the correct person at the correct address. At the end of the year all payments revert to the '00' suffix and the other person ends up with a 1099 for income he knows nothing about.
  4. Payment address vs 1099 address - Some companies have one address for payments and another address for all other correspondence. Make sure to set the 'all other correspondence' address up as the '00' suffix and the 'payments' address up as the '01' suffix. This will allow both the 1099 and payments to go to the proper addresses.
  5. Identification number changes - Anytime you are notified a vendor number is incorrect or has changed, let A & R know so we can shut down the incorrect number so no more payments may be made to the incorrect number. Other agencies may be making payments to this vendor and may not be aware of the number change. When we shut down a number because a new number is being used a note will be put in the vendor file referencing the new number so other agencies will be able to update their information. REMEMBER, any payments made year-to-date that calendar year will need to be journal vouchered to the new number.
  6. Payee Social Security Number vs Business FEIN - Watch payments to Consultants, Lawyers, Doctors, etc... When you initially ask them for their ID numbers make sure they are aware this is for tax reporting purposes. Every year we have to correct numerous 1099's because payments were made against an individual's SSN when they should have gone against their business ID number. If a professional is representing his firm he needs to provide you with the firms FEIN number, not his SSN.
  7. Corporations - All corporations except Legal firms and vendors receiving medical payments are exempt from the 1099 process. There is a 1099 indicator field in the vendor file. If you are setting up a new Corporate vendor that you know is not a Legal firm or a Medical firm then you should put a 'N' in the 1099 indicator field in the vendor file.
  8. Reimbursements - Employees - Some employees, due to their jobs, are reimbursed expenses for purchasing services or other reportable items for their agency. At the time of payment these items are properly coded to a 1099 reportable code, however this results in the employee getting a 1099. If you have employees falling in this category, give the 1099 Supervisor in A & R a list of the employees' names with SSN's. We will delete the 1099's out of the file before they are printed and mailed. This will save the employees from having to call us each year complaining about the 1099 they received.
  9. Reimbursements - Other - We send out numerous corrected 1099's each year to consultants, speakers, etc... that were reimbursed for their expenses and then received a 1099. If they submit receipts at the time of payment these expenses do not need to be reported on a 1099. They may be coded object 2621 and bypass the 1099 process. Any honorariums or other non-reimbursement type fees should still be coded to a reportable code.
  10. Initial contact - Your initial contact with a vendor is the best time to notify him of what to expect from you and to get the proper information for reporting purposes from him. If you know a payee will be getting a 1099 at the end of the year, make sure they are aware of this during your initial contact. In some cases there are three parties  involved in contracts, the State, the Vendor and a contractor working for the vendor. The payments are made payable to the vendor and the contractor. The vendor signs the check over to the contractor and in some cases has an agreement where the payment goes directly to the contractor. The State's agreement is with the vendor, so we must send him a 1099. He is responsible for issuing a 1099 to the contractor if necessary (many contractors are corporations). We get a lot of calls each year from vendors wondering why they got a 1099 when the money did not go to them. It would help if they were notified of the 1099 process at the time the original contract was signed.
  11. The main thing for agencies to remember is that they need to be very careful anytime they add information in the vendor file, since the vendor file is tied directly to the 1099 process which directly affects taxpayers reported earnings to the Internal Revenue Service. All vendor information should be doubled checked for correctness. If you look up a vendor in the vendor file and there is a discrepancy with some of the information, don't make assumptions, always verify the correct information. If you notice any errors in information in the vendor file notify the vendor file supervisor in A & R so we can update the file. Never add additional suffixes to a vendor number unless absolutely necessary. Always be aware that the lowest numbered suffix will be the one picked up for tax reporting purposes.
  12. Make sure payments that are 1099 reportable are coded to a reportable code (See PPM 7002 for reportable object codes). Make sure non-reportable payments (such as reimbursements with receipts) are not coded to a reportable code.
  13. If your agency has satellite offices make sure your personnel at these offices are aware of the 1099 reporting requirements and vendor file requirements. They usually have the direct contact with the vendors and are the ones who need to verify the correct vendor information and make the vendor aware of the 1099 reporting, if applicable.