Written by Andrew Coats.
NC State University is required by the IRS to provide information returns to vendors, individuals, etc. who have received payments from the university for the following:
- Rent
- Royalties
- Prizes
- Awards
- Physician or medical services
- Healthcare
- Attorney fees
- Non-employee compensation
Who receives a 1099, and who receives a 1042-S form?
Information returns can take the form of a 1099 or a 1042-S, depending on the payee’s status. U.S. citizens and foreign nationals, who are resident aliens for tax purposes, will receive a 1099. Foreign national individuals who are in nonresident alien status and foreign national entities will get a 1042-S. Information reporting to nonresident individuals and entities is more complicated and encompassing than reporting for U.S. citizens, as there are no minimum dollar thresholds.
Each year, Tax Compliance processes more than 3,000 1099s to vendors paid by the university through the Accounts Payable system. Along with 1099s, any AP payments to non-U.S. individuals or entities will receive a 1042-S, which is also part of the information reporting process.
Who is involved in the information reporting process?
To ensure the year-end informational reporting is timely and accurately prepared, many departments and individuals are involved in the reporting process within the University Controller’s Office: Tax Compliance, Accounts Payable and Payroll. Additionally, Enterprise Application Services (EAS) staff works hand-in-hand to ensure the system processing runs smoothly. In addition to the above central campus offices, university colleges and departments perform a critical role by entering the appropriate account codes. This is one key component which is utilized during the reporting process and essential to accurate reporting to federal and state regulatory agencies.
What is PaymentWorks?
To assist in accurately reporting the university’s information returns, the university uses its third party supplier management system, PaymentWorks, to gather supplier information that is necessary for both payment and information reporting. PaymentWorks has a built-in functionality that allows for Taxpayer Identification Number (TIN) matching with the IRS to assist in verifying that the name and TIN match with the IRS. This process helps eliminate potential fines from the IRS.
PaymentWorks allows suppliers to input the necessary information from form W-9 and the W-8 series, which is immigration documentation to verify information needed in determining payment eligibility, tax residency and TIN matching mentioned above. Once a supplier is verified in PaymentWorks and the details flow to the Financial System, the 1099 process reviews the type of payment (services, rent, etc) to determine if the payments are reportable based on the vendor type (corporation, partnership, sole proprietor, etc). Additional logic in the program determines if a vendor has met the IRS dollar threshold requirement for their type of 1099.
Additional Information
Please refer to the University Controller’s Office 1099 & Reporting requirements and the Finance Division Knowledge Base. For questions, please contact Tax Compliance at 1099_questions@ncsu.edu.