Setting up a Vendor for 1099 Miscellaneous Income Reporting
7.4 Setting up a Vendor for 1099 Miscellaneous Income Reporting
When a vendor submits a W-9 Form to the District, the vendor indicates on the W-9 Form which of the following types of Businesses applies to their organization:
Individual/Sole Proprietor Corporation Partnership Other
This information indicates whether the District needs to issue a 1099 Miscellaneous Income tax form to the vendor. The District will issue a 1099 Miscellaneous Income tax form to all non-Corporation Service Vendors who were paid in excess of $600 in a calendar year. Since some Goods Vendors provide services to the District, and some Service Vendors provide goods to the District, the District will code all Goods and
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PERALTA CCD
SOP04 PURCHASING DEPARTMENT
Document #:
03/02/10 STANDARD OPERATING PROCEDURE
Revised Date:
Supersedes Revised Date: N/A
Service Vendors who are not designated as a “Corporation” on their W-9 Form, as requiring a 1099 tax form.
Throughout the year, as the District A/P staff receives invoices from the vendors, the A/P Staff will code (in their Voucher system) the portion of the invoice that is associated with Goods, and portion that is associated with Services. This will allow the District to properly issue a 1099 tax form for the value of the services to the vendor. At the beginning of each calendar year (by January 31st), the District will issue a 1099 Miscellaneous Income tax form to the all non-Corporation Service Vendors who provided services in excess of $600 to the District for the previous calendar year.
In order to properly setup the vendor for 1099 reporting in the PROMT system, the following two steps must be followed: (See Business Process Document—Adding Vendors in the PROMT System for step-by step procedures.)
7.4.1 For all vendors whose W-9 Form indicates they are a Individual/Sole Proprietor, Partnership, and Other, you must check the “Withholding” box in the “Identifying Information” Tab in the Vendor Database. (Note: the Withholding box does not mean the District is withholding taxes. It only means we need to consider issuing this vendor a 1099 tax statement.)
7.4.2 After the “Withholding” box has been checked, navigate to the “Location” tab in the Vendor Database and select the “1099” field to enter the proper tax ID number for the vendor and designate the vendor for 1099 Reporting Only status.
8. PAYMENT FOR SERVICES—NOT TO EXCEED $600 In the past, the District had used the “Payment for Services—Not to Exceed $600” form in lieu of
a Vendor Application and W-9 Form. However, because many vendors provide services to our various Colleges, and may potentially exceed the $600 IRS threshold for 1099 tax forms, the District Purchasing Department no longer accepts this form in lieu of a Vendor Application and W-9 Form. All Goods and Services Vendors must fill out a Vendor Application and W-9 Form, regardless of the amount of services they will provide to the District.
9. VENDOR DATABASE MAINTENANCE AND INACTIVATING A VENDOR Annual vendor database maintenance is required to mark vendors that have not done business
with the District for the past three years as inactive. Annually, the Purchasing Staff Assistant will notify the Information Technology Department (IT) that it’s time to mark inactive vendors as such, and IT will then write the code to find all inactive vendors and change their status from “Approved” to “Inactive”. To re-activate a vendor see the “VENDOR CREATION AND UPDATES” section earlier in this procedure.