Supreme Court Case Management System Allows Clerks to Comply with IRS Form 1099 Reporting
No one likes to receive a notice from the Internal Revenue Service (IRS), unless it is notification of a tax refund. But the federal tax code requires the annual reporting of monies paid to non-employees. Many Indiana clerks risk IRS assessment of penalties for failure to report monies paid to attorneys and law firms. Courts and clerks who have converted to the Supreme Court case management system, Odyssey, have a state of the art, IRS-compliant system for producing and reporting Form 1099.
Every entity, including the clerk, is required to issue a Form 1099 to each payee by January 31st of each year if, in the previous year, it disbursed $600.00 or more in payments to an individual, partnership, estate, trust or medical and legal service provider for services, rents or retirement. The reporting requirement also applies to interest payments of $10.00 or more per year. Payors issuing at least 250 Form 1099s per year are required to use automated reporting through a computer interface with the IRS.
Court judgments often include interest payments and assessments of attorney fees. Clerks determine the payees based on the wording of the judgment and frequently disburse monies to attorneys and law firms who receive the judgment on behalf of their clients. These payments should be included on Form 1099. The IRS has increased its enforcement of this last reporting requirement.
The payor is responsible for furnishing a form W-9 to each payee while the payee must complete it and return the form to the payor. The W-9 must provide the payee’s name, address and either a Tax Identification Number (TIN) or Social Security Number (SSN). If a payee fails to provide this information, the regulations require that the payor withhold 28% of the monies paid. Failure to collect this withholding subjects the payor to liability for the amount of uncollected tax.
This IRS legal requirement, as well as all other state fiscal requirements, has been appropriately configured into the new state case management system, Odyssey, which is being deployed by the Court to many clerks’ offices. County Clerks and/or Auditors can use Odyssey to track properly monies disbursed to attorneys and law firms. By issuing proper 1099 Forms with appropriately reported amounts, clerks who use Odyssey can avoid IRS penalties.
Questions about the Supreme Court’s case management system may be directed to Mary DePrez at 317/234-2604 (Fax: 317/234-2605) or [email protected].
