State filing of Forms 1099 varies state to state and can
differ from federal filing requirements, so employers should examine each
state’s requirements to ensure compliance, a tax expert said May 7 at the 2013 American Payroll Association
Congress in Grapevine, Texas.
What triggers Form 1099 reporting in states often is unclear,
said Marianne Couch, a principal at COKALA Tax Information Reporting Solutions
LLC. To determine whether Form 1099 reporting is required by a state, employers
should examine whether a state has jurisdiction over the payments made to
employees, she said. Employers should look at whether they are located or have headquarters
in the state and whether the payee is located or working in the state, she
said.
However, not all states that have jurisdiction over payments
require reporting by employers, Couch said. Alaska, Florida, Nevada, New Hampshire, South
Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax, so
they do not require Form 1099 reporting, she said. In addition, states that
have reporting requirements may not require reporting of all types of Forms
1099. Many require Form 1099-R reporting, but fewer require Form 1099-Misc
reporting. Some states require employers to report only if state income tax was
withheld, she said.
Of the 42 states that require Form 1099 reporting, 31 and
the District of Columbia participate in a data sharing program with the
Internal Revenue Service, Couch said. The Combined Federal-State
Filing Programprovides for cooperation between states and the Internal Revenue
Service, she said. While most states that participate in the program do not
require separate filing by employers of Forms 1099 to the state, 14 states require
direct filing: Alabama Colorado, Connecticut, Delaware, Georgia, Kansas, Maine,
Massachusetts, Minnesota, Mississippi, North Carolina, North Dakota, South
Carolina, and Wisconsin.
States that require direct filing for Forms 1099 increasingly
require electronic filing of state Forms 1099 and are reducing electronic
filing thresholds, Couch said. The federal filing threshold is 250, she said.
States do not automatically honor federal Form 1099 filing
extensions, so employers should check with each state for deadline extension
requirements and apply directly if necessary, Couch said.
Employers that wish to
use the Combined Federal/State Filing System should note that IRS requires an
electronic test file by Feb. 15, Couch said. The test file should be uploaded through
the online
Filing Information Returns Electronically (FIRE) system. Instructions
for the process are available in IRS Publication 1220.
By Allison M. Gatrone