+ OMB Circular A-123 (Appendix B): Improving ... - The White House

12.6 When must Form 1099 information be collected by the check writer?
The IRS requires that information be collected for reporting income to the IRS when a
convenience check is used for purchases. If a person is “engaged in a trade or business and, in
the course of that trade or business, pays any person $600 or more of rent, salaries, wages,
premiums, annuities, compensation, remunerations, emoluments, or other fixed or determinable
gains, profits and income during a calendar year, Internal Revenue Service (IRS) Code Section
6041 generally requires them to file an information return with the IRS and to furnish an
information statement to the payee.”
The IRS states that Agencies may rely on the merchant category code (MCC) in determining
whether a transaction is subject to Form 1099 reporting. IRS Form 1099 MISC is used to collect
that information. A MCC table which may be used to determine whether transactions are
reportable for Form 1099 reporting can be found at the following link:
http://usa.visa.com/download/corporate/resources/mcc_booklet.pdf.
Failure to file a correct information return (Form 1099) by the due date may result in a penalty
imposed by the IRS.
12.7 When are payments exempt from Form 1099 reporting?
Form 1099 reporting is restricted to services. Section 1.6041-3(c) of the Income Tax
Regulations exempt purchases of “merchandise,” as well as “telegrams, telephone, freight,
storage and similar charges” from these reporting requirements. See IRS Bulletin 2004-31,
Section 2 for more information and a complete list of exceptions.
12.8 What must Agencies include in the Agency Charge Card Management Plan and/or
Agency policy?
Agencies must develop and maintain written policies and procedures for the appropriate use of
convenience checks in accordance with the requirements of this document. At a minimum,
policies, procedures and internal controls for purchase cards will also apply to convenience
check usage.
In addition, the charge card management plan, policy, and/or procedures for convenience checks
must address:
• Restrictions on use (e.g., types of purchases, dollar limitations, etc.);
• Training requirements;
• Fees;
• Stop payment;
• Replacement checks;
• Independent reviews;
• Improper use;
• Departure of check writer (e.g., resignation, change of position, etc.);
Appendix B
OMB Circular A-123
(Revised January 2009)