Last week, we used an example of Peter, a new businessowner contracting work by people based out of a number of different locations, and his efforts to complete his Informational Returns .
Because his contractors were based in different states, Peter would also be required to send a copy of your Informational Returns to the payee’s state or city. For example, he paid a designer in Michigan who performed her service remotely from her office there. Therefore, Peter is required to file the 1099-Misc with Michigan and the relevant local governments, even when there was no MI tax withholding.[1]
When Peter paid a lawyer in Virginia, he should note that the Commonwealth of Virginia does not require the 1099 payer to file the form unless there is Virginia income tax withheld. Since there was no VA tax withheld, he can skip the filing a 1099-Misc.
For the small businesses that Peter contracted in Maryland, he should note that The Comptroller of Maryland is a participant in the IRS combined Federal/State filing program.[2] Since the Internal Revenue Service will forward the electronically filed returns to the State of Maryland, he doesn’t have to file a separate copy of the 1099-Misc.
In the case of his marketing contractor in the State of Connecticut, 1099 payers are required to provide copies of 1099-Misc to Connecticut, regardless of the withholding of CT tax. However, the State of Connecticut is also a participant of the IRS combined Federal/State filing program. So, he can skip sending an extra copy to the state, because his federal 1099-Misc will be forwarded to the state automatically.
This example shows how daunting task Informational Returns can be, when all fifty states have different Informational Return filing requirements. However, the IRS’s combined Federal/State filing program has made great strides in simplifying this process, and currently 32 states are participating in this program. Until this program covers all fifty states, though, it is always a good idea to go the extra mile to check with State or municipal filing requirements of Informational Returns.
[1] Public Act 211 of 2003. In fact, this requirement was repealed three weeks ago. Nevertheless, there is no detailed instruction about this change in the MI State or its municipal governments’ web-sites.
[2] You can find more about the program at the IRS Pub. 1220
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