IRS Logo
Print - Click this link to Print this page

Information Return Reporting for State and Local Governments

General Rule:

Government entities are generally subject to the same information reporting requirements and must file information returns for each calendar year with respect to applicable payments made during the year in the course of its trade or business.

The payer must file Form 1099-MISC, Miscellaneous Income, for each person it has paid at least $600 for rents, services (including parts and materials), prizes and awards, or other income payments. If payment for services includes amounts paid for labor and parts, include both amounts on the Form 1099-MISC. For more information, see the Instructions for 1099-MISC.

Interest Income (1099-INT):

In general, a government entity must issue Form 1099-INT, Interest Income, to each person to whom it paid, during the calendar year:

$10 or more of interest on:

  • Accounts in banks, credit unions, or similar organizations
  • Tax credit bonds
  • Bonds, including tax-exempt state or local government bonds
  • U.S. savings bonds

or

$600 of interest on:

  • Damage awards
  • Income tax refunds
  • Other payments made in the course of governmental operations

Interest of less than $600 on a tax refund may be reported with the refund on Form 1099-G. See the Instructions for Form 1099-G. For more information, see the Instructions for Form 1099-INT and Form 1099-OID.

Certain Governmental Payments (1099-G):

A governmental entity must issue Form 1099-G, Certain Governmental Payments, to each person it made payments, during the calendar year, of:

  • Unemployment compensation
  • State or local income tax refunds, credits or offsets
  • Agricultural payments
  • Taxable grant payments

For more information, see the Instructions for Form 1099-G.

Special Information Reporting Rules:

  • Payments to Attorneys: Attorney fees of $600 or more paid the course of the business must be reported on Form 1099-MISC, box 7. This includes legal fees paid to corporations. This does not include gross proceeds paid to attorneys in connection with legal services in box 14.

  • Vendor Services: Payments made by a federal executive agency for any type of vendor services must be reported on Form 1099-MISC, box 7.

  • Payments Reportable to Corporations: In general, payments to corporations are exempt from the requirements; however, payments for medical or health care services and payments to an attorney are required to be reported on Form 1099-MISC, box 6. See the Instructions for Form 1099-MISC for more information.

  • Student Loan Interest Statements: If student loan interest of $600 or more from an individual is received during the year, report this amount on Form 1098-E, Student Loan Interest Statement.

  • 1099-R: Use 1099-R to report distributions from certain pensions, annuities, retirement or profit-sharing plans of $10 or more. For more information, see Instructions for Form 1099-R.

Backup Withholding:

Government entities are subject to requirements to withhold income tax of 28% from certain payments if the payee is not exempt from backup withholding and fails to furnish a correct taxpayer identification number (TIN), or a notice is received from the IRS indicating that backup withholding should begin on a payee.

Note: Backup withholding does not apply to wages or pension payments.

All entities are required to comply with the backup withholding rules. However, some recipients are exempt from having backup withholding imposed on them. Do not apply backup withholding to any of the following entities:

  1. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities.
  2. The United States or any of its agencies or instrumentalities.
  3. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2).
  4. A foreign government or any of its political subdivisions, agencies, or instrumentalities.
  5. An international organization or any of its agencies or instrumentalities.

State and local governments are required to comply with backup withholding rules. For more information, see the FSLG Backup Withholding Fact Sheet or Publication 1281.

However, certain payments are exempt from back-up withholding. For more information on these and other exemptions, see FSLG Backup Withholding Fact Sheet.

For more information on information return filing requirements, refer to the General Instructions for Forms 1099, 1098, 5498, and W-2G.

Payees Exempt from Backup Withholding:

  1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2).
  2. The United States or any of its agencies or instrumentalities.
  3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities.
  4. A foreign government or any of its political subdivisions, agencies, or instrumentalities.
  5. An international organization or any of its agencies or instrumentalities.
Page Last Reviewed or Updated: 28-Jan-2014