Reporting a payment on behalf of another on 1099-MISC (2023 Update)

Is anyone familiar with circumstances in which payments of monies received on behalf of another are reportable other income payments in box 3 of Form 1099-MISC off the top of his head? Reg 1.6041-1(e)(1) does not appear to apply.

Reg 1.6041-1 (e) Payment made on behalf of another person

(1) In general. A person that makes a payment in the course of its trade or business on behalf of another person is the payor that must make a return of information under this section with respect to that payment if the payment is described in paragraph (a) of this section and, under all the facts and circumstances, that person

(i) Performs management or oversight functions in connection with the payment (this would exclude, for example, a person who performs mere administrative or ministerial functions such as writing checks at another's direction); or

(ii) Has a significant economic interest in the payment (i.e., an economic interest that would be compromised if the payment were not made, such as by creation of a mechanic's lien on property to which the payment relates, or a loss of collateral).

The examples in the regulation are about third parties paying contractors and subcontractors paying for work that has been verified to have been performed, or a mortgage holder ensuring that work was performed to restore damaged property to maintain his investment.

These are dues payments received from members by one organization on behalf of another. The dues are contributions for which no goods nor services are received. The organization is not a charity. There is a national organization, incorporated, and regional chapters, some of which are unincorporated.

Typically, a member writes one check for dues either to the national or the chapter. Monies received as dues payments are apportioned between the national and chapter.

The dues payments themselves are not in the course of trade or business and aren't reportable in the first place, so I don't believe they are reportable by the dispersing organization.

The national is incorporated. Not all chapters are incorporated. If it's reportable and I'm wrong about this, there may be an exemption from reporting on behalf to payments to the incorporated chapters. The reporting threshold may be $600 or more.

Reply to
Adam H. Kerman
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Based on the information provided, it appears that the organization is collecting dues payments on behalf of the national organization and regional chapters. The dues payments themselves are not considered to be in the course of trade or business and are not reportable income.

As for the payments made on behalf of the national and chapter organizations, the regulation you cited, 1.6041-1(e)(1) states that a person that makes a payment in the course of its trade or business on behalf of another person is the payor that must make a return of information under this section with respect to that payment, if the payment is described in paragraph (a) of this section and, under all the facts and circumstances, that person performs management or oversight functions in connection with the payment or has a significant economic interest in the payment.

It seems that the organization you described is not performing any management or oversight functions in connection with the payment, and it does not have a significant economic interest in the payment. The organization is simply collecting the dues payments on behalf of the national and chapter organizations and distributing the payments. Therefore, it does not appear that the organization would be required to report these payments on Form 1099-MISC.

Reply to
Smart Bean

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