Accounts and Reports

Over the past several years, the payment card industry (VISA, MasterCard, and American Express) has been working with the Internal Revenue Service (IRS) on a plan to facilitate 1099 reporting for purchasing card transactions. Draft regulations have been published, public comment heard, and hearings conducted. At this time, the IRS appears close to a decision approving VISA’s status as a Qualified Payment Card Agent (QPCA). What this means to the State of Kansas is that if VISA is approved as a QPCA, we can rely on the taxpayer identification numbers which are in the VISA system, and be assured that these numbers are accurate and periodically validated against the IRS database.

As of this time, we believe that this will be effective on January 1, 2008, which means that our CY 2008 1099s (to be issued in January 2009) must include 1099-reportable transactions made using the Business Procurement Card (BPC). The payment card industry and the IRS have further agreed that the Merchant Category Code (MCC) can be the basis for this reporting, and have designated which codes are and are not reportable.

The Division of Accounts and Reports is designing a process to automate 1099 reporting for all BPC and Business Travel Account (BTA) transactions made on and after January 1, 2008. We are in the early design phase of this process, and we will be working with UMB Bank as well as state agencies over the next several months to finalize procedures.

As we transition to this new reporting methodology, agencies currently processing JVs for 1099-reportable BPC transactions will need to process their December 2007 and January 2008 and subsequent transactions and billings as follows:

• All journal vouchers for 1099-reportable transactions appearing on the December 2007 billing (generally billed the 15th working day of the month) should be released by the agency in SOKI by noon on December 28, 2007.  These JVs reverse the payment transaction to UMB Bank’s Vendor Number and record the 1099-reportable payment against the vendor from whom the goods or services were obtained.
  
  
• All 1099-reportable transactions with a December 2007 transaction (swipe) date which do not appear on the December 2007 billing may be reported via SOKI JV if the agency has the necessary transaction information available.  However, if the agency does not have the necessary information available, and these transactions cannot be released in SOKI by noon on December 28, 2007, the agency should not report these in SOKI at all.
  
  
• All 1099-reportable transactions appearing on the January 2008 and subsequent BPC (and BTA) billings with a January transaction date and all transactions for subsequent months will be reported using a new automated central process, and agencies will no longer have to prepare SOKI journal vouchers to record these transactions against the vendor from whom the goods or services were obtained.

In addition to relieving agencies of the labor-intensive JV task each billing cycle, automating this process will also give agencies the opportunity to use their BPCs more (if they choose) since there will no longer be any reason to restrict payments for services paid with the BPC. This automated process will also allow the State of Kansas to be in compliance with reporting required transactions made using the BTA accounts.

We will keep you informed as this process evolves and will have more details at future agency gatherings and in informational circulars during the next calendar year.

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