Procedures for Paying 1099-required Services

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dufekmc
New Member
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Joined: Fri Dec 26, 2014 11:37 am

Procedures for Paying 1099-required Services

Postby dufekmc » Wed Sep 07, 2016 7:04 pm

Scenario: Stake pays a security guard for service at various stake-level fundraiser activities throughout the year. The security guard has been paid in cash out of the money raised during the fundraiser before money is recorded and deposited into Church accounts. Therefore, no record was ever kept of payment, nothing was ever hitting MLS related to payment for services or who was paid, and no 1099-MISC was issued.

Questions: Obviously, this is not good and needs to be changed. We'd like to put a formal procedure in place to track this, and issue a 1099-MISC in accordance to IRS and Church policy (noted here: http://tech.lds.org/wiki/Form_1099-MISC) if paid over $600/year.

So, here we go:
  1. Is it ok to keep paying cash in this manner so long as we get some kind of receipt or affidavit of payment and purpose?
  2. Or, should we instead deposit all cash, and pay security guard via check? If we do this, should we receive a bill or invoice from the security guard as payment backing for the check/expense?
  3. How do we go about tracking this in MLS?
    1. If check, we'd categorize the expense - is there a specific category/sub-category you'd recommend creating/using?
    2. If cash, how do we track this?
  4. Is there an easy way in MLS to identify and/or track who needs to have a 1099-MISC issued, or should we track this external to MLS?

Any guidance would be appreciated.

eblood66
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Posts: 2027
Joined: Mon Sep 24, 2007 8:17 am
Location: Cumming, GA, USA

Re: Procedures for Paying 1099-required Services

Postby eblood66 » Wed Sep 07, 2016 7:49 pm

dufekmc wrote:1. Is it ok to keep paying cash in this manner so long as we get some kind of receipt or affidavit of payment and purpose?

No. All expenses should always be paid by check (or equivalent).

dufekmc wrote:2. Or, should we instead deposit all cash, and pay security guard via check? If we do this, should we receive a bill or invoice from the security guard as payment backing for the check/expense?

Definitely deposit all cash and pay by check. You should ask the guard for a bill, invoice or receipt of payment. Something that documents the need to make the payment or that the payment was made and for what purpose. This is the same as for any other expense.

dufekmc wrote:3. How do we go about tracking this in MLS?

All the cash should be deposited into a sub-account of the 'Other:Authorized Member Financed Activities' category. This sub-category should be named using the purpose for which the funds are being raised. The expense would then be paid out of that category.

dufekmc wrote:Is there an easy way in MLS to identify and/or track who needs to have a 1099-MISC issued, or should we track this external to MLS?

There isn't any way to track that in MLS. You can run a report in MLS to show how much each payee received (in MLS select Finance > View/Update Expenses from the menu and then select 'Summary by Payee using the Report drop-down box). That can help identify potential candidates but you still have to check who the payee is and what the nature of the expenses were in order to determine whether a 1099-MISC is required.

You should read the article The "Other" Category in the help center carefully for more information on how the Other category should be used in situations like this. Also make sure that you and the stake presidency are familiar with Handbook 2 section 13.6.8 which describes what kind of fundraising is allowed. If the fundraising doesn't follow policy then it's usually very difficult to follow policy for handling the money involved.


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