12/16/2015

Scott Gilligan Legal Quiz

Digital Director answer of the week!

Your accountant tells you that the funeral home needs to send a Form 1099 to all ministers, musicians and other third party payees who were paid more than $600 per year from the funeral home through cash advances.  You do not believe that is correct. Who is right?

A.   The accountant.  Accountants are always right.

B.   The accountant.The U.S. Tax Code requires any business that pays out more than $600 to any person for services in a particular year must send that person a Form 1099 reporting the amount of compensation paid to the person. 

C.  You.  The IRS will never track you down. And if it does so, they will forgive you.

D.  You.  The IRS issued a private letter ruling back in 2000 that addressed this issue and concluded that the funeral home was simply serving as a middleman in paying out cash advances to third parties who the funeral home neither managed nor supervised. As such, the funeral home did not have to issue Form 1099’s to the third party payees.

D.  Many accountants are unaware that the IRS issued a private letter ruling 15 years ago which holds that funeral homes that pay ministers, musicians, florists, and other third party providers as part of a cash advance arrangement are not required to issue Form 1099 to the third party payee.  The IRS held that in these cases the funeral home is not supervising or managing the activities of the third party and is merely serving as a middleman in the payment scheme.  As such, they are not responsible to issue a Form 1099.  If OFDA members need a copy of the private letter ruling for their accountant, they may contact the OFDA office.