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State Reporting Requirements for Information Return Reporting

Thirty-three states, as well as the District of Columbia, require information returns tax reporting for various types of non payroll compensation and other miscellaneous income. While the filing requirements and dollar reporting thresholds may vary (See paragraphs 706 and 707), the requirement to file a state return is generally contingent on the reporting requirements for the state in which the 1099 recipient (individual, sole proprietor, medical corporation, partnership, trust, or estate) resides. As of January 1994, the states not requiring tax filing for information returns are Alaska, Colorado, Florida, Kentucky, Michigan, Nebraska, Nevada, New Hampshire, North Carolina, Ohio, South Dakota, Texas, Utah, Vermont, Virginia, Washington, and Wyoming.

For example, a contractor residing in South Carolina performs services at the University of North Carolina at Wilmington (UNC -W). The services were performed in North Carolina which does not require an information returns filing. However, the contractor lives in South Carolina which does require an information returns filing. Under these circumstances, UNC-W should submit either a paper copy or electronic return to the South Carolina Tax Department for the amount of income paid to the contractor.

Of the thirty-four states requiring a separate state tax filing, twenty-six participate in the IRS Combined Federal/State Filing Program. This means that the IRS will accept, upon prior approval, magnetic media containing state reporting information. Under this program, the IRS forwards the information to the participating states free of charge. However, please note that Forms 1098, Mortgage Interest Statement, 1099-A, Acquisition of Abandonment of Secured Property, 1099-B, Proceeds from Barter Exchange and Broker Transactions, 1099-S, Proceeds from Real Estate Transactions, and W2-G, Certain Gambling Winnings, cannot be filed under this program.

To request approval to participate in the Combined Federal/State Filing Program, a test file in the prescribed IRS format and coding, Form 4804, Transmittal of Information Returns filed on Magnetic Media, and a letter requesting permission to participate in the program, must be submitted to the Martinsburg Computing Center between November 1 and December 1 of the reporting year. If the submitted test file is acceptable, the IRS will send the agency an approval letter and a Form 6847, Consent for Internal Revenue Service to Release Tax Information. Agencies must complete and return this form to the IRS by December 31.

See Also

Criteria for Filing State Information Returns

State Taxing Agencies