CAR Newsletter - January 2023

Volume 33 | N0. 7 | Fiscal Year 2023 | Jan. 13, 2023

PAYROLL

• Email Scam for W-2 Information
• New for 2022 IRS Reporting – Form 1098-F Fines, Penalties and Other Amounts
• Searching for Individuals by Social Security Number
• Social Security Number Changes
• Employee Direct Deposit Verification of Bank Routing Number
• Updating Employee Bank Routing Numbers
• W-2 and 1099 Instructions
• Forms W-2 & W-2C Terminology
• Form W-2 Corrections
• Employee Tax Refunds
• Reporting Requirements for Repayments of Prior Year Wage Amounts
• Annual Withholding Tax Exemption Certification for Military Spouse
• Tax Year 2021 – IRS Backup Withholding Notice
• 1099 File Format – Outside Agencies
• 1099 NEC & MISC Forms and Corrections

HIGHER EDUCATION ENTITIES

• Federal Tax Payments Scheduling

ACCOUNTING

• Mileage Rate for 2023
  
• Per Diem in Lieu of Subsistence Update
• OMES Form 19
• Updated Travel Training Website
• Per Diem Calculator - Miscalculations
• Meal Deductions on the First and Last Days of Travel

AGENCY NEWS

• Notification of Change Procedures - OST
• NACHA Rule Reminder – Egregious Violation
• PCI Reminder

TRAINING

• Payroll Law
• Financial Query Training

The Internal Revenue Service and state tax agencies have once again renewed their warning about email scams requesting employee Forms W-2 from company payroll or human resources departments.

Agencies are urged to double check any executive-level or unusual requests for lists of Forms W-2 or Social Security numbers. Cybercriminals are tricking payroll and human resource officials by disguising emails to make it appear as if it is from an organization executive. An email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2. The thieves then attempt to file fraudulent tax returns for tax refunds and/or post the information for sale on the darknet. Personnel should pay close attention to the email address of the sender and confirm requests for any sensitive data verbally, using previously known telephone numbers or in-person.

As part of a Security Summit effort, the “Don’t Take the Bait” education series continues to focus on raising awareness of the critical need for increased computer security and caution when reviewing email inboxes – specifically email scams that identify themselves as a friend, customer or company. The series can be viewed on the IRS website.

The IRS is investigating phishing emails. If an agency receives an email of this type, immediately contact Lisa Raihl at 405-521-3258 or Jean Hayes at 405-522-6300.

The Tax Cuts and Jobs Act of 2017 added Internal Revenue Code (I.R.C.) Section 6050X, which imposes a reporting requirement on certain government entities involved in settlements where I.R.C. Section 162(f) applies. Section 162(f)(1) disallows any deduction for amounts paid or incurred by a taxpayer, to or at the direction of a governmental entity, for violation of a law or the investigation or inquiry by such entity into the potential violation of a law. However, Section 162(f)(2) provides exceptions for amounts related to restitution, remediation and costs incurred by a taxpayer to come into compliance with a law.

Beginning with tax year 2022, the IRS requires governmental entities to file IRS Form 1098-F for amounts required to be paid pursuant to a suit, court order or agreement with respect to any violation of law or the investigation or inquiry into the potential violation of a law, if the aggregate amount involved in all suits, orders or agreements in relation to the violation of the law equals or exceeds $50,000 (threshold may change in future years).

• Reporting is required for a suit, order or agreement that becomes binding on or after Jan. 1, 2022.
• The amount required to be paid includes costs to provide services or to provide property.
• A separate Form 1098-F must be filed with respect to each payer that is a party to the suit, order or agreement.
• Form 1098-F is not required for any person that doesn’t have a payment obligation or obligation for costs to provide services or to provide property.
• Forms are due to payers by Jan. 31, 2023.

Instructions for IRS Form 1098-F can be found here. 

A reporting document has been created for state agencies to provide OMES with the required information to create the 1098-F forms. Please complete and submit the reporting document just as soon as possible but no later than Jan. 25, 2023, to: payrollreporting@omes.ok.gov.

NOTE: Institutions of higher education will not submit any information to OMES for 1098-F reporting. Please consult your tax accountant if you feel reporting may be required.

A search by Social Security number (SSN) will provide information for the correct individual if the person already exists in Workday@OK. Searching by name or any other criteria can cause an agency to identify a person that isn’t truly the one they want. To search by SSN, go to the search bar and enter “ID:” and then the nine-digit SSN without dashes. (ID:123456789).

Employees and agencies have access to update employees’ Social Security numbers (National ID) in Workday@OK. Once an update is made, the task comes to OMES Central Payroll to verify the change. We use the Social Security Administration’s Social Security Number Verification Service (SSNVS) to verify the name and SSN match. If the name and SSN match to the SSNVS, we will approve the change. If the name and SSN do not match, we will deny the change.

If an agency finds an employee is listed with the same SSN under two or more different EmplIDs, please contact the OMES Service Desk. Employees with multiple EmplIDs must be reviewed and, if needed, have information combined onto the one correct record.

With employee self-service, direct deposit information should be entered directly by employees. If an agency has to enter an employee’s direct deposit information, please remember that bank deposit slips should NOT be used to get the bank routing/transit number for setting up direct deposit information. A voided check from the employee is the most reliable method.

If the employee does not have a voided check or wants to deposit into another type of account, have the employee call the bank directly to get the routing/transit number. A bank routing/transit number should never start with the digit 5. This indicates a branch of the bank and will cause the direct deposit to fail. A direct deposit that fails will not leave OST to be paid and additional processing by the agency will be required to pay the employee.

Agencies may, on occasion, receive a report generated from the Office of the State Treasurer’s current ACH application. OST’s current ACH application automatically updates bank routing numbers based on the latest table of Federal Reserve Bank routing numbers. This update allows the items to continue processing for payment.

When an update is made, the Participant Old/New Routing Number report is generated listing the employee, the incorrect bank routing number, and the correct bank routing number. This report is distributed to agencies to update employee banking information. These updates must be made so transactions will continue to process without interruption. This report is sent out by OMES to the contact listed for the Updated Banking Information report.

OMES will have W-2s ready electronically by Jan. 17, 2023. Employees that do not elect to receive electronic ONLY for their W-2 will have their form printed centrally on Jan. 27, 2023, and mailed on Jan. 30, 2023. The attached W-2 and 1095-C user guides have been created to assist employees in opting out of receiving the W-2 and 1095-C by mail. All employees should have received an email notification with the user guides attached. Please encourage employees to select electronic only for both documents.

1099 Misc and NEC files will be ready for release on Tuesday, Jan. 18, 2023. Agencies will receive the files electronically and be required to print the forms for mailing. See 1099 distribution article below.

The following are terms frequently used for different types of W-2s based on when the form is completed.

Original W-2: Form W-2 that was originally issued to an employee by Jan 31.

Reissued W-2: Original Form W-2 reissued to an employee when an original form is lost, misplaced, not received, etc. Write ‘REISSUED STATEMENT” and the reissued date (MM/DD/YYYY) on the employee’s new copies. A reissued W-2 can be produced at any time because the data is not being changed.

Corrected W-2: A Form W-2 used to correct the original W-2 when an error has been discovered, before OMES submits the file to the Social Security Administration. “CORRECTED” must be written on the employee’s new copies along with a corrected date (MM/DD/YYYY).

NOTE: Corrected W-2 forms must be delivered to OMES by Jan. 25, 2023. Please send the original W-2, a copy of the corrected form and a memo explaining why the correction is needed. Do not send copies of checks or other items.

W-2C: The form used to adjust the original W-2 (or corrected W-2) information when an error has been discovered after OMES has submitted the file to the SSA.

NOTE: W-2Cs must be submitted to OMES as soon as completed and will be filed with the SSA. Please send a copy of the original W-2, Copy A of the W-2C and a memo explaining why the correction is needed. Do not send copies of checks or other items. The employee should receive a copy and the agency should keep Copy D for their records.

Corrected W-2 forms must be delivered to OMES by Jan. 25, 2023, for the corrections to be in the submission file. Due date for submission of Form W-2 information to the Social Security Administration is Jan. 31, 2023.

Please send the original W-2, a copy of the corrected form and a memo explaining why the correction is needed. If the correction is due to a statutory canceled warrant that is not to be replaced, include a letter asking that the warrant not be replaced.

Note: When a warrant has been canceled by statute there is no reason for a W-2 correction unless the payment was made in error. If it was a valid payroll payment, the employee is still entitled to a replacement warrant; therefore, the W-2 reporting is proper.

Any correction needed after this date must be sent to OMES as a W-2C for us to notify the SSA. This will ensure reporting is as accurate and complete as possible.

Employee payroll tax withholdings are not authorized to be refunded to an employee once withheld from payroll. Refunds will not be given for those employees who did not submit a W-4 in time for payroll processing. Employees should enter W-4 changes directly in Workday@OK. Agencies that enter employee W-4 changes should have a deadline for employee submissions. The effective date should not be backdated in an attempt to refund taxes to the employee; this is not authorized by the IRS.

Repayments from employees made in the current year (2023) that are for overpayments of wages in a prior year (2022 or earlier) must be repaid at the gross overpayment amount in accordance with Internal Revenue Service regulations. A Corrected W-2 or a W-2C, as applicable, must be completed and sent to OMES. Only Social Security and Medicare wages and taxes are corrected on the Corrected Form W-2 or W-2C.

DO NOT correct federal or state taxable wages or income taxes. The employee received and had use of the funds during the year of overpayment and as such, the amounts are taxable for federal and state purposes. The employee may be able to take into account such repayments on their current year (2023) income tax return. Please advise them to speak to their tax accountant. Additional instructions for Form W-2 and Form W2-C are available on the IRS website. For assistance, contact Jean Hayes at 405-522-6300, jean.hayes@omes.ok.gov or Lisa Raihl at 405-521-3258, lisa.raihl@omes.ok.gov.

Agencies are reminded to review and ensure employees have a valid OTC Form OW-9-MSE, Annual Withholding Tax Exemption Certification for Military Spouses, on file for 2023. The form must be completed annually to continue the exemption for 2023. If a new exemption form has not been submitted for 2023, the employee’s withholding status must go back to the last valid Form W-4 on file. Employees can enter the military spousal exemption directly in Workday@OK for their OK W-4 entries. The system will send notification of documentation and review/approval needed prior to the exemption taking effect. When an employee submits a paper Form OW-9-MSE to the agency, they must also submit a completed Form OK-W-4. If you receive an exempt Form OK-W-4 with Form OW-9-MSE after processing a payroll, do not process a tax refund to the employee or submit one to OMES for processing. The new exemption form will take effect going forward; it is not retroactive to the beginning of the year.

As a reminder, a nonresident spouse of a nonresident service member may be exempt from Oklahoma income tax on income from services performed in Oklahoma. OTC Form OW-9-MSE must be completed and returned to the employer with the required documentation, along with Form OK-W-4. The instructions contain a list of requirements the employer must meet before the withholding exemption will be allowed. The forms must be completed each year the exemption is to be claimed.

This exemption will require an update to the employees' State Tax Election in Workday@OK. The Military Spouse Exemption box should be selected and will kick off the approval process. This does not affect the Federal Tax withholding. Federal withholding will still be calculated based on the IRS Form W-4 in effect.

The Oklahoma Tax Commission has additional information and a section of Frequently Asked Questions on its website.

OMES is expecting the tax year 2021 backup withholding notice from the IRS and will send to agencies any mismatches. This notice identifies payees with a taxpayer identification number (TIN) missing or an incorrect name/TIN combination. Agencies must obtain correct information from the payees and resolve the discrepancies. All corrections must be reported to OMES Vendor Registration. The information will be TIN matched to verify accuracy and to update the vendor file as needed.

Backup withholding may need to begin on these payees. When a payee’s information does not match the IRS records for two out of three years, the entity is required to apply backup withholding to future payments until the mismatch is corrected. The backup withholding rate is 24%. 

IRS Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), provides the actions an entity must take when notified of a mismatch, which includes the requirement to apply backup withholding until the correct information is provided.

Backup withholding held from miscellaneous claim payments must be submitted to OMES on the same day as the vendor payment is completed. Interagency wires for backup withholding should be payable to the State Contribution Fund (Vendor 0000000467, LOC #0001, ADDR #1). After processing a payment for backup withholding, send details of the payment to OMES at payrollreporting@omes.ok.gov.

Once correct information is provided, verified and entered in the system for correct reporting, the agency may stop applying backup withholding.

Any agency needing to submit an additional file for 1099M reporting should use the format listed in the CAR forms page link below. Instructions are provided in a separate link as well as a listing of 1099M reportable account codes. Due to the sensitive nature of the data, please submit your file by a password protected email to Alicia.Reel@omes.ok.gov. It is recommended that these agencies submit a test file to have a name and TIN match done with the IRS.

The file instructions and format can be found on the CAR Forms page of the OMES website:

• 1099 Detail File Format – Outside Agencies
• 1099 Instructions – Detail File Format
• 1099 Account Code Cross-Reference

NOTE: This does not apply to higher ed institutions since they do their own 1099 reporting.

1099 NEC and MISC forms will be ready for email distribution after 10 a.m. on Tuesday, Jan. 17, 2023. Please review the 1099s you receive and advise OMES of any changes which you determine necessary. If you have several corrections, please contact Alicia.Reel@omes.ok.gov to create new 1099s with your corrections and forward them to you. Please return as many changes as possible to OMES prior to Jan. 25, 2023.

Please note the following procedures pursuant to such changes in the 1099 documents:

• For missing addresses or address changes, send a copy of the 1099 which includes the address you added/changed. Include a notation as to the type of change as well as an updated W-9.
• For name or FEI/SSN changes, send a copy of the original and the amended document as well and an updated W-9 or Vendor/Payee form so we have appropriate documentation for the changes.
• For all amount changes, please send appropriate documentation which explains the nature of the transaction changes.
• Any changes that need to be made after Jan. 25, 2023, still need to be sent to OMES as soon as possible and we will forward the information to the IRS.

In all instances, please make sure that your documentation includes enough information for us to understand your changes, the reasons for them and a contact person in case we still have questions.

FYI:

• As in the recent past for 1099 reporting – To ensure security on Form 1099M & 1099 NEC, we will truncate the SSN and FEI numbers so that only the last four digits are shown, ex. xxxxx1234. If you have an inquiry on any 1099 NEC or MISC, please provide OMES with the Account Number which is found in the lower left portion of the form.
• In January, before submitting our 1099 file to the IRS, we will TIN match the file with the IRS e-Services system. Any vendors that mismatch in this process will need to be corrected before we can submit our final file to the IRS on Jan. 31, 2023.

Questions or comments should be directed as follows:
Alicia Reel, 405-522-1099, Alicia.Reel@omes.ok.gov.

NOTE: This does not apply to higher ed institutions since they do their own 1099 reporting.

Please be aware of the processing time when entering the tax journal entry and scheduling the tax payment on the OST ACES system to ensure payments are entered and set to pay by the liability due date. Tax payment information must be provided by 10 a.m. for the payment to be released that day. With the release one day, the effective date must be at least one day in the future.

The IRS announced an increase in the mileage reimbursement rate effective Jan. 1, 2023, to $0.655 per mile. This is an increase from the $0.625 IRS rate for the second half of 2022 (refer to Internal Revenue Notice 2022-234, released Dec. 29, 2022). All state agencies may use the IRS rate for travel incurred on and after Jan. 1, 2023.

The Trip Optimizer law is still in place for determining the lowest cost of transportation for travel on state business. The new $0.655 rate is now used for the mileage calculation and for the OMES mileage reimbursement amount referenced in paragraphs E and F of 74 O.S. § 85.45l.

To match federal travel reimbursement guidelines, the daily per diem in lieu of subsistence allowance ($10 per day) is no longer available for travel occurring on or after Nov. 1, 2022.

An updated OMES Form 19 is available on the OMES website under the CAR Forms section. The new form has some major changes and will be required for all per diem claims beginning on or after Nov. 1, 2022.

The OMES Travel Training Website has been updated to include the legislative changes that took place on Nov. 1, 2022. In addition, the training website shows examples of how to fill out the new OMES Form 19. We strongly encourage agencies to review the training website and share the website with travelers.

A per diem calculator (perdiemcalc.net/gsa/) was mentioned in the September 2022 Newsletter as being a useful tool to calculate per diem using the new method. It has come to our attention that this tool is deducting meal totals incorrectly on the first and last days of travel. It is our recommendation that agencies discontinue use of this tool to avoid future voucher rejections.

Meals should be deducted at the full amount on the first and last day of travel. In the event the deduction total on either the first or last day of travel reduces the reimbursement total for the day to less than $5, the traveler will be paid $5 as a flat reimbursement for incidental expenses for the day. At no point will a traveler receive less than $5 for each day in travel status.

You must handle Notifications of Change in a timely manner.

A Notification of Change is a non-dollar entry that the receiving deposit financial institution transmits to the ACH operator for distribution back to the originator through the originating deposit financial institution. When the RDFI receives a prenotification or a live dollar entry that contains incorrect information, it creates this notice, which:

• Identifies the entry that has been received at the RDFI.
• Pinpoints the specific information on that entry that is incorrect.
• Provides the correct information in a precise format so the originator can make the change.

Responsibilities of agencies

Agencies are required to handle the NOCs in a timely manner. The information reported in an NOC should be corrected within six banking days of receipt of the NOC information or prior to initiating another entry to the receiver’s account, whichever is later. However, agencies should not wait if the change can be made earlier.

Agencies should implement any necessary system/process edits ASAP to ensure that any subsequent transactions to the recipients in question cannot be initiated until the information reported in the NOC has been updated.

Fines and penalties for rules violations

If the agency does not correct the incorrect data upon receipt of the NOC, prior to initiating another entry, they may be subject to fines and/or penalties imposed by NACHA for the violation. The fine for an infraction of these rules is determined on an evaluation by NACHA and can range from $5,000 to $500,000 per month. Any fines or penalties assessed by NACHA and JPM for rules violations are chargeable to the violating agency. Repeat offenders may be subject to further consequences as repeated offences could jeopardize the state’s ability to participate in the NACHA network.

On Jan. 1, 2021, NACHA implemented a change to the NACHA Operating Rules. The new rule defined an egregious violation as a willful or reckless action by a financial institution, originator or third-party sender, involving at least 500 entries or multiple entries totaling a minimum of $500,000.

In addition to its other responsibilities and oversight functions, the ACH Rules Enforcement Panel will have the authority to determine whether a violation is egregious. 

The sanction for an egregious violation can be up to $500,000 per occurrence and a directive to ODFI to suspend the originator or third-party sender.

Please review and update the current agency controls in place to avoid any violations.

For more information about the new rule, please reach out to OST at TreasuryServices@treasurer.ok.gov.

Payment Card Industry Data Security Standards (PCI-DSS) assessments should be completed by Feb. 28, 2023. OST has contracted with Cerberus Sentinel (formerly True Digital), a PCI Qualified Security Assessor, to provide state agencies assistance in completing their PCI-DSS assessments. Please email OST Treasury Services TreasuryServices@treasurer.ok.gov for more information or if you need assistance with accessing the assessment portal.

Presented by Fred Pryor Seminars.

Online seminars.

For more information, please visit their website.

Are you interested in learning more about running financial queries? We are enrolling now for the Financial Query training. Contact slstraining@omes.ok.gov if interested.