TAX REPORTING AND WITHHOLDING REQUIREMENTS FOR …



|OFFICE OF THE COMPTROLLER 815 CMR 5.00 PAYMENT AND TAX REPORTING OF SETTLEMENTS AND JUDGMENTS |

|EMPLOYMENT CLAIMS - All Claims Arising Out of Employment with the Commonwealth - All Employment Settlements and Judgments will be Processed in Accordance with these rules |

|TYPES OF DAMAGES |Are Damages |Payment System |PAYMENT MUST BE PAID UNDER THIS TIN|Is Payment Subject to State, |Tax Reporting |Tax Reporting for Attorney or|

|For payment purposes, employment related damages |Considered |HR/CMS Payroll - Earnings Code |(Tax Identification Number) for IRS|Federal, Medicare Tax or |Form to |3rd party Payee? |

|are classified into the following categories |Wages? |MMARS Object Code |and DOR purposes |Retirement Withholdings? |Claimant |(Manual) |

|based upon tax treatment | | | | | | |

|Lump sum. Damages awarded without a specific | |Payroll | |YES | |YES |

|breakdown or allocation, or as emotional |YES* | |Claimant TIN |Mandatory Tax Withholdings prior |W-2 |Manual Tax reportable to |

|distress, compensatory damages, consequential, | |S/J (A11 – state employee) | |to payment: (not negotiable) | |Attorney 1099-MISC (Box 14) |

|overtime, front pay or all inclusive damages to | |SJC (C11 – contract employee) |Joint checks to attorney or 3rd |State income tax 5.25% | |or (Box 3) for 3rd party) if |

|settle a claim. | | |party not available for current |Federal income tax 25% | |named payee on check, for the|

|*All lump sum payments are treated as wages for | |Accounts Payable: |employees |Medicare 1.45% unless exempt | |amount of the check |

|tax reporting and withholding purposes and will | |APJ (A11 - state employee) | |Personal tax exemptions not used | | |

|have withholdings made prior to payment. | |APC (C11 - contract employee) | | | | |

|Attorney Fees, Costs. A Specific amount | | | |NO | |YES |

|designated as attorney fees in a settlement or |NO |MMARS |Attorney TIN |Claimant responsible for taxes on|Manual |Tax reportable to Attorney |

|judgment. Attorney fees must be awarded as a (1)| | | |amount. |1099-MISC (Box |1099-MISC (Box 14) for the |

|specific amount and (2) specifically identified | |(E52) Attorney TIN (Sole or Joint) | |Claimant may have a state/federal|3) |amount of the check |

|as Attorney fees or court costs. Attorney fees | | | |tax deduction for employment | | |

|and costs are normally paid directly to the | | | |discrimination claims | | |

|Attorney. | | | | | | |

|Punitive Damages. Damages must be awarded as a | |Payroll (TBD) |Payroll – Claimant TIN |NO | |YES |

|(1) specific amount and (2) specifically |NO |OR |OR |Claimant responsible for taxes on|1099-MISC |If Joint check is paid to |

|identified as punitive damages. | |MMARS |MMARS |amount. |(Box 3) |Attorney, Attorney will also |

| | |(E50) Claimant TIN Sole Payee |(E50) Claimant TIN Sole Payee |Punitive Damages generally | |receive a 1099-MISC (Box 14) |

| | |(E51) Claimant TIN (Joint w/Attorney)|(E51) Claimant TIN (Joint |taxable to Claimant. | |for check amount. |

| | |(E52) Attorney TIN (Sole or Joint) |w/Attorney) |Estimated taxes may be required | | |

| | | |(E52) Attorney TIN (Sole or Joint) |prior to filing tax return. | | |

|Interest. Pre and Post Judgment interest on | | | |NO |1099-INT if |YES |

|damages and Attorney fee interest. Payment |NO |MMARS (E29) |Claimant TIN |Payee responsible for taxes on |over $10 and |Tax reportable to Attorney |

|instruction from CTR will determine if interest | | |or |amount. |paid under |1099-INT if processed under |

|is payable through HR/CMS or MMARS. | |Payroll (INT) |Attorney TIN |Interest is generally taxable. |Claimant TIN |Attorney TIN and over $10. |

|Non-tax reportable damages. Limited to | |HR/CMS (TBD) | | | |YES |

|documented medical expenses for emotional |NO |OR | |NO |None |Tax reportable to Attorney |

|distress. There are no personal injury claims | |MMARS | | | |1099-MISC (Box 14) or (Box 3)|

|for employment related damages that are tax | |(E53) Claimant TIN Sole Payee |(E53) Claimant TIN Sole Payee | | |for 3rd party if named payee |

|exempt. Employment injuries default to workers | |(E54) Attorney TIN (Sole or Joint) |(E54) Attorney TIN (Sole or Joint) | | |on check for the amount of |

|comp under G.L. c, 152 | |(E55) 3rd Party TIN (Sole or Joint) |(E55) 3rd Party TIN (Sole or Joint)| | |the check |

|OFFICE OF THE COMPTROLLER 815 CMR 5.00 PAYMENT AND TAX REPORTING OF SETTLEMENTS AND JUDGMENTS |

|NON-EMPLOYMENT RELATED CLAIMS - All claims that do not arise out of employment with the Commonwealth. All Non-Employment Settlements and Judgments will be Processed in Accordance with these rules |

|TYPES OF DAMAGES | | | | | |

|For payment purposes, non-employment related |PAYMENT SYSTEM |MUST BE PAID UNDER THIS TIN |STATE, FEDERAL, MEDICARE |TAX REPORTING FORM TO CLAIMANT |TAX REPORTING FOR ATTORNEY OR 3RD |

|damages are classified into the following |MMARS OBJECT CODE | |TAX WITHHOLDINGS? | |PARTY PAYEE? |

|categories based upon tax treatment | | | | | |

|Attorney Fees, Costs. Damages must be | | | | | |

|awarded as a (1) specific amount and (2) |MMARS |Attorney TIN |NO |(E52) Manual 1099-MISC (Box 3) |(E52) 1099-MISC (Box 14) to Attorney |

|specifically identified as Attorney fees or |(E52) Attorney TIN (Joint Payee) | | |(N93) 1099-MISC (Box 3) |(E54) 1099-MISC (Box 14) to Attorney |

|costs. Attorney fees and costs are normally |(E54) Attorney TIN (Sole Payee) | |Claimant responsible for | |(N93) Manual 1099-MISC (Box 14) to |

|paid directly to the attorney. |Construction | |taxes on amount. | |Attorney |

| |(N93) Attorney TIN (Sole or Joint) | | | | |

| | | | | | |

|Punitive Damages. Damages must be awarded as| | | | | |

|a (1) specific amount and (2) specifically |(E50) Claimant TIN Sole Payee |(E50) Claimant TIN Sole Payee |NO |(E50) 1099-MISC (Box 3) |(E50) N/A (attorney not paid) |

|identified as punitive damages. |(E51) Claimant TIN (Joint w/Attorney)|(E51) Claimant TIN (Joint |Claimant responsible for |(E51) 1099-MISC (Box 3) |(E51) Manual 1099-MISC (Box 14) to |

| |(E52) Attorney TIN (Sole or Joint) |w/Attorney) |taxes on amount. |(E52) Manual 1099-MISC (Box 3) |attorney if joint payee |

| | |(E52) Attorney TIN (Sole or Joint) | | |(E52) 1099-MISC (Box 14) |

| | | |Punitive Damages generally | |Joint with 3rd party – Manual |

| | | |taxable to Claimant. | |1099-MISC (Box 3) to 3rd party |

| | | | | | |

| | | |Estimated taxes may be | | |

| | | |required prior to filing | | |

| | | |tax return. | | |

|Interest. Pre and Post Judgment interest on | | | |1099-INT if over $10 and |YES |

|damages and Attorney fee interest. Payment |MMARS |Claimant TIN |NO |processed under Claimant TIN |Tax reportable to Attorney 1099-INT |

|instruction from CTR will determine if |(E29) Non-Construction Interest |or | | |if processed under Attorney TIN and |

|interest is payable through HR/CMS or MMARS. |(N95) Construction Claim Interest |Attorney TIN |Payee on Check responsible | |over $10. |

| |(N96) Eminent Domain Interest | |for taxes on amount. | | |

|Non-tax reportable damages. Documented | | | | |YES |

|medical expenses for emotional distress, |MMARS | |NO |(E53) None | |

|other non-tax reportable damages for Claimant|(E53) Claimant TIN Sole Payee |(E53) Claimant TIN Sole Payee | |(E54) None |(E53) N/A (attorney not paid) |

|as determined by CTR. |(E54) Attorney TIN (Sole or Joint) |(E54) Attorney TIN (Sole or Joint) | |(E55) None |(E54) 1099-MISC (Box 14) to Attorney |

| |(E55) 3rd Party TIN (Sole or Joint) |(E55) 3rd Party TIN (Sole or Joint)| | |(E55)1099-MISC (Box 3) 3rd Party |

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