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Attorneys must file IRS forms for Summit County income
RICHARD WEINER
Legal News Reporter
Published: November 6, 2014
Summit County Common Pleas Court has recently published an order which clarifies the way that income from that court, and from any county entity, must be reported by attorneys.
In brief, any attorney income of any kind that comes from the court, including returned monies, returned filing fees, guardian ad litem fees, court appointment fees, appraiser fees or anything else that comes from Summit County, “must have a W-9 form,” said Summit County Clerk of Courts Daniel Horrigan.
The order, which is mandatory, was requested by Horrigan and was designed to clear up confusion about how that income should be accounted for, he said.
The order means that, “all attorneys must have a W-9 on file with the court or will be subject to a 28 percent withholding on every check,” Horrigan said.
The clerk’s office sends out, “about 2,000 checks a year,” Horrigan said, totaling a little over $7 million, with more than $6 million of that going to attorneys.
Many of those amounts do not in and of themselves meet the $600 threshold. But that caused some confusion, said Horrigan, starting in the, “late 1990’s, when the IRS created a rule where money returned to attorneys was presumed to be income, unless proved otherwise.”
However, over the course of time, “some attorneys had failed to file the appropriate tax forms with our office or the clerk of courts’ office for attorney’s fees received through those offices,” said Jack LaMonica, chief of staff with the Summit County Fiscal Office. “That created an audit issue for our office and for the clerk’s office.”
The issue, he said, was the county’s compliance with Internal Revenue Code Section 1.6041-1, which requires a paying entity to file an “information return” on all monies distributed to a non-employee over the amount of $600, via form 1099-MISC.
In 2012, many attorneys who received monies from the various county agencies, including the clerk of courts office, did not have a W-9 on file with the county to effectuate that reporting, said Horrigan.
According to the form’s official instructions, an IRS W-9 form, Request for Taxpayer Identification Number and Certification, “is used by persons required to file information returns with the IRS to get the payee's (or other person's) correct name and TIN (taxpayer information number).”
“Information returns” include the form 1099-MISC, and the W-9 forms are used by business or other entities to keep needed identification information for independent contractors to fill out the 1099’s for the IRS.
Form W-9 has a minimum reporting threshold amount of $600, which created a unique problem for the county, said LaMonica.
“The entire county of Summit has only one tax identification number,” said LaMonica. “The W-9 forms have a $600 threshold for reporting. But, let’s say that an attorney receives $200 from the clerk’s office, $200 from us and $350 from the sheriff’s office. Before this last order, they wouldn’t be required to file a W-9,” he said. “But now they are.”
In 2012, Horrigan, along with other county officers, began working with the IRS to clear up the situation. The discussion began as a result of a regular county audit. “The issue needed to be addressed,” he said.
The result of those discussions was a request from Horrigan to the common pleas court for an order, which was signed on Oct. 15, 2014, as Miscellaneous Order 325. From that date onward, any attorney who wants to receive a check from the court must have a W-9 on file, or will face that 28 percent withholding.
Most lawyers have already gotten the message––LaMonica and Horrigan both indicated that there is currently a “high level of compliance” with the W-9 requirement, with only a handful of attorneys who receive money from the county currently not having a W-9 on file. Both encouraged every attorney to make sure he or she is in compliance.
ORDER
IN COMPLIANCE WITH INTERNAL REVENUE REGULATION CODE SECTION 1.6041, THE SUMMIT COUNTY COURT OF COMMON PLEAS ORDERS THAT ANY COUNSEL OF RECORD MUST PROVIDE CURRENT TAX IDENTIFICATION INFORMATION BY FILING AN IRS-W9 FORM WITH THE OFFICE OF THE SUMMIT COUNTY CLERK OF COURTS.
FAILURE TO PROVIDE PROPER TAX INFORMATION WILL RESULT IN WITHHOLDING PAYMENTS, REFUNDS, ANSWERS TO GARNISHMENTS, ETC. THAT ARE DUE COUNSEL OF RECORD AND MAY BE SUBJECT TO TWENTY-EIGHT PERCENT (28%) WITHHOLDING TAX UNTIL THE PROPER IRS-W9 FORM HAS BEEN FILED.