To our knowledge, this is the first time we have been asked by the payroll office to pay an employee a garnishment through accounts payable. This involves one employee suing another employee.
The employee to receive the garnishment already has a vendor record with accounts payable which is not flagged 1099.
- Should the garnishment be flagged 1099?
- Would you advise creating an additional vendor record specifically for the garnishments?
- Is there anything our school system should be concerned with while paying an employee under these circumstances?
I spoke to the IRS on this one; that seemed the best course of action.
IRS information agent Ms. Morrison (#1003375683) stated that no 1099 reporting of the garnishment made to the recipient is necessary UNLESS the payments are made to an attorney. Therefore, your having created a 1099-reportable vendor record appears to be unnecessary.
However, per Publication 17 (https://www.irs.gov/pub/irs-pdf/p17.pdf), you must report on the W-2 the amounts paid out by the other employee: "Garnisheed wages. If your employer uses your wages to pay your debts, or if your wages are attached or garnisheed, the full amount is constructively received by you. You must include these wages in income for the year you would have received them." Therefore, these amounts must be reflected on the PAYER's W-2 form as a deduction of after-tax dollars in boxes 1, 3 and 5, and optionally in box 14.