|This update to Accounting Bulletin A-429, dated 1/5/98, is based on a subsequent clarification provided by IRS.
Contrary to A-429, if an attorney or law firm provides services to an agency, continue to code vouchers for this type of payment with an "N" (non-employee compensation) in the IRS Code block.
Agencies should use the new IRS Code "L" when paying settlements or judgments to claimants' attorneys. Specifically, when a settlement payment is made to an attorney, or jointly to an attorney and client, enter the following on the voucher:
- The attorney's or firm's Payee ID;
- The corresponding attorney's or firm's name in the first Payee Name block;
- An "L" in the IRS Code block.
On occasion, two payments resulting from the same settlement or judgment are made to an attorney. One payment represents the attorney's fee and the other payment represents the client's portion of the settlement. In this case, the payment for the attorney's fee should be coded with an "N" in the IRS Code block, and the payment representing the client's share should have a blank IRS Code since none of the latter is income to the attorney.
If your agency has processed payments in 1998 that require a change to IRS Code based on this bulletin, please contact OSC's Federal Reporting Unit at (518) 402-2022.
Direct questions on this bulletin to the Accounting Information Center, (518) 473-1170.