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Accounts Payable Advisory
Office of Operations
Bureau of State Expenditures

Advisory Number: 34
Advisory Name: Payment and Reporting of Interest
Date Issued: 01/02/2014 Date Last Updated: 01/02/2014
Subject:
Updates to SFS Account Codes for the payment and reporting of interest.

Guidance:
The Internal Revenue Service (IRS) generally requires the annual reporting of interest payments to certain payees totaling $600 or more in a single calendar year on Form 1099-INT.  Consistent with the Guide to Financial Operations (GFO), Chapter XII, Section 5.K.2 - Processing Payments Subject to Federal Reporting, OSC’s Bureau of State Expenditures (BSE) will produce Form 1099-INT to payees and the IRS for reportable payments processed through a joint custody account.  

Proper accounting for interest payments provides for accurate reporting. Below is a list of interest account codes available for use.  Account code descriptions have been reviewed and updated to provide additional guidance in selecting proper values.  Effective January 1, 2014, Business Units should use the following account codes to classify interest payments, consistent with the Guide to Financial Operations Chapter IV:

SFS Account Code

Title

 

Category

58401

Prompt Payment Interest

Non Personal Service- Interest Expense

58402

Interest on Leases, Loans and Land Claims**

  58403*

Prompt Contracting Interest

  60200*

Settlement Interest

General State Charges- Claims, Awards, Judgments and Settlement Agreements

60311

Interest - Grants to Others

Grants and Public Assistance

60740

Interest on Late Payments

Capital Projects

*New SFS Account Code
** New SFS Account Title

For your reference, the following GFO sections were updated as a result of the above changes in the accounting for interest payments:

Chapter XII, Section 5.K - Federally Reportable Payments There is no longer a Withholding Class code 03 for interest payments.  Business Units must use the correct account code when paying interest according to GFO Chapter IV Accounting Codes – Uses and Descriptions (summarized in table above).

Chapter XII, Section 6.B - Paying for the Purchase of Land

  • Interest payments as part of the purchase of land will use account code 58402.  Business Units will no longer use account code 60701.

Chapter XII, Section 6.C - Paying Prompt Contract Interest

  • Business Units will use account code 58403 when paying Prompt Contracting Interest.

Chapter XII, Section 6.U - Payments Pursuant to Awards and Non-Judicial Settlement Agreements

  • There is no longer a Withholding Class code 03 for interest payments.  Interest payments as a result of a settlement will use account code 60200.
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