How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask William Ellis, CPA Your Own Question
William Ellis, CPA
William Ellis, CPA, CPA
Category: Tax
Satisfied Customers: 296
Experience:  Over 15 years of experience in public accounting
50200401
Type Your Tax Question Here...
William Ellis, CPA is online now
A new question is answered every 9 seconds

I am in need of a CFE or CPA to render an opinion regarding

Customer Question

I am in need of a CFE or CPA to render an opinion regarding the following. I am the executive director of a 100 bed, 12 month residential substance abuse center. All our students are required to work in one of our programs to pay for tuition. While we do not allow them to carry cash we do have an accounting system (Quickbooks) for all the individual student's accounts. Some are paid regular "spiff" money by the owner of one of our programs. These funds are deposited in the student account and a journal entry is entered crediting the student. At graduation I give them their balance by corporate check. Sometimes it is over $10,000. THE QUESTION. Our corporate office is nervous that we are creating an employee/employer relationship and are not 1099ing the students. Do you have some input?
Submitted: 4 years ago.
Category: Tax
Expert:  Anne replied 4 years ago.

Anne :

Hi

Anne :

Thank you for using justanswer

Anne :

I'm curious how you have come to call this money "spiff money"

Anne :

A spiff is bonus money paid to salespeople for meeting a specific sales goal. Manufacturers of products often provide spiffs. A spiff is also referred to as push money. At the end of the relevant period when the spiff is offered, the salesperson will submit proof of the sales to the manufacturer and the manufacture will cut a check. A spiff is a form of compensation and will have to be reported on your tax return.

Anne :

It should be reported as an award, or prize

Anne :

I've never heard of a "spiff" in any other connotation than with manufacturers and sales men

Anne :

Could you please explain why this money is paid to a particular student, and how it came to be known as "spiff" money?

JACUSTOMER-56j1n8i2- : Thanks for you're response. I knew you would need more detail but space was limited. Many of our students work at a call center located on campus but not owned by our corporation. They sell vacation packages and receive the spiffs as a reward for sales production. They are not allowed to have cash during their 12 months rehab program so the spiff checks are given to us with a breakdown and we deposit the checks into the student account and make journal the distribution. When the student graduates the remaining balance is given to them in the form of a check drawn against the student account.
JACUSTOMER-56j1n8i2- : I understand the reporting requirements but we do not pay the spiffs they are paid by the owners of the call centers. We simply hold the funds in our student account until they graduate. All necessary back up is kept on file showing the flow of the payments from the call center owners to our student account and then finally from our student account to the student. Is the tax reporting the responsibility of the payer, and is our documentation adequate in not issuing a 1099?
Anne :

Hi

Anne :

Thank you for that explanation. It helped alog

Anne :

slot

Anne :

alot

Anne :

sorry....seems I've lost my typing skills somewhere today....if you see them, will you please send them home....I miss them alot

Anne :

You are correct in that your facility, since they are not the payers, are not required to issue a 1099

Anne :

Since you have documentation that you are not the actual "payer", you just hold the money for the recipient, you should be fine.

Expert:  William Ellis, CPA replied 4 years ago.
Hello and thank you for allowing us at Just Answer to assist you. The next question is whether the owners of the call center are issuing the students 1099s or W-2s or are they issuing them to you? If the owners are paying you directly on the students' behalves, you may be liable for filing the tax forms since you are acting as an agent for the owners.

You also should be reporting the interest earned by the students' on Form 1099-INT to them.

This needs to be clarified because both you and your students could be subject to potential audits. If the owners' are issuing tax forms to the students, the IRS could assess the students tax on the additional payments received from you.

Thanks,

Bill Ellis, CPA, CFE