Government entities that need to make payments to bankruptcy trustees should be aware of an exception to the information return filing requirements for bankruptcy trustees.

In general, under section 6045, payments for legal services, including corporations, are subject to reporting on Form 1099-MISC. Payments for professional services are reportable in box 7. In addition, gross proceeds of any amount paid to an attorney must be reported in box 14. This applies generally to payments made for legal services that exceed $600 in a single year.

Under Regulations 1.6045-5(c)(7), effective January 1, 2007, payments you make as to a trustee in a private bankruptcy under Title 11, in any form, are exempt from these reporting requirements. For example, if a government employer withholds amounts from a bankrupt’s wages under a garnishment order, and forwards that amount to the bankruptcy trustee, this is not considered a payment for legal services and does not require reporting on box 7 of Form 1099-MISC.

For more information on reporting payments for legal services or to attorneys, see the Instructions for Form 1099-MISC.