Settlement Payment and City
We are a title insurance company. Our insured owes a city for penalties and interest on a CDBG (Community Development Block Grant) loan which my company decided to settle. The settlement (over $600) was paid to an escrow company (non-incorporated) that is the City's contract collection agent for these loans. Is the payment reportable and to whom, the city or the collection agent? PS: My interpretation is that the beneficiary of the payment is the city and is thus non-reportable (government organization). I figure the city owes the agent a 1099MISC for any payments made to the agent. Your answer above will determine whether I am correct.
Any time you are confronting the potential for a reportable payment you will want to begin with the basics.
For instance, we aways recommend that our clients start with two simple questions.
Let's look at those and then apply them to your questions.