1099 VENDOR MASTER DATA SET UP FOR ZPI VENDORS
ZPI vendors must be properly set up for 1099 reporting prior to any payments being made. If the vendor is set up correctly from the start, prior to any postings being made, then the 1099 amount should be correct at year-end. Therefore, it is important for buyers and AP personnel to help ensure that AP has the necessary information to send out Form W9 as part of the new ZPI vendor setup. AP is responsible for securing and maintaining W9 forms from vendors for IRS audit purposes. Forms W9 need to be kept as long as the company is doing business with that vendor.
If the vendor is paid prior to being properly set up for 1099 reporting, then a true-up posting is required prior to the year end in order for the proper 1099 reportable amount, described in SAP as the field labeled withholding tax base amount, to appear on the 1099 MISC FORM.
IMPORTANT: While the True up Process must be done prior to the end of the year, it can be done as soon as any vendor has been modified to allow the 1099 reporting. In other words, the preferred process is to do the True up Process as soon as the vendor has been corrected so minimize the amount of year-end work.
Below are helpful to keep handy to copy into your transactions as you go.
- True-up $1 1099
- Post $1 payment to record 1099 WHT tax base
- Reverse $1 1099
- Reverse $1 payment to record 1099 WHT tax base
- 1099 Clearing
BASIC STEPS FOR TRUE UP PROCESSING.
For each vendor true up:
a. Check to see if the vendor is truly a 1099 reportable vendor
b. Check to see if the payments are reportable 1099 amounts
c. Compare the difference between the S_PL0_09000314 report and the FLB1N payments in SAP
d. If appropriate, post the true up amount to the WHT Tax Base Field using one of 2 procedures.
Determine which of the two 1099 True Up processes to use:
There are two methods for posting true up amounts to vendors that were not properly set up for 1099 reporting prior to any payments being made depending upon whether an existing WHT tax base amount field is available for the true up posting.
A) Existing WHT Tax Base 1099 True up Procedure: If a payment document exists for the vendor after the ZPI vendor master data was changed to reflect the proper 1099 status, then the true up amount for 1099 reporting may be added to the WHT tax base amount already posted in the payment document.
B) True Up $1 Posting for 1099 Vendors: If NO payment document exists for the vendor because no payment has been made after the ZPI vendor master data was changed to reflect the proper 1099 status, then the true up amount can be recorded.
The True Up $1 Posting Procedure requires three steps:
- Posting an FB60 invoice for $1 but placing the true up amount in the WHT tax base amount field on the Withholding tab,
- Posting an FB60 credit memo for $1, and zeroing out any WHT tax base amount of $1 on the Withholding tax tab,
- Processing F-53 Manual Payment Process to clear the above transactions.
Note: All true up transactions must be posted into SAP prior to year-end for the amounts to be reflected on the 1099 MISC Forms. The true-up steps may be done on as soon as the vendor is updated for 1099 reporting. The true-up steps may also be done monthly, quarterly or as a year-end process. Reviewing the vendor files and making necessary true up posting during the year is preferred to a year-end rush to clean up the data set.