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Author's profile photo Ingrid Macova

1099-NEC Withholding Tax Return for Nonemployee Compensation

The objective of this blog post is to inform you that in SAP Business ByDesign 21.02 release you can find a new 1099-NEC Withholding Tax Return for reporting nonemployee compensation in US. Internal Revenue Service (IRS) published annual legal changes to tax forms, either in print and TXT file for fiscal year 2020.

The nonemployee compensation amount was previously part of the 1099-MISC Withholding Tax Return. This income type was removed from the 1099-MISC Tax Return. As of fiscal year 2020 nonemployee compensation is reported in separate 1099-NEC Withholding Tax Return.

What’s new?

  • New Tax Return Type 1099-NEC is available with the possibility to setup a threshold, if needed.

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  • The new print form is available for the 1099-NEC Tax Return.

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  • TXT file is available for 1099-NEC Tax Return in SAP Business ByDesign

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Using this new tax return type in SAP Business ByDesign you will be compliant with US legal requirements. Nonemployee compensation is reported separately for each supplier, following the local legislation.

In case you have any comments or suggestions, please let us know via Comments section below the Blog.

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      3 Comments
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      Author's profile photo Carol Casey
      Carol Casey

      This is very helpful, since it is a relatively new requirement.  I suspect that many US clients have not yet implemented this in BYD.  To do so, one must set up the new tax arrangement, and also do the configuration of the tax return in the activity Withholding Tax Return - US.  We could also use some guidance for the setup of state reporting there for 1099MISC and 1099NEC.  The Threshold Code and Reporting Indicator are not clear, not noted in the IRS guidance.  Plus, the requirement to input states for all three arrangements (1099MISC file, 1099MISC form, and 1099NEC) seems redundant.

       

      Thank you,

      Carol Casey

      Author's profile photo Aaron Joy
      Aaron Joy

      Currently the Withholding Tax type FE 07 for the 1099NEC.  How do we configure if the vendor also has a withholding tax type that belongs on the 1099MISC?  The vendor master does not allow for two withholding tax types to be the same.  Ex-  I can not have a FE 07 and FE01 populated at the same time.

      Any help would be appreciated.

      Author's profile photo Ingrid Macova
      Ingrid Macova
      Blog Post Author

      Dear Mr.Joy,

      Thank you for the comment. In order to provide you with the correct answer could you, please clarify what do you mean by Withholding Tax Type FE07 and FE01? In the Business ByDesign system there is a field "Withholding Tax Income Type" which has several options in its drop down list. One of them is "7-Nonemployee Compensation". Did you mean this option?

      Best regards,

      Ingrid Macova