Determining
1042-S reportabilityThe Offline 1099 Process will also generate 1042-S Forms when 1042-S reportable data is found on the 1099 Reporting Journal. This batch job runs at the end of a calendar year end, but can be run at any point in the year if you should choose to do so. More information on this process is discussed in the 1099 Processing section of this user guide. This topic discusses only the differences for the generation of 1042-S Forms.
Determining
1042-S reportability
The Offline 1099 Process evaluates each record on the 1099 Reporting Journal for reportability (records that should be reported to the IRS) for 1099 and 1042-S payments. Those records that are reportable are picked up for further processing. Non-reportable records are skipped. A record is considered reportable based on type of income, vendor/taxpayer eligibility, and chart of accounts classification. The Offline 1099 Process can also exclude PCard records based on the batch parameter (records associated with payments paid to vendors through credit cards). These records can be reported by the issuer of the card instead of the person/company that holds the card related to the credit card.
The valid combinations of 1042-S Income Code, 1042-S Ch. 3 Recipient Code or 1042-S Ch. 4 Status Code, and 1042-S Type of Income used in the 1042-S reporting process are defined on the 1042-S Type of Income (1042T) table. This table contains the following fields relevant to generation of 1042-S forms:
1042-S Income Code - This field is used to identify the type of income paid to the recipient.
1042-S Ch. 3 Recipient Code - This field will provide the valid IRS identifier for foreign vendors subject to Ch. 3 withholding.
1042-S Ch. 4 Status Code - This field provides the valid IRS identifier for foreign vendors subject to Ch. 4 withholding.
1042-S Type of Income - As with the current 1042 Type of Income table (1042T), this field represents the actual box number on the 1042-S form. This field will be required and will be a CVL with two values: 2 (Gross Income) and 9 (Overwithheld tax repaid to recipient pursuant to adjustment procedures).
Threshold Amount - This field will be used to determine the reporting threshold amount for 1042-S reporting. The field will default to 0.00. Included for future IRS threshold requirement.
BWH (Backup Withholding Indicator) - This field will indicate if Income Code/Ch. 3 Recipient Code or Ch. 4 Status Code/Type of Income is applicable for backup withholding.
INCM is linked to the Object (OBJ), Sub Object (SOBJ), Balance Sheet Account (BSA), and Sub Balance Sheet Account (SBSA) tables and it is used in defining the valid 1042-S Income Code. The fields on those Chart of Accounts (COA) tables relevant to 1042-S reporting include the following:
1042-S Income Code - This field identifies the Income Code such as 01, 06, or 09.
1042-S Income Code Name - This field displays the name of the Income Code such as Interest paid by US obligators (for Income Code 01) or Dividends paid by US Corporations (for Income Code 06) as defined on the 1042-S Income Code (INCM) table. This is provided for informational purposes only and not used when determining reportability.
1042-S Type of Income - This field displays the Type of Income for the Income Code. This is inferred from INCM based on the Income Code selected. This field is provided for informational purposes only and not used when determining reportability.
Vendor income is reported to the IRS by TIN, TIN Type, 1042-S Recipient Account Number, and Income Code. Therefore, the TIN and TIN Type must be tied to a Vendor Code and a 1042-S Recipient Account Number if the vendor is 1042-S reportable. This relationship is built by defining taxpayer information on the 1099 Information (1099I) table, then associating that TIN and TIN Type with a Recipient Account Number on the 1042-S Reporting Information (1042I) table and setting the 1042-S Reportable flag to true, as well as updating the Vendor Customer (VCUST) table with the TIN, TIN Type and 1042-S Recipient Account Number. This can be done when creating a vendor using a VCC transaction, updating a vendor using a VCM transaction, or directly on VCUST. The IRS Country Code and Sub Country code should also be defined on the vendor record.
The Offline 1099 Process also uses the following criteria to determine reportable 1042-S transactions:
The 1042-S Ch. 3 Recipient Code is entered/selected for the Vendor Code on the VCUST table, AND
The 1042-S Recipient Account Number associated with the Vendor Code on the VCUST table is defined as 1042-S Reportable on the 1042I table, AND
The combination of 1042-S Income Code/1042-S Income Type associated with the applicable COA (Object, Sub Object, BSA or Sub BSA) and the 1042-S Ch. 3 Recipient Code associated with the Vendor Code is defined on the 1042T table.
OR
The 1042-S Ch. 4 Status Code is selected for the Vendor Code on the VCUST table, AND
The 1042-S Recipient Account Number associated with the Vendor Code on the VCUST table is defined as 1042-S Reportable on the 1042I table, AND
The combination of 1042-S Income Code/1042-S Income Type associated with the applicable COA (Object, Sub Object, BSA or Sub BSA) and the 1042-S Ch. 4 Status Code associated with the Vendor Code is defined on the 1042T table.
During the record selection of the Offline 1099 Process, the transaction is considered for 1042-S reporting if the transaction contains a Vendor Code with a Recipient Account Number.
Chart
of Accounts Classification
1042-S reportability is also defined by the Object, Sub Object, Balance Sheet Account, or Sub Balance Sheet Account recorded on the 1099 Reporting Journal (J1099) record.
Prior to running the Offline 1099 Process, an Object, Sub Object, Balance Sheet Account, or Sub Balance Sheet Account code is defined as reportable by linking the code on its respective chart of accounts table to a valid 1042-S Income Code. For example, to define an Object code as reportable, you need to locate the code on the OBJ table, then select the 1042-S Income Code ID using the pick to the 1042T table. Based on the set up on 1042T, the Income Code and Name, plus the 1042-S Type of Income is displayed.Income is considered reportable for 1042-S if its Object, Sub Object, Balance Sheet Account, or Sub Balance Sheet Account is associated with a valid 1042-S Income Code.
Income is considered reportable for 1042-S if its Object, Sub Object, Balance Sheet Account, or Sub Balance Sheet Account is associated with a valid 1042-S Income Code.
1099 Reporting Journal records deemed eligible for 1042-S reporting are then consolidated by the following fields:
1099 Reporting Payer (inferred from SOPT or DEPTFY based on the Department Code on the 1099 Journal record),
1042-S Recipient Account Number (inferred from the VCUST table),
1042-S Country of Residence and IRS Country Sub Code (inferred from the 1099 Journal),
IRS Tax Rate (inferred from the 1099 Journal),
1042-S Ch.3 Recipient Code or 1042-S Ch. 4 Status Code (inferred from the VCUST table),
1042-S Income Code (inferred from applicable COA code), and
1042-S Ch.3 Exemption Code (inferred from the 1042-S Income Code/Ch.3 Tax Rate (ICTX) table) or the 1042-S Ch. 4 Exemption Code (inferred from the 1042-S Income Code/Ch. 4 Tax Rate (ICTX4) table). Note: Ch. 3 Exemption Code will be blank if the Ch. 3 Tax Rate equals the 1042-S Backup Withholding Tax Rate on 1099P and the Ch. 4 Exemption Code will be 00 if the Ch. 4 Tax Rate equals the 1042- S Chapter 4 Tax Rate on 1099P.
All consolidated records, even those that cause exceptions will be updated to the 1042-S Reported Income (1042R) table. Records that do not pass 1042-S validations are written to the 1042-S Exception Report. This report is necessary so a determination can be made if any changes were made to the setup during the reporting period.
(No difference from the "1099 Processing" topic).
The Offline 1099 Process will also create the following data files for 1042-S reporting:
Withholding Agent (i.e. Payer) extract file
Recipient (i.e. Payees) extract file
1042-S Form extract file
Updating
1042-S Reported Income table
The 1042-S Reported Income (1042R) table records vendor income that has been consolidated/ summarized by Calendar Year, 1099 Reporting Payer, 1042-S Recipient Account Number, 1042-S Ch.3 Recipient Code/1042-S Ch. 4 Status Code, 1042-S Income Code, 1042-S Country of Residence, and 1042-S Exemption Code. The table is initially updated with records from the 1099 Journal the first time the Offline 1099 Process is executed for a calendar year. During subsequent runs, updates are made to individual records depending on what processing mode is chosen and the value in the Use 1099 Journal as Input flag on the 1099 Processing Options and Controls (1099P) table. The record's Processing Date and Current indicator provide a log of the processing history. This allows users to identify if a record was reported to the IRS or corrected (if applicable). In addition, new records may be manually added directly to 1042R.
One additional report is generated for 1042-S reporting:
1042-S Exception Report is generated as part of the Offline 1099 Process when exceptions are found. The report is produced in all processing modes.