In Advantage Financial, the administration of 1099 Processing Options and Control (1099P), the 1099 Type of Income (TINC) table, and the 1099 Reporting Information (1099I) can control the behavior of the Backup Withholding process. Backup Withholding can apply to most kinds of income that are reported on Form 1099. These include: interest payments, dividends, patronage dividends, rents, profits, gains, commissions, fees, independent contractor income, royalty payments, and payments by brokers. Under Section 3406 of the Internal Revenue Code, a payer making certain payments to payees is required to withhold and pay to the IRS a specified percentage of applicable payments if one or more of the following conditions are met:
The vendor does not furnish a Tax Identification Number (TIN) in the required manner.
The IRS notifies the payer using CP2100 or CP2100A that the TIN number supplied by the vendor is incorrect.
The vendor is required, but fails, to certify that they are not subject to Backup Withholding.
The IRS notifies the payer using Notice CP543 to start withholding on interest or dividends because the vendor has underreported interest or dividends on their tax return.
The amount of tax withholding will be reported to the individual vendor on Form 1099 along with the detail of earned income. The payer must remit the total backup withholding amount to the IRS during the tax year. The frequency of this remittance is determined by the cumulative dollar amount that the payer withholds from vendor payments.
Backup withholding deductions will occur for a specific TIN when:
1099P has the Backup Withholding option selected for the Calendar Year,
The 1099 Reportable flag is selected on 1099I for a specific TIN,
The 1099 Backup Withholding Status is Eligible on 1099I for a specific TIN, and the Chart of Account element (Object, Sub Object, Balance Sheet Account or Sub Balance Sheet Account) used on the document is 1099 Reportable -OR-
The 1099 Backup Withholding status is not Eligible but the 1099-INT Backup Withholding flag is checked on 1099I for a specific TIN, and the Chart of Account element (Object, Sub Object, Balance Sheet Account or Sub Balance Sheet Account) used on the document has a 1099 Type of Income associated with the 1099-INT form,
The Type of Income record (TINC) associated with the Chart of Account element has the Backup Withholding flag selected.
The actual withholding for Backup Withholding occurs when the disbursement is issued using a Manual Disbursement (MD) document or an Automated Disbursement (AD/EFT) document. Please refer to the Calculate Backup Withholding on a Manual Disbursement section in the Advantage Disbursement User Guide for more discussion on the calculation and rules for taking backup withholding or the CGI Advantage Financial Accounts Payable Run Sheets guide "Backup Withholding" (within the Automated Disbursement Chain job).
The1099 Backup Withholding Exemption (1099E) table allows you to define possible combinations of department and/or fund codes, along with Fiscal Year which should be exempt from Backup Withholding. This table is validated by the Automated Disbursement (AD) Chain batch process when determining if Backup Withholding should be calculated, as well as the Manual Disbursement (MD) document type, when an MD is processed that has the Manual Check or Adjusting Entry flags unchecked. When a match is found, no backup withholding will be taken even if the Vendor and TIN/TIN Type are eligible for backup withholding.
When saving records on this table, a “wildcard” value of “ALL” can be specified for a Department or Fund. However, when a record with a DEPT value of ALL is saved, then the associated Fund code cannot be defined with other specific Department codes on this table and vice versa.
Advantage supports the ability to have multiple 1099 Transmitters as part of the 1099 reporting process. The 1099 Transmitter Information (1099TI) table provides the ability to define each valid Transmitter Control Codes (the Payer). This table is used as selection criteria for the Print Backup Withholding Notices batch process when selecting records from the IRS Backup Withholding file.
The Backup Withholding Notice Printing History (BWNPH) page stores historical information of printed First and Second Backup Withholding Notices. This table is populated by the Print Backup Withholding Notices batch process. You may also request that First or Second B Notices be reprinted from this page.