Friday, July 18, 2014

Backup Withholding on 1099 Payments

Gotcha’s on using the withholding feature in Dynamics GP

3d man with calculator

Lately, I’ve been fielding several questions from clients regarding the ability to track Backup Withholding using Dynamics GP. The short answer is that you can do it, you’ve just got to be careful.

Here are a few tips:

  1. First, turn it on by entering a 1099 vendor ID in the Company Setup Options window:
    Administration | Setup | Company | Options Button
  2. Open the Vendor card for the Vendor subject to backup withholding, push the Withholding button, and check the box indicating the Vendor is Subject to the Withholding Deduction .
  3. After entering, posting and paying some transactions subject to withholding, print the Form 1099 for the vendor on whom you have withheld. Make sure box 7 has not been reduced by amount withheld.
  4. The Vendor must be marked as a 1099 vendor on the date of the transaction subject to withholding or it will not make it onto the 1099. Neither the ‘update’ utility, nor the PSTL utility will fix it.
  5. Using the Update ‘1099 Information’ utility does not move the withheld amount to the new form.
  6. The ‘Edit 1099 Transaction Information’ window will likewise not move nor create the withholding information.
  7. If you enter any amounts in the 1099 details window and then reconcile, the amount not supported by a transaction will return to zero
  8. The withholding vendor will not withhold on itself even if you have it set up as a 1099 vendor subject to withholding.

Bear in mind, this withholding feature was not designed for the United States. If you are using it for US Backup Withholding, be sure to test it after each service pack release.

Kind regards,



Robyn Evans said...

Any recommendations when you need to do this but the first 1500 spent with the vendor is not subject to the tax? Each year that calculation starts over.

Dynamics Confessor said...

Hi Robyn,
I'm not familiar with this rule. Is this something for the IRS? I don't know of a way to manage this using the withholding settings.