This article describes how to set up backup withholding for 1099 reporting for miscellaneous vendors in a company in Microsoft Dynamics GP.

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Set up the company

  1. On the Tools menu, point to Setup, point to Company, and then click Company.

  2. In the Company Setup window, click Options.

  3. In the Company Setup Options window, enter information in the following fields:

    • Withholding Vendor ID

    • Withholding File/Reconciliation Number

    • Withholding Tax Rate

  4. Click OK.


Set up the vendors

Set up the vendors as 1099 vendors, and then specify the withholding options. To do this, follow these steps:

  1. On the Cards menu, point to Purchasing, and then click Vendors.

  2. In the Vendor Maintenance window, select a vendor in the Vendor ID list, and then click Withholding button.

  3. In the Vendor Withholding Options window, click to select the Subject To Withholding Deduction check box, and then enter the required withholding information for the tax rate, the tax type (such as Non-Resident Withholding), and the tax Start and End Dates. Consult your own local tax advisor to help you select the correct options.

  4. Click OK.

  5. Click Options button. In the Vendor Maintenance Options window, click Miscellaneous in the Tax Type field.  Box 7 will default in for the 1099 Box, so change accordingly if needed.

  6. Click OK.

  7. In the Vendor Maintenance window, click Save.


Enter transactions and withholding amounts

  1. On the Transactions menu, point to Purchasing, and then click Transaction Entry.

  2. In the Set up for vendors area, select the vendor that you set up.

  3. When you receive the following message, click Yes:

    "Is this document subject to withholding?"

  4. Enter the invoice amounts and the other required information.  Notice the Subject to WIthholding checkbox is marked and the % has defaulted in, but it editable.  (The distributions for the withholding taken will be on the payment, not the invoice.)

  5. If you designate a 1099 vendor, the 1099 Amount field is automatically populated with the transaction amount.

  6. Click Post.


Example:  Let's say you have a $1,000 invoice with 20% withholding, so a net check of $800 was paid out.  In the 1099 Details window, Box 7 will display $1,000 and $200 will show in Box 4 for Federal Tax Withheld.  (To get the withholding in Box 16 for State Tax Withheld, you would have to manually edit the 1099 Details before printing.) 

Note:  There is no functionality for 'State' requirements built into 1099 processing at this time.


Display the Withholding YTD column

  1. On the Microsoft Dynamics GP menu, click Smartlist.

  2. In the Smartlist window, expand Vendors, and then click 1099 Vendors.

  3. If the Withholding YTD column is not displayed, click Columns.

  4. In the Change Column Display window, click Add.

  5. In the Columns window, click Withholding YTD in the Available Columns list, and then click OK.

  6. Click OK to close the Change Column Display window.

    Now you can view the withholding year-to-date amounts of 1099 vendors in the Smartlist window.


View the withholding amounts

In the Vendor Credit Summary window, you can view the withholding amount for individual vendors by period. To do this, follow these steps:

  1. On the Cards menu, point to Purchasing, and then click Summary.

  2. In the Vendor Credit Summary window, select a 1099 vendor.

  3. Click Period.

  4. In the Vendor Period Summary window, select the year, and then specify the period.

    The Withholding field displays the withholding amount. The 1099 Amount field displays the amount that was paid for the period. The sum of the withholding amount and of the 1099 amount is the same as the original invoice amount.


Print the Purchasing Analysis report

To see the 1099 amount by period and by vendor, print the Purchasing Analysis report. To do this, follow these steps:

  1. On the Reports menu, point to Purchasing, and then click Analysis.

  2. In the Purchasing Analysis Reports window, select Period in the Reports list, and then click Print.

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