AP Vendor backup withholding setup

Question

We have a vendor that we sent a B Notice to because the tax ID/name reported on their 1099 did not match the government's records. They did not reply, so I need to set the vendor up so backup withholding will be held if we should use them in the future. Does anyone know how to do this? I found a knowledge base article on setting up a Mis Deduction 2 field, Before I tried this method, I thought I'd reach out to for confirmation or other suggestions.

Rhonda V · Accepted Answer

IRS Publication 1281 explains when to begin backup withholding. Knowledgebase ID 48551 is what we used a few years ago. It worked well following the steps. On Step 2, we used the Invoice Level. On Step 4, we used Include misc deduction in 1099 totals, we did NOT round, and we sent GL entries when Payment is Posted. We setup a new liability account in General Ledger called Backup Withholding which we needed for Step 7. IRS Publication 1281 gives the current percentage (which can change from year to year) and answers to frequently asked questions. The amounts deducted for backup withholding must be paid over using the EFTPS tax system and the frequency is outlined in IRS Publication 15. Backup withholding requires an annual return, Form 945. You will also send the vendor a Form 1099 at year end that reports the total amount paid and the total amount of backup withholding.

Sage Construction & Real Estate

AP Vendor backup withholding setup

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