Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Cloudy with a chance of 1099

305 views

Published on

1099 compliance can be quite stressful during the beginning of the year. Oracle Cloud Payables makes it really easy to do 1099 processing. We will discuss the whole lifecycle of 1099 processing from setup to printing the form and mailing it to the supplier and filing the e-file with the IRS. 1099 processing will be the least of your worries on 1099 cloud payables and we will show how. We will discuss 1099 withholding, reporting, making non-AP Adjustments to 1099 amounts using the functionality.

Published in: Business
  • Be the first to comment

Cloudy with a chance of 1099

  1. 1. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | How Oracle Cloud ERP makes 1099 reporting easier Mahesh Vallampati Cloud ERP Consulting Manager North America Consulting North America Applications October 25, 2018 Cloudy with a chance of 1099
  2. 2. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |
  3. 3. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 3 1 2 3 4 5 6
  4. 4. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Consideration Conclusions 4 7 8 9 10 11
  5. 5. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 5 1 2 3 4 5 6
  6. 6. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Process Summary 6 1099 Process Flow Documentand FilePrep 1099TeamPayablesTeam SupplierSetup Team Supplier Start Fills out W-9 Form and sends it to Supplier Setup Team Supplier Setup Team Sets it up and verifies with IRS IRS TIN Check Process TIN Error? Serve B-Notice to Supplier Put Supplier on hold until TIN Error is resolved If Critical Supplier. Setup Withholding tax at 28 percent Supplier fills out Amended w-9 Form Yes Yes Setup Vendor as Spend Authorized with correct MISC Code No Payable Team Creates Invoices Distribution Information Reviewed for MISC correctness and applicability Run 1099 Supplier Exception Report Run 1099 Invoice Exception Report Resolve Issues Setup Reporting Entities Merge Non- Payables 1099 data Create Mailings to Suppliers E-file with IRS E-file with state agencies or send listing End
  7. 7. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Background • What is 1099? – 1099 is non-employee compensation paid to suppliers for services that are reportable to the Internal Revenue Service and the supplier – Does not include payments made to corporations – Amounts more than $600 have to be reported – The schedule is a the Fiscal calendar year (Jan-Dec) • IRS definition from IRS.gov – Report payments made in the course of a trade or business to a person who is not an employee or to an unincorporated business. – Report payments of $10 or more in gross royalties or $600 or more in rents or compensation. Report payment information to the IRS and the person or business that received the payment.
  8. 8. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 8 1 2 3 4 5 6
  9. 9. 1099 Supplier Level Setup
  10. 10. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Supplier Level Setup Field Meaning Tax Payer Country Usually the United States, although other countries have similar requirements Tax Payer Id The id issued by the regulatory authority which in the case of the United States is the IRS Federal Reportable That the supplier is 1099 reportable to the IRS Federal Income Tax Type The type of 1099 income. There are several categories with MISC7 being the most common State Reportable Some states need a copy of the 1099 reported to the IRS which would be the state of the suppliers 1099 reportable address Tax Reporting Name The name of the entity which would appear on the 1099 report Name Control Typically the first four characters of the tax reporting entity name
  11. 11. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Supplier Site Level Setup
  12. 12. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Supplier Site Level Setup • Income Tax Reporting Site – A supplier can have many sites – But only site can be an Income Tax Reporting Site – If more than one site is designated is an Income Tax reporting site, then the exception report lists it as an exception – The address associated with the site is where the 1099 form will be mailed 12
  13. 13. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 13 1 2 3 4 5 6
  14. 14. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Transaction Flow • Payable Invoices – 1099 Information like MISC category is stored in the Invoice Distribution of the line – It is important that the correct MISC category is set up at the supplier level and also used at the distribution level – There are two fields at the Invoice Distribution which are grouped as Income Tax • Income Tax Type  This is defaulted from the Supplier setup  Federal Income Tax Type • Income Tax  Region  This is the state of the Supplier site address • Payments that count towards 1099 – A payment made to a 1099 suppliers for Invoices that have 1099 distribution amounts – The payment status may be outstanding or cleared 14
  15. 15. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Data in Invoice Distributions 15
  16. 16. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 16 1 2 3 4 5 6
  17. 17. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Transaction Flow • When entering invoices, care should be taken to differentiate the following – Services rendered which are 1099 income – Pass through billing like expense reports that are not 1099 income – We recommend requesting suppliers to send separate invoices for 1099 income and non-1099 pass through billing • The system allows certain distributions to have a 1099 type specified and some set to empty 17
  18. 18. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 18 1 2 3 4 5 6
  19. 19. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Manage Tax Reporting and Withholding Tax Options • This is a setup at the Business Unit Level 19
  20. 20. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Manage Reporting Entities • Reporting Entities that file 1099 have two levels – Header Level • Business Entity • Location • Name of the Reporting Unit that files the 1099 on behalf of the corporation • Tax-payer-id of the 1099 filing entity which is provided by the IRS as an identifier – Detail Level • Balancing Segments of Invoice Distributions that have 1099 income recorded against the invoices • In environments, where balancing segments are added, care should be taken to add the balancing segment to the 1099 reporting entity for completeness • Else the 1099 income reported against that balancing segment will not be recorded causing discrepancies • FSM task: Manage Reporting Entities 20
  21. 21. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Manage Reporting Entities 21 • This is a setup at the Business Unit Level
  22. 22. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Manage Reporting Entities 22
  23. 23. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Manage Transaction Calendars 23
  24. 24. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Click on Create Calendar 24
  25. 25. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 25 1 2 3 4 5 6
  26. 26. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Reporting 26 • Oracle provides several 1099 reports – Exception Reports – 1099 Reports
  27. 27. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Exception Reporting Report Report Description US 1099 Supplier Exceptions Report Lists suppliers with inaccurate or incomplete United States 1099 income tax information. US 1099 Invoice Exceptions Report Lists paid invoice distributions with inaccurate or missing United States 1099 income tax information. 27
  28. 28. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Reports Report Report Description US 1099 Electronic Media Report Generates summarized 1099 information in electronic format as required by the United States Internal Revenue Service. US 1099 Forms Report (Comma Delimited Format) Reports the total United States 1099 miscellaneous tax type payments for 1099 suppliers in a comma delimited format. 28
  29. 29. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Reports Report Report Description US 1099 Report Reports the total United States 1099 miscellaneous payments for a particular 1099 supplier and generates 1099 forms for each tax reporting entity in an organization. US 1099 Payments Report Lists payments made to United States 1099 reportable suppliers. 29
  30. 30. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Program Agenda 1099 Background Supplier Setup Transaction Flow Reporting Setup 1099 Reporting IRS Timelines and Services 30 1 2 3 4 5 6
  31. 31. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Timelines • Starting 2017, IRS now requires electronic upload to the IRS and a paper copy to the suppliers by January 31 • An extension will have to be filed • The last date is March 31st if filing a deadline • The next slide indicates the deadlines 31
  32. 32. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099-MISC IRS Timelines 32
  33. 33. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Services • TIN Check/Match – IRS provides a service where a corporation can upload the names and tax identifiers and IRS provides feedback on the quality of the data. – TIN Matching is part of a suite of Internet based pre-filing e-services that allows “authorized payers” the opportunity to match 1099 payee information against IRS records prior to filing information returns. – Objective of TIN Check/Match are • match the payee name and TIN with IRS records; • decrease backup withholding and penalty notices; and • reduce the error rate in TIN validation. – The link for TIN Check/Match is here 33
  34. 34. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Services – TIN Check • IRS TIN Check report • *** IRS Tin/Name Matching Report *** 1/31/2012 10:35:35 AM Filename: T18097.txt Total Records Received from IRS: 1480 Total Error Codes 1, 2, 3, 4, 5 received from IRS: 261 Error Percent: 17.6351 34
  35. 35. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Services – TIN Check Tin Name Sequence Code ------------------------------------------------------------------------- Code 2: Tin never issued. Typed incorrectly by mistake or fake (Count=9) ------------------------------------------------------------------------- Error Tin Name Sequence Code ------------------------------------------------------------------------- Code 3: Tin and name do not match IRS records. (Count=252) ------------------------------------------------------------------------- 35
  36. 36. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Services – TIN Check • ------------------------------------------------------------------------- • Code 1 or 4, Invalid data: The following were dropped, not sent to the IRS • ------------------------------------------------------------------------- • ------------------------------------------------------------------------- • Code 5 Duplicates: The following were dropped and not sent to the IRS • ------------------------------------------------------------------------- 36
  37. 37. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS Services – TIN Check • Original Record Count = 1516 • Drop Count Code 1 and 4 = 25 • Duplicate Count Code 5 = 11 • Codes returned by the IRS are: • 1=Invalid TIN, other than 9 digits, all zeros, etc. • 2=Incorrect Tin. It was never issued by the SSA or IRS. • 3=NO MATCH. Name/TIN Combination does nat match IRS Records • 4=Invalid input, i. e. special characters • 5=Duplicate input, same as a previous record. • 6=Match on the SSN database (NAP DM1). • 7=Match on the EIN database (EIN N/C). • 8=Match on both EIN and SSN databases. 37
  38. 38. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Data Quality • We recommend TIN Check once a quarter • Goal should be zero exceptions from the IRS • Run 1099 Suppler and Invoice exception reports once a month and resolve any issues • 1099 Data quality issues when propagated to the IRS will invoke penalties • The 1099 B-Notice to suppliers will have to be issued and withholding initiated if IRS intimates issues with TIN or the supplier 38
  39. 39. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | IRS TIN Error Definition and Deadlines • TIN format error – TIN is not provided – TIN has more or less than nine digits – TIN includes an alpha character in one or more of its nine positions. • TIN Error Definition – Name/TIN combination does not match and or – TIN cannot be found in the files of the IRS and/or the Social Security Administration. • In case of TIN (Tax Identifier Number) Error – Send B-Notice to Supplier within 15 days of receipt of notice – Begin backup withholding no later than 30 business days after the date of the CP2100 notice or the date you received it, whichever is later. – Stop backup withholding no later than 30 days after the payee furnishes a TIN and certifies that it is correct. 39
  40. 40. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Consideration Conclusions 40 7 8 9 10 11
  41. 41. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Non-AP 1099 Payments • It is possible that payments can be made to suppliers out of petty cash • Journals are then created • These payments may trigger 1099 reporting and will have to be captured. • It is important that Non-AP 1099 payments be tracked by supplier in some fashion • The following page shows scenarios which will have to be accounted 41
  42. 42. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Scenarios – Payables and Petty Cash Disbursements Vendor Payables 1099 Income Petty Cash Disbursement 1099 Income Report to the IRS? (Amt > 600) A $10,000 $111 $ 10,111Y B $8,000 $ - $ 8,000Y C $500 $ - $ 500N D $300 $200 $ 500N E $200 $401 $ 601Y F $0 $401 $ 401N G $0 $601 $601Y 42
  43. 43. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Off-line Merge • It is critical that 1099 AP Data be merged with non-AP 1099 petty cash disbursements • It is a crucial 1099 compliance requirement • The “US 1099 Electronic Media Report” program when run populates the table ap_1099_tape_data_all. • The XML of the report then can be leveraged to convert to xls and then merged with non-AP 1099 data to generate 1099 numbers • There are 1099 report filing vendors who can take this data and then can generate mass mailing as well as file with the IRS 43
  44. 44. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Consideration Conclusions 44 7 8 9 10 11
  45. 45. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Documents and E-file preparation • 1099 Document mailings and E-file can be done in-house or outsourced • If all payments are made out of Oracle payables, then in-house 1099-Misc form and e-file can be generated by running the programs and should suffice • Oracle Cloud team may patch the system for the 1099 format for that year if needed • We recommend planning this ahead of time with the cloud support team • If 1099 Data from Payables need to be merged with Petty Cash Disbursement, an option is to do offline and outsource the mailing and electronic filing 45
  46. 46. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | State Filing of 1099 • 36 states require filing of 1099 with them • Most States support electronic filing on their web sites • It is important to file with the states whether it is electronic or paper • Separate the Supplier Data with State as a filter • And file with the 36 states either electronic or paper 46
  47. 47. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Consideration Conclusions 47 7 8 9 10 11
  48. 48. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Conversion Consideration • 1099 is based on the Jan-Dec Fiscal Calendar • It is likely that customers may go live in a month other than January • The 1099 balances from the prior system will have to be merged with the current year 1099 data • There are two options that can be considered – Offline Merge as discussed in the prior section – Invoice and Credit Memo with zero dollar payment – The steps are discussed in support note • How to Enter a 1099 Starting Balance For A Vendor or Supplier From a Legacy System (Doc ID 1999727.1) 48
  49. 49. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Conversion Consideration • Recording 1099 Information for conversion balances – Create an invoice for the total amount of the adjustment with an Income Tax Type Code. – Create a credit/debit memo without the Income Tax Type Code for the same amount. Please use a dummy tax type such as INDE/F for the Credit Memos – Create a zero dollar payment for the invoices • GL Accounting will net to zero for these invoices and payments 49
  50. 50. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion – Create Supplier 50
  51. 51. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion-Create Invoice 51
  52. 52. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion-Credit Memo 52
  53. 53. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion – Zero Payment 53
  54. 54. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion – Invoice/Credit Memo Acctg 54
  55. 55. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Example of 1099 Conversion – Payment Accounting 55
  56. 56. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 1099 Report 56
  57. 57. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Considerations Conclusions 57 7 8 9 10 11
  58. 58. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Other Considerations • Address Considerations • (Doc ID 1999746.1) • “The 1099 form only allows 30 characters of the address, and this is not enough. • This has been requested over and over and there is not enough room on the form to handle more than 30 characters. Oracle does not have control over the size of the form, this is an IRS design. You will have to use abbreviations in your supplier site address to shorten it to 30 characters. You can make a special site just for this case, and make it the Tax Reporting Site. Our software takes the 1st supplier site address line and truncates the trailing spaces, adds one space, and concatenates the 2nd address line, etc., until there are 30 characters, and then truncates the rest of the address lines. Another solution is to print Vendor Mailing Labels, and they can peel off the appropriate label and stick it on the envelope. • NOTE: All sites are reported on 1099s. The Tax Reporting Site is the site that has its address used for printing on the 1099 form. That is how Oracle knows where to send the 1099 form. The 1099 Electronic Media will truncate the address after 40 characters.” 58
  59. 59. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Agenda Non-AP 1099 Payments and Data Merge 1099 Document and Supplier File Preparation Conversion Consideration Other Considerations Conclusions 59 7 8 9 10 11
  60. 60. Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Conclusions • Filing 1099’s on time accurately is a key accounting, finance and business milestone • Knowledge of how Oracle does 1099 will help in meeting these milestones • The penalties of not filing on time or incorrect supplier information can be significant and can lead to increased scrutiny and audits • Awareness of IRS 1099 deadlines and guidelines is a key to success 60

×