Backup Withholding

If a payee does not furnish a valid tax ID to a payer, the payer must withhold a certain percentage of the payment for tax authorities. The IRS refers to this as backup withholding. The JD Edwards EnterpriseOne Accounts Payable system includes a feature that enables you to calculate withholding on the payments to suppliers and to pay withheld amounts to tax authorities. The supplier receives a 1099 form with actual amounts paid reported in each box, regardless of whether those payments exceed the minimum required for reporting to the IRS.

Because 1099 returns must reflect the amount that you withheld from each supplier without a TIN, you must also perform one of these tasks:

• Run the Build A/P Workfile program (R04514FP) as follows:

  • For data selection, use Alternate Payee EQ (equal to) the address book number of the tax authority.

  • For the Type of Return processing option, specify box A4 (Federal Income Tax Withheld). If you have withheld federal tax for a supplier, the Write Media program (P04515) will ignore the minimum payment amounts that are required to generate 1099 returns. The program will produce a 1099 return showing the full amount attributable to each box of the return, regardless of the minimum.

• Enter the withholding amount manually by using the Enter A/P Workfile Adjustment program (P04510FP).

Suppliers report the amounts that you withheld on their individual tax returns.