Understanding Withholding Percentages for Contractor Services

Before you can process withholding for contractor services, you must set up withholding percentages. You use the Contract Services Withholding Percentages program (P760405A) to set up withholding percentages for each type of contractor service that you use, such as engineering and architectural services. You also specify the minimum amount of services that you must purchase from a contractor before you begin to withhold the social security withholding amounts. The government establishes the amount that must be attained before you begin withholding social security amounts. The system saves the data that you set up to the Contract Withholding Percentage table (F760405A).

You use the Contract W/H Exempt Percentage program (P760416A) to specify the transactions for which a specified supplier is exempt from withholding. The system uses document types to identify the transactions. The system saves the data that you set up to the Withholding Exempt Percentage table (F7607A).

Note: If you assign 0% to a withholding concept and then assign that concept to a voucher line for a contract service, the system does not calculate withholding for the line, but does include the base amount of the line in the Contract Withholding – Payments Done table (F76A430) when you process the payment.