Understanding Payment Rules for CIS

Instead of making a payment directly to a subcontractor, you might need to send the payment to a third party (alternative payee). In some cases, the third party might be an entity for whom payments are regulated by the CIS. The supplemental CIS module enables you to have the system validate whether the third party is set up in your system as a subcontractor under the rules of the CIS.

If you set up the alternative payee and define a cross reference between the subcontractor and the alternative payee, you can set a processing option in the CIS Pre-Withholding Validation program (R74U4030A) to have the system validate the subcontractor information for the alternative payee.

You use the Special Payee Definitions program (P74U0452) and the Subcontractor/Special Payee Cross Ref program (P74U0451) to set up the special payee types and then associate the types with the subcontractors and payees. You then set up the supplier master record for the subcontractor with the special payee's address book number.

Payments that you send to special payees do not include the withholding amounts that are payable to the government and calculated when you run the Calculate Withholding program (R74U04580). You retain the withholding amounts until you send them to the government. The Statement of Payments and Deductions (R74U4040) and CIS Monthly Return (R74U4050) reports include the payments made to third parties as if the payments had been made directly to the subcontractor.