One of the issues with 1099s is that if a vendor doesn’t provide a tax identification number (TIN), it’s your responsibility to withhold a percentage of any payments due. Microsoft Dynamics SL 2011 and previous versions don’t have built-in functionality to deal with this situation, so users of the older software have to manually keep track of whose information is missing and make sure that the appropriate amounts are being withheld. Failure to comply with the IRS withholding rules may result in a $100 penalty for each incorrect or incomplete 1099-MISC form. Beginning with Microsoft Dynamics SL 2015, handling backup withholding for 1099 vendors is an automated process that guards against costly mistakes.
How to Configure Backup Withholding in MS Dynamics SL 2015
Under the 1099 tab of the AP Setup screen, there are a few settings and input fields that previously didn’t exist. One of them gives you the ability to enable or disable the new feature that automatically calculates the backup withholding. After turning the feature on or off, enter the backup withholding percentage to use, and select whether or not to have MS Dynamics SL initiate any warning messages about 1099 vendors. Lastly, define the pertinent account and subaccount.
After you initially turn the feature on and save the settings, you’ll see a message asking if you want the system to search through all of your vendors to find those who need partial payments withheld. If it finds any non-compliant vendors, you can view the 1099 Info tab of the Vendor Maintenance screen to identify and address problems, such as a missing TIN.
When it comes time to pay a 1099 vendor, the vendor’s tax status is automatically factored in. For example, if a vendor is owed $1000 but is subject to a 20% withholding, then the check amount will be $800, and this amount will be shown on the check report. The software also keeps a history of the withholding. You can access it by clicking on either the 1099 Info tab (for the year-to-date withholdings) or the “Show History” button on the Vendor tab (for the period-to-date withholdings).
Staying compliant with 1099 rules is now a simple and efficient process. Please contact a Microsoft Certified Partner to for specific Dynamics SL training, learn more about the other great features of MS Dynamics SL 2015.