1099 Invoices Processing
Every Year January the subject of 1099 processing shoots to the top of the priority list for many AP Managers. Remembering exactly what was done the previous year typically is the first step. IT Department may have already downloaded the latest annual 1099 patches from Oracle for 1099 processing. To help pick up where you left off last year I have summarized the setup and processing steps below for ease of reference.
For a deeper dive Oracle provides plenty of pertinent information and documentation for the 1099 process. The best place to visit is the Information Center here on the Oracle My Support site (support.oracle.com) for what is new or for frequently asked questions.
The 1099 preparation steps are as follows:
- Set up the Query Driver for either INV or PAY (Setup > Tax > Reporting Entities)
Name: Name of your 1099 Tax Reporting Entity
Location: From a LOV
Tax ID: Number Tax ID Number
Balancing Segments: The balancing segment of the accounting flex field that is 1099 reportable
- Set up Suppliers to be reportable (Supplier > Entry, Tax Reporting tab)
Reportable, Federal: Must be checked
Income Tax Type: This MISC code will default into the invoice distributions
Reportable, State: This controls if State Code on the Site is required and if there is an LOV for the State Code
Reporting Site: * This will be filled in for you from the SITE
Reporting Name: If you want the Suppliers Name to be different on the 1099s
Verification Date: Used for the Supplier Tax Verification Letter
Organization Type: Used for the 1099 Electronic Media, and must be one of the eight options listed (You cannot make up your own, because the IRS will not accept them)
- Setup one Supplier site as the 1099 reporting site (Supplier > Entry, Site button, Tax Reporting tab)
Tax Registration Number: This has nothing to do with 1099s
Income Tax Reporting Site: Only one site per supplier can have this field checked
The Reporting Site * on the Supplier record gets filled in with this Sites name
This Sites address is used for mailing the Suppliers copy of the 1099 form to the Supplier
NOTE: All sites are reportable. This site is just the address to use on the 1099 form.
- Ensure that the appropriate AP invoice lines are flagged appropriately (Invoices > Entry > Invoices)
Enter a regular invoice
Enter Distributions
Income Tax Type The MISC code defaults from Supplier record
Income Tax Region The State code (like FL for Florida) defaults from the Site’s address
- Understand what will be considered 1099 reportable
The total for all 1099 reportable invoice distributions is $600 or higher (See http://www.irs.gov for more information on which MISC codes have reportable amounts different from the normal $600 limit)
There is a MISC code on the invoice distribution in the Income Tax Type field
The balancing segment of the account number is the same as the balancing segment of the Tax Reporting Entity
The Invoice is paid within the date range specified (the year usually)
The Query Driver (INV or PAY) determines which account number is checked
INV checks the balancing segment from the charge account on the invoice distribution
PAY checks the balancing segment on the banks cash account used for the payment
- Identify and resolve 1099 exceptions:
Submit for each reporting entity the 1099 Invoice Exceptions Report to identify the following exceptions:
1099 invoice distributions with no Income Tax Type
1099 invoice distributions with invalid or missing income tax regions
non-1099 invoice distributions with an Income Tax Type
Resolve exceptions for each invoice distribution (See Adjusting Invoice Distributions or Update Income Tax Details Utility and Report)
Submit the 1099 Supplier Exceptions Reportto identify and resolve the following exceptions:
suppliers with null or invalid state abbreviations
suppliers that will be flagged as foreign in the 1099 Tape
suppliers with missing or non-standard Tax Identification Numbers
Resolve any exceptions in the Suppliers window
- (Optional) Print a Tax Information Verification Letter for each supplier who has not yet furnished or confirmed its tax identification number or tax reporting region (See: Tax Information Verification Letter)
After a supplier provides this information, update the Supplier Verification Date in the Tax Region of the Suppliers window
Adjust Invoice Distributions manually in the Invoice Workbench, or use the Update Income Tax Details Utility (See: Adjusting Invoice Distributions, or Update Income Tax Details Utility and Report)
- Update 1099 Payment Information
Adjust Invoice Distributions manually in the Invoice Workbench, or use the Update Income Tax Details Utility (See: Adjusting Invoice Distributions, or Update Income Tax Details Utility and Report)
- Generate 1099 Reports
1099 Forms – Submit to the Internal Revenue Service for each 1099 supplier, and send a copy to the supplier (See: 1099 Forms)
1096 Form – Submit to the Internal Revenue Service for each 1099 MISC type paid during the calendar year (See: 1096 Form)
1099 Tape – If you submit 250 or more 1099 forms, the Internal Revenue Service requires you to file your 1099 payment information on magnetic media (See: 1099 Tape)
Form 941 – Send this form to the Internal Revenue Service to report total supplier withholding for a quarter. Your Accounts Payable department should create a manual payment for the total amount withheld, and you should remit this amount and the 1096 Form to the Internal Revenue Service. In a future version of Payables, you can generate the 941 Form as a standard report.
1099 Payments Report – Run this report for your reference to review 1099 payments by supplier or MISC type (See: 1099 Payments Report)
