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Extended withholding tax

Hi

Can anybody tell me the setting (configurations in detail) made for withholding tax for US company. Please mention the official codes and rates as well.

Thanks in advance

Sangram

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2 Answers

  • Best Answer
    Posted on Feb 24, 2009 at 11:52 AM

    HI

    Please refer the below points.

    please refer the note no 363650

    Solution

    A)How to configure extended withholding tax to get correct 1099MISC

    reporting ?

    1 )Define a type:

    Go to IMG path:-> Financial Accounting Global Settings

    -> Withholding Tax -> Extended Withholdng Tax

    -> Calculation

    -> Withholding Tax Type

    -> Define Withholding Tax Type for Payment Posting

    Define one withholding tax type for 1099 federal reporting. If state

    withholding tax needs to be withheld, a second withholding tax type

    needs to be created to allow two withholding tax postings for one

    vendor.

    2) Define a code:

    Go to IMG path: -> Financial Accounting Global Setting

    -> Withholding Tax -> Extended Withholdng Tax

    -> Calculation

    -> Withholding Tax Code

    -> Define Withholing Tax Code

    Define one code for each box of the 1099MISC form where a base amount

    needs to be reported.

    The codes must have the following numbering to get correct reporting:

    TYPE CODE DESCRIPTION W/T PERCENTAGE

    Page 2

    FE 01 Rents 0%

    FE 02 Royalties 0%

    FE 03 Other Income 0%

    FE 05 Fishing boat proceeds 0%

    FE 06 Medical and health care payments 0%

    FE 07 Nonemployee compensation 0%

    FE 08 Substitute payment in lieu of dividends 0%

    FE 09 Direct Sales to a buyer for resale 0%

    FE 10 Crop insurance proceeds 0%

    FE 3b or 13 Excess golden parachute 0%

    FE 3c or 14 Gross proceeds to an attorney 0%

    FE 7b Section 409A income 0%

    FE 15 Section 409A deferrals 0%

    Base amount, percentage to tax : 100 %

    Postings, Post.indic. 1

    Calculation, With/tax rate: leave blank

    If tax must be withheld, a new code must be created starting with an

    F. Example F1 for rents. In this case fill the followig field as

    follows:

    Calculation, With/tax rate: 30%

    The codes for tax rate 30% should look as follows:

    TYPE CODE DESCRIPTION W/T PERCENTAGE

    FE F1 Rents 30%

    FE F2 Royalties 30%

    FE F3 Other Income 30%

    FE F5 Fishing boat proceeds 30%

    FE F6 Medical and health care payments 30%

    FE F7 Nonemployee compensation 30%

    FE F8 Substitute payment in lieu of dividends 30%

    FE F9 Direct Sales to a buyer for resale 30%

    FE F0 Crop insurance proceeds 30%

    FE Fb Excess golden parachute 30%

    FE Fc Gross proceeds to an attorney 30%

    FE Fd Section 409A deferrals 30% FE

    Fe Section 409A inocme 30%

    If state tax must be withheld, assign a second type to the company

    code as follows:

    TYPE CODE DESCRIPTION W/T PERCENTAGE

    ST 16 State tax withheld depending on state

    3) Assign Withholding Tax Types to Company Code:

    Go to IMG path: -> Financial Accounting

    -> Financial Accounting Global Settings

    -> Withholding Tax

    -> Extended Withholding Tax

    -> Company Code

    -> Assign Witholding Tax Types to Company Code

    Switch on: Vendor data, With/tax agent and fill the validity period.

    4) Assign an Account:

    Go to IMG path: -> Financial Accounting

    -> Financial Accounting Global Settings

    -> Withholding Tax

    -> Extended Wtihholding Tax

    Page 3

    -> Postings

    -> Account for Withholding Tax

    -> Define Accounts for Withholding Tax to be paid

    over

    B) How to configure classical withholding tax for 1099MISC reporting

    1) Define a code

    Go to IMG path: -> Financial Accounting Global Settings

    -> Withholding Tax -> Withholding Tax

    -> Calculation

    -> Maintain Tax Codes

    Define one code for each box of the 1099MISC form where a base amount

    needs to be reported.

    The codes must have the following numbering to get correct reporting

    (2001 reporting):

    CODE DESCRIPTION

    01 Rents

    02 Royalties

    03 Other Income

    05 Fishing Boat Proceeds

    06 Medical and health care payments

    07 Nonemployee compensation

    08 Substitute payments in lieu of dividends or interest

    09 Direct Sales to a buyer for resale

    10 Crop Insurance proceeds

    13 or 3B Excess Golden parachute

    14 or 3c Gross proceeds paid to an attorney

    7B Section 409A income

    15 Section 409A deferrals

    Percentage subject to tax : 100 %

    Mark box :Posting with the payment.

    If tax must be withheld, a new code must be created starting with an F,

    Example F1 for Rents. In this case fill the fields as follows:

    CODE DESCRIPTIOn

    F1 Rents

    F2 Royalties

    F3 Other Income

    F5 Fishing boat proceeds

    F6 Medical and health care payments

    F7 Nonemployee compensation

    F8 Substitute payment in lieu of dividends

    F9 Direct Sales to a buyer for resale

    F0 Crop Insurance Proceeds

    FB Excess golden parachute

    FC Gross proceeds to an attorney

    FD Section 409A deferrals

    FE Section 409A income

    Percentage subject to tax: 100%

    Withholding tax rate: 30% (or valid rate for reporting year)

    Mark box: Posting with payment

    Page 4

    C) Change Rules for classical and extended withholding tax

    If the withholding tax base amount should be changed after a

    docment has been paid already, the following steps are required:

    For Classical Withholding Tax and only if the withholding tax amount

    is zero.

    Change of withholding tax base amount or withholding tax code of a

    cleared invoice.

    If the withholding tax base amount and/or the withholding tax code

    needs to be changed after an invoice has been cleared please follow

    the procedure below:

    1) Change Document Change Rules

    Go to IMG -> Financial Accounting Global Settings

    -> Document

    -> Line Item

    -> Document Change Rules

    Go to account Type K field name BSEG-QSSHB and click off

    Line item not cleared.

    Go to account Type K field name BSEG-QSSKZ and click off

    Line item not cleared.

    2) Change Document Change Rules for extended withholding tax

    Go to IMG -> Financial Accounting Global Settings

    -> Document

    -> Line Item

    -> Document Change Rules

    Go to account Type K field name

    Go to field WITH_ITEM-WT_QSSHB and click on 'Field can be changed'

    Go to field WITH_ITEM-WT_WITHCD and click on 'Field can be

    changed'

    2) Change Witholding Tax Code

    Go to IMG -> Financial Accounting Global Settings

    -> Withholding Tax

    -> Withholding Tax

    -> Calculation

    -> Check witholding tax codes

    Go to the respective withholding tax code and click off

    Posting with payment.

    3) Change the payment document of the invoice which needs to be

    changed.

    4) Your changed documents will be selected with report RFW1099m

    Reg

    Madhu M

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  • author's profile photo Former Member
    Former Member
    Posted on Feb 24, 2009 at 11:07 AM

    Hi,

    Search "extended witholding tax pdf" in google and see documentation from sapficoconsultant. Cannot help you with US rates.

    Thanks

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