Processing 1099s is a top priority for accounts payable (AP) managers at the beginning of each year. In most companies, the IT department reviews Oracle’s Metalink for the new annual AP patches (made available in November/early December to reflect 1099 reporting changes required by the Internal Revenue Service [IRS] for that tax year). The AP managers then extract the data for the current tax year and file that data in the updated format.
The IRS requires all state agencies to report non-employee compensation on a calendar-year basis. This sometimes requires modifications and updates to the supplier master data and/or AP invoices so they reflect the right information. In these cases, such changes must be made by December 31 of the current tax year.
Dates for 1099 Processing are:
- January 31, 2018
- February 28, 2018
Set Up the Tax Reporting Entities
(Setup – Tax – Reporting Entities)
Use the Reporting Entity
window to define reporting entities, which are any person or organization that has a unique Tax Identification Number (TIN). For each entity, you’ll need the following information:
- Location (From a LOV)
- Tax ID Number
- Balancing Segment(s) (From the accounting flexfield that is 1099 reportable)
Some entities may have more than one balancing segment. For example, an enterprise comprised of three companies may have an entity called “Headquarters” with of three balancing segments—one balancing segment value for each respective company. When submitting a 1099 report, Headquarters is entered as the reporting entity and Payables prints the sum of all of the paid invoice distributions related to the three balancing segments.
Because balancing segment values must be unique across reporting entities, the list for the Balancing Segment
field of the Reporting Entity
window displays only values not already assigned to other reporting entities.
Set Up the Suppliers
(Supplier – Entry – Tax Reporting)
Payables requires you to have specific fields populated in order to set up a supplier for a 1099 report. Make sure you have:
Meet the AP Invoice Requirements
(Invoices – Entry – Invoices)
- Reporting Name (You have the option to use an alternate name for the supplier on the 1099s)
- Tax ID (9 digits)
- The “Reportable” box selected
- Income Tax Type (To determine in which box on the 1099 the amount will go)
You must make sure the AP invoice lines are flagged correctly. Invoice distributions contain a field called Income Tax Type
. When this field is populated, the invoice distribution becomes “flagged” for 1099 reporting. These two fields should be completed:
Make Sure That…
- Income Tax Type (The MISC code that defaults from the supplier record)
- Income Tax Region (The state code–like FL for Florida—defaults from the site’s address)
- The total for all 1099 reportable invoice distributions is $600 or higher (See http://www.irs.gov for more information.)
- 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 specified date range specified (usually the year)
Review Oracle 1099 Processing Updates
The IT department should review Oracle’s Metalink for 1099 processing and program updates (typically available in November/early December) to identify any patches for 1099 reporting changes required by the IRS tax year.
If there are new patches needed, IT should apply and test those patches
Review 1099 Suppliers
Running a 1099 Supplier Exception Report
will identify suppliers with “exceptions” (inaccurate or missing information) for 1099 processing. You can correct these supplier exceptions in the Suppliers
window. This should be done for each of the tax reporting entities.
For each exception, Payables lists the supplier’s name, number, TIN, tax reporting site, state and exception condition, including a brief description of each exception condition. Payables sorts this report by exception condition and supplier name. A supplier is listed once for each exception condition it meets. A supplier can have the following exceptions:
Review 1099 Invoices
- Duplicate TIN
- Foreign Supplier
- No Tax Reporting Site
- Non-Standard State
- Non-Standard TIN
- Null Address Element
- Null Foreign Address
- Null Organization Type
- Null State
- Null TIN
Running the 1099 Invoice Exception Report
will reveal invoice distributions with exceptions for 1099 processing. Use the Update Income Tax Details Utility
to correct the missing Income Tax Type
or Income Tax Regions
fields. The utility will update multiple invoices after changes have been made to the federal reporting status or income tax type of a supplier. The 1099 Invoice Exceptions Report is divided into three sections:
Run payment Reports
- Invoice Distribution Lines for 1099 suppliers with no income tax type
- Invoice Distribution Lines for non-1099 suppliers with an income tax type
- Invoice Distribution Lines with null or invalid income tax regions
Run a detailed 1099 Payment Report
—include invoice numbers, invoice amounts, and payment dates—to create a list of payments made to 1099 suppliers. Then submit the report for each tax-reporting entity in the organization. You can review this report to identify instances where one supplier has two different tax types. Where needed, correct all invoice line distributions to display only one amount on the 1099.
Generate 1099 Documents
Submit the 1099 Electronic Media Report
to generate the summarized 1099 information in an IRS-approved electronic format.
Then transfer the electronic file to the IRS via the IRS website. The submission process will show an error if certain exceptions exist, such as an invalid supplier TIN. Use the 1099 Forms PDF Format
program to generate 1099 forms.
Generate 1096 Form
Generating the 1096 form will print a summary of the annual total of 1099 payments for all suppliers of a particular MISC type. When the 1099 Forms Report
is run, Payables summarizes all payments of 1099 MISC reportable invoice distributions and populates a table for 1096 information.