1099-MISC Tax Withholding requirements for Pennsylvania

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Posted on by William W. - Profes...

Act 43 of 2017 created a withholding obligation for certain payors of Pennsylvania-source income and lessees of Pennsylvania real estate to non-residents . It also expanded the requirements with respect to when a copy of Federal Form 1099-MISC is required to be filed with the Pennsylvania Department of Revenue. Beginning January 1, 2018, anyone that makes the following payments is required to withhold from such payments an amount equal to the tax rate specified per 72 P.S. § 7302 (currently, 3.07%).

In a nut shell, Pennsylvania now requires employers withhold income tax for non resident 1099's! Considering there are many people who work as pass-through businesses, this seems like a huge compliance problem for GP and will be affecting thousands of people. Is Microsoft going to be fixing this anytime soon?

http://www.revenue.pa.gov/GeneralTaxInformation/Tax%20Types%20and%20Information/EmployerWithholding/Documents/1099-MISC_Fact_Sheet.pdf

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Mike Bufano 1,484 on at

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We are considering using Use Tax function to withhold the 3.07% from each Vendor invoice. Haven't tested yet, but pretty optimistic. Haven't had to setup this feature in some time. This will at least accommodate the withholding component but it will not address the 1099 reporting component at year end.

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William W. - Profes... on at

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Thanks, Mike. GP doesn't allow a negative tax to be entered into the window. You can force it negative via SQL, but then the batch won't post and goes to batch recovery.

The value can't be positive, because that doesn't withhold the tax value, but just tacks in on top, effectively making the company pay for the individuals income tax. A trade discount would reduce the value, but that seems like a reporting nightmare to withhold taxes that way.

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William W. - Profes... on at

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I just tried going to Company Options and checking the box "Enable Reverse Charge Taxes." That allowed the negative entry, but the distributions were unbalanced. Manually changing the distributions resulting in a batch that would save, but go into batch recovery on attempting to post.

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William W. - Profes... on at

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Ok, I think we’ve got this figured out:

1. Go to Financial pane —> Cards —> Account

2. Setup a new Balance Sheet, Credit balance account to hold this new tax liability

3. Go to Administration pane —> Setup —> Company —> Options

4. Check the box next to “Enable Reverse Charge Taxes”

5. Go to Administration pane —> Setup —> Company —> Tax Details

6. Create a 1099-MISC Non resident tax, with negative percent.

7. Go to Administration pane —> Setup —> Company —> Tax Schedules

8. Assign the new 1099 MISC Non resident tax detail id to a Tax Schedule ID, or create a new one (e.g. 1099PANR)

9. Assign the Tax Schedule ID to the vendor for defaults, and change the accounts for tax to point to the newly created GL tax liability account

That should be enough for the transactions to be able to post. You’ll also need to report on this, and for that you’ll need to use the 1099 Withholding Feature, which is really a reporting only tool, to get the rates on there. For steps see Leslie Vail’s post:

community.dynamics.com/.../backup-withholding-on-1099-payments

On a side note, this is still a bit of a hack job. Microsoft should implement something to handle this smoother.

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dhtax on at

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it's helpful

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Community Member on at

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We completed the setup but had a couple of questions.

First, the standard PM check format we use does not show the original amount of the voucher and the 3.07% withheld, only the amount net of the withheld tax.

Has anyone found a check format that shows the calculated PA tax witheld on the PM check stub?

Also, the tax schedule we created and includes on the Vendor card does not automatically appear when we input a voucher - we expected that the tax schedule would populate on the voucher entry screen.

Thanks.....

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Community Member on at

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Does anybody here know how it can be implemented with using third-party templates of forms? For example, https://1099-misc-form.pdffiller.com/ or from the tax1099? I hadn't seen any workaround yet

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