1099 ReportingThe Special GL Indicator Gets a New Use in.docx

1099 ReportingThe Special GL Indicator Gets a New Use in.docx

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1099ReportingTheSpecialGLIndicatorGetsaNewUsein

1099Reporting-TheSpecialG/LIndicatorGetsaNewUseinRelease4.7

byMartinUllmann

InthemanyyearsIhavebeenconsultingintheFIarea,almosteveryU.S.clientIhaveworkedwithhashadacommonissue-1099MISCreporting.ThequestiontheyhavehadishowtodealwithdataoutsidetheirSAPsystemthatissubjectto1099MISCreporting.

InthemanyyearsIhavebeenconsultingintheFIarea,almosteveryU.S.clientIhaveworkedwithhashadacommonissue—1099MISCreporting.ThequestiontheyhavehadishowtodealwithdataoutsidetheirSAPsystemthatissubjectto1099MISCreporting.

ThegoodnewsisthatstartingwithRelease4.7（Enterprise）,theycanpostthatdatadirectlyintheirR/3systemviaacommonplacedataentryfieldthathasanewuse—thespecialG/Lindicator.（Seethesidebar,“WhatIsaSpecialG/LIndicator?

”）

TheGenericWithholdingTaxReportingprogram（newasofRelease4.7）nowallowstheselectionofvendorinvoicespostedinSAPR/3bothwithandwithoutaspecialG/Lindicator（Figure1）.Now,whywouldyouwanttopostavendorinvoicewithaspecialG/Lindicatormerelyfora1099taxreport?

Figure1

GenericWithholdingTaxReportingprogramscreen

WhatIsaSpecialG/LIndicator?

ThespecialG/Lindicatortransactionallowsyoutopostvendororcustomertransactionstoreconciliationaccountsotherthanthereconciliationaccountdefinedinthemasterdatarecord.Foralllineitemsincustomerorvendoraccountsthatareupdatedtoanalternativereconciliationaccountinthegeneralledger,thespecialG/Lindicatordetermineswhichaccountistobeselected.

ExamplesofspecialG/Ltransactionsare:

•Billsofexchange（vendor）

•Downpayments（vendor）

•Guarantees（vendor）

•Securitydeposit（customer）

•Reserveforbaddebt（customer）

Toanswerthatquestion,youneedtoknowtwothings.First,thespecialG/Lindicator,whenused,drivesthedebitorcreditvaluepostedtoavendortoaunique,not-typically-used,balancesheetaccountnumber.（Seethesidebar,“WhatIsaSpecialG/LIndicator?

”）Second,severalnormalbusinesseventscanleadtoaconditioninwhichsome1099-relevantdataisnotinyourSAPsystem.IfyouwanttoaddthatdataintoyourSAPsystem,youruntheriskofdouble-countingthevendoramountsonyourbalancesheetreport.Notgood.

I’mgoingtogiveyousomeexamplesofhow1099-relevantdatacanendupoutsideofyourSAPsystem.Afterthat,I’lltakeoneofthoseexamplesandwalkyouthroughthestepsonhowtoapplytheoldfunctionality（specialG/Lindicator）tothenewfunctionality（theGenericWithholdingTaxreport）togetallyour1099datainoneplacewithoutdouble-countingonyourbalancesheet.

Herearethreequickexamplesofhow1099-relevantdatacanendupoutsideyourSAPsystem:

∙Yourcompanyusesprocurementcardsforpurchases,andyouonlypaytheprocurementcardissueronamonthlybasiswithoutenteringthesinglepurchasesinyourSAPsystem.（I’llexplainthisexamplemorefullylater.）

∙DifferentA/Pdatasourcesarenotintegrated,andyouwanttoreportall1099transactionsfromR/3.

∙YoujustwentlivewithSAPinthemiddleoftheyearandneedtoconvertyour1099MISCtransactionsfromthebeginningoftheyearthroughyourSAPgo-livedate.

DisadvantagesofReportingfromDifferentSystems

Reporting1099MISCtransactionsfromdifferentsystemspresentsthefollowingdrawbacks:

∙Aseverytaxpayerknows,thetaxreportingrequirementschangefromyeartoyear.IcannotrememberwhenIwasabletousethesameformsandinstructionsformorethanoneyear.Ifyouhavetherequirementsinmorethanonesystem,youneedtodoyouradjustmentsmultipletimes.Thisrepetitionistime-intensiveandincreasesthecostsofyourongoingsystemsupport.However,SAPdoesprovideyouwiththelatestlegalchangesinreportingrequirementsandformchangesaspartofyourserviceagreements.

∙Cumbersomeaudittrail.ItisdifficulttotrackdatachangesinoutsideSAPdataorincustomtableswithinSAP.InthecaseofanIRS1099taxaudit,youarerequiredtoprovidedetailedsupportingdocumentsforeachtransaction.Thiscanbedifficultifyour1099MISCdataresidesindifferentsystems.SAP,however,providesachangehistoryforalltransactiondata.

∙Mergingdifferent1099filesusuallyrequiresprogrammingknowledgeandfilereconciliationprocedures.TheIRSrequiresstrictdeadlinesfor1099forms（January31）and1099filesubmissionstotheIRS（March31）.Sincemissingthesedeadlinesresultsinheavypenalties,youdonotwanttorelyontoomanyfactorsinpreparingyour1099formsandfiles.

OptionsPriortoRelease4.7

Canyoureportonthose1099MISCtransactionsfromdifferentsystems?

Sure.Onemethodistoprintthe1099MISCformsandthenmergethe1099files.Anotherapproachistouploadoutsidetransactionsintocustom-definedSAPtables（commonlyknownas“Z”tables,becausecustom-definedSAPtablesneedtostartwiththeletterZ）andmodifytheSAPstandard1099MISCreportingtoolsinordertoincludethedatainyour“Z”tables.

Bothoftheseapproacheshavecommondisadvantages.（Seethesidebar,“DisadvantagesofReportingfromDifferentSystems.”）

PostProcurementCardDataintoR/3

TomoreeasilyseehowthespecialG/Lindicatorfunctionalityallowsyoutogetallofyour1099-relevantdataintoR/3withoutrequiringlotsofextradataentryfromyourendusersorcreatingextraconfusionforaccountingreportanalysts,let’susetheexampleofprocurementcards.Alotofcompaniesuseprocurementcardstostreamlinetheirpurchasingprocess.Usuallyprocurementcardsareissuedtovariousdepartmentswithdollarlimits,andthesedepartmentscanpurchasesmalleritemslikeofficesupplieswithoutpurchaseorders.Then,onamonthlybasis,theprocurementcardprovider（i.e.,MasterCardorVisa）sendsastatement,andtheentireamountdueispaidtothecardprovider.

Thisprocessmaybebeneficialforyourprocurementdepartment.However,youraccountingdepartmentismissingtheamountandvendorinformationforeachsinglepurchaseinyoursystemthatisnecessaryforproper1099MISCreporting.

Figure2

PurchasesfromVendor45000

Tosolvethisdilemma,allsinglepurchaseswithyourprocurementcardhavetobeenteredintoyoursystem.Youraccountingdepartmentmayarguethatbypostingthesetransactionsagain,youinflateinvoicesandpaymentsandthereforereportmisleadingcashflowstatements.Usingthefollowingmethod,youcanpostthesetransactionswithoutanyeffectonyourcurrentaccountbalancesorcashflowstatements.

AccountingDocumentFlow

TohelpyouunderstandhowthepostingsflowthroughyourSAPsystemwithoutimpactingyourcashflowstatements,I’musinganexampleoftwopurchasesthatarerelevantfor1099reporting.（SeeFigure2above.）During2003,sayyoupurchasedtwoitemsfromVendor45000.

Youpurchasethefirstitem（$1,500USD）throughyourregularpurchasingprocess.Tosimplifymyexample,let’shavethecostdirectlypostedtoanexpenseaccountinsteadofaGR/IRaccount.TheinvoiceisenteredinA/P（Document1）.Thisdebitstheexpenseaccountandcreditsthevendor’snormalB/Sreconciliationaccount（whichisdefinedinthevendormasterdata）.Duringtheregularpaymentprocess,you’llendupcreditingthebankaccountanddebitingthatnormalvendorreconciliationaccount（Document2）.

Item2（$800USD）isapurchasewithaprocurementcardfromVendor45000.TheinvoiceisalreadyprocessedandpaidtoVendor31000,whichrepresentstheprocurementcardprovider.TheaccountingpostingsarethesameforVendor45000andVendor31000.Document3representstheinvoiceandDocument4thepayment.

NormallyyouwouldnotenteranyadditionaldocumentsinSAP.However,bystoppinghere,youwouldonlyreport$1,500USDforVendor45000totheIRS,insteadofthecorrectamountof$2,300USD.

Inordertoreportthecorrectamount,youneedtoentertwoadditionaldocuments—aninvoiceandapaymentintheamountof$800USDforVendor45000.Accordingtotherequirementsofyouraccountingdepartment,thedocumentsmustnothitthenormalvendorreconciliationandbankaccount.Otherwise,youwouldissueincorrectcashflowstatements.

YoucanavoidincorrectstatementsbypostingtheinvoicewithaspecialG/Lindicator.Thischangesthenormalvendorreconciliationaccount.Inmyexample,I’mpostingwithspecialG/LindicatorY（Document5）.Thecontraaccountfortheinvoiceshouldbeanaccountthatisnotincludedinyournormalfinancialstatementaccountrange.Thisaccountisdebitedduringinvoiceentryandcreditedduringpayment（Document6）.Theneteffectonthisaccountiszero.

Youhaveaccomplishedtwothingssofar.First,thenon-SAPdataispostedinSAPwithoutinfluencingthefinancialstatementreporting.Second,thenon-SAPdataisnowavailablefor1099reporting.Next,I’llexplainhowtocreatethenecessaryG/LaccountsandcustomizethesettingsforthespecialG/Ltransactions.

G/LAccountCreation

YouhavetocreatetwonewaccountsforyourspecialG/Ltransactions.BothaccountscanbecreatedwithtransactionFS00（menupathAccounting>FinancialAccounting>Masterrecords>IndividualProcessing>Centrally）.

Account1—Creationofvendorreconciliationaccount.Thisaccountisusedasthevendorreconciliationaccountforyour1099MISCpostingswithaspecialG/Lindicator.Ithastobecreatedasabalancesheetaccountandreconciliationaccountforaccounttypevendor.

Account2—Contraaccountfor1099invoice/paymentpostings.Thisisacontraaccountthatisdebitedduringinvoiceentryandcre