I need advice on setting up a new dataset.

A company who uses Adagio to provide accounting services to their clients is starting a new line of business. One of their clients issues monthly checks to individuals; they are annuity payments and the amount never changes for each individual. Until Payables has a real archive function, they will be importing the monthly invoices from Excel.

Here's the catch. They need to withhold federal and state taxes from the payments, and track and report the amounts paid and withheld on a 1099 at the end of the year. The actual issuing of the 1099s will be done outside of Adagio, using data extracted by GridView.

There are multiple states involved.

Being in the US, I rarely deal with taxes on vendor payments, but I'm wondering if I can do this using the taxes built into Payables, making the rate negative.

Thanks in advance for any ideas.

Steve

Hi Steve:

Adagio prevents a negative tax rate on a Distribution Code. Could this be done with payroll software?

Steve:

Just to make sure I'm on the right page:

Gross annuity amount is $1,000 but then withhold Federal Tax $150 and State Tax $100 so the actual check is $750.

As the gross never changes then I assume the withholding never changes (until the tax rate changes).

Why can't you set up the invoice import as a Header/Detail, each header then has 3 details (Gross annuity positive, Federal and State Taxes as negative)?

If this was Canada then I would use Payroll to accomplish this as tax rate changes would be automatically handled.

Hi Brian and Doug

Yes, this could be done with payroll, but in the US we don't have a great payroll option, and I was hoping to avoid it, even though the client already owns the payroll software.

Doug - your assumption is correct that the withholding never changes. The problem with doing the breakdown in the detail of an invoice is that it's harder to separate the gross and the taxes at the end of the year - it would have to be done using the Invoice Posting Journal, which is not the easiest table to use.

Thanks for your feedback

Steve

Steve:

There shouldn't be any problem generating these numbers using the AP GL Distribution table (aka the drill down journal entry for AP transactions).