Overview of IRS 1099 forms and SAP Business ByDesign Tax Return Types

Under IRS guidelines, 1099 reporting for Non-Employee Compensation is now separate from other 1099 income types.  Accordingly, in SAP Business ByDesign there are separate SAP Business ByDesign tax return types to create forms and files as well. 

1. Miscellaneous Income (1099 Misc) – FormB -this SAP Business ByDesign run prepares all 1099 forms other than non-employee compensation.
2. Miscellaneous Income (1099 Misc) – File – this SAP Business ByDesign run prepares the electronic 1096 file to be sent to the IRS.
3. Non Employee Compensation 1099-NEC – this SAP Business ByDesign run prepares both the 1099 NEC form and the 1099 file for all Non Employee Compensation vendors.

Step 1: Request the TCC if not already obtained

Warning! Your Transmitter Control Code (TCC) is on FIRE! No, really…it is. Your TCC is on the IRS’s FIRE website. FIRE stands for File Information Returns Electronically. Go to the FIRE website and retrieve your TCC, using IRS Form 4419. It takes 45 days from the time you submit the request to get your TCC. If you use your TCC to file each year, it remains in effect, which means you don’t have to re-submit to retrieve it each year.

Step 2:  Review the Withholding Tax to be reported

Go to Tax Management Work Center> Reports. Find the report Withholding Tax Items.  Run the report to see the amounts reported by Supplier and Income Type (non-employee compensation, rents, etc.).  NOTE: If there is no data is in this report, there may be an issue with the setup of the tax authority. Contact your implementation partner for assistance.  Review your data. If the withholding tax is calculated correctly, proceed to Step 2.  If an incorrect amount is reported to a vendor, make corrections by going to Tax Management Work Center>Manual Tax Entries>Withholding Tax Base Amount Entries. Select the New button and an entry screen opens. Make the adjustment and release. 

Step 3a: Prepare the 1099 forms for all vendors other than NEC

Go to Tax Management work center>Periodic Tasks> Withholding Tax Return Runs.  Select New>Tax Return Run.  The screen opens. Enter a description (for example, enter 2022 Almika 1099 Forms). Enter the Tax Return Arrangement ID for the tax return type, Miscellaneous Income (1099 Misc) – Form B. Enter the appropriate Dates.  Save your entries, set it to Active and then Schedule. When the return runs, a message displays: Tax return run XX created successfully.

Step 3b: Review and print the 1099 forms just created

Go to Tax Management Work Center>Tax Returns> Withholding Tax Returns.  The tax return appears with a status of In Preparation.  Use the Preview button to view the 1099 forms. If the forms are correct, enter Release and Print. The status of the return changes to Reported.  A pdf file is created which can be printed.

Step 4a: Prepare the 1096 File for all vendors other than NEC

Go to Tax Management Work Center>Periodic Tasks> Withholding Tax Return Runs.  Select New>Tax Return Run.  The screen opens. Enter a description, something like 2022 Almika 1099 File. Enter the Tax Return Arrangement ID. This should be the tax return arrangement for tax return type, Miscellaneous Income (1099 Misc) – File.  Enter the appropriate Dates.  Save. Set to Active. Schedule.

The system creates a tax return file.

Step 4b: Review and release the 1099 file (form 1096) just created

Go to Tax Management work center>Tax Returns> Withholding Tax Returns.  The tax return is visible with a status of In Preparation.  Use the View button to view the 1096 file.  Enter the TCC code and select Release and Print.  The system will create the electronic file. It will be stored on the run as an attachment.   The Transmitter Control Code (TCC) is a required field for this process so be sure to request the code from the IRS if you have not already done so (see Step 1 above).

Step 5a: Prepare the 1099 NEC Forms and File

Go to Tax Management work center>Periodic Tasks> Withholding Tax Return Runs.  Select New>Tax Return Run.  The screen opens. Enter a description, something like 2023 Almika 1099NEC. Enter the Tax Return Arrangement ID. This should be the tax return arrangement for tax return type, Non Employee Compensation 1099-NEC.  Enter the appropriate Dates.  Save. Set to Active. Schedule. The system creates a tax return file.

Step 5b: Review and print the 1099NEC forms and file just created

Go to Tax Management work center>Tax Returns> Withholding Tax Returns.  The tax return is visible with a status of In Preparation.  Use the View button to view the 1099 forms.  Enter the TCC and select Release and Print.  The system will create the electronic file. It will be stored on the run as an attachment. The Transmitter Control Code (TCC) is a required field so be sure to request the code from the IRS (see Step 1 above).

Step 6: Create, then upload the electronic 1096 File and the electronic NEC file to the IRS website

For the 1096 electronic file return, and the 1099 NEC electronic file return released above, download the files from SAP Business ByDesign. The files are created and ready for uploading to the IRS website.  Uncertain about filing electronically? Don’t be. Test your electronic file at the IRS FIRE site. When you get the pass function file, you’re clear to send your actual file to the IRS FIRE site.

Using SAP Business ByDesign and following these few simple steps saves you time when it comes to preparing 1099 forms and 1096 file and 1099 NEC forms/file. It’s just one more way ByDesign benefits smart organizations. That’s our opinion. What’s yours?

Find out more about how SAP’s Business ByDesign can help your organization be more effective and efficient by getting in touch with us. Send us a message today. Click here.

By: Teresa Blackwell, Director, SAP Business ByDesign Practice, and David Snyder, Director of Customer Engagement