Easy Royalties Withholding Tax & QuickBooks · 1. Go to the Edit menu and select Preferences. 2. In the left column, select Tax: 1099. 3. Click on the Company Preferences tab. 4

East Royalties Version 4 Withholding Tax & QuickBooks

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Easy Royalties Withholding Tax & QuickBooks

1 Withholding Tax & QuickBooks ............................................................................................................. 2

1.1 Summary ....................................................................................................................................... 2

1.2 Overview ....................................................................................................................................... 2

1.3 Easy Royalties ................................................................................................................................ 3

1.4 QuickBooks: Create a Federal Tax Withholding Liability Account ................................................ 3

1.5 QuickBooks: Configure 1099-MISC Reporting for Backup Withholding ....................................... 7

1.6 QuickBooks: Setup Royalty Recipients as 1099 Vendors .............................................................. 9

1.7 Easy Royalties: Payments Excel File ............................................................................................ 10

1.7.1 Include the withholding amounts in the payments export file .......................................... 10

1.7.2 Change withholding amounts to a negative dollar amount ............................................... 10

1.8 Transaction Pro Importer: Configuration for Withholdings........................................................ 11

2 Questions? .......................................................................................................................................... 16

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1 WITHHOLDING TAX & QUICKBOOKS

1.1 SUMMARY US tax law requires the licensee to withhold 28% of royalty payments to US residents (non-corporations) if the licensor does not provide a valid tax ID number. The royalties earned and any taxes withheld are reported to the Internal Revenue Service on the IRS 1099 MISC form.

This section covers how to configure Easy Royalties, the QuickBooks accounting software and Transaction Pro Importer (for importing royalty payments into QuickBooks) for withholding taxes.

QuickBooks is an accounting software application used by many small companies in the United States.

Transaction Pro Importer is the 3rd party software application used to import payments due to authors and contributors into QuickBooks. (www.transactionpro.com)

1.2 OVERVIEW 1. QuickBooks: Create a tax withholding account in your chart of accounts. 2. QuickBooks: Map the tax withholding account to 1099 Box 4. 3. QuickBooks: Confirm that vendor accounts for royalty recipients; that are not corporations, are

coded as 1099 vendors. 4. EasyRoyalties: The payments export file should contain the Withholdings and Withholdings GL

Account fields if taxes are withheld. 5. Easy Royalties: After exporting the selected payment records from Easy Royalties the

Withholdings amount must be converted to a negative number prior to importing into QuickBooks via Transaction Pro Importer.

6. Transaction Pro Importer: Enable Program options > Advanced > Enable Columns as rows for bills to allow importing the Gross payment and Withholdings amount and general ledger (GL) account for each payment record.

7. QuickBooks: The software calculates the amount due (the royalty payable) amount from the sum of the positive gross payment and the negative withholdings amount. The gross payment amount will be reported on IRS 1099 MISC form in Box 2: Royalties and the Withholding amount will be reported in Box 4: Federal Tax Withheld.

Note: Royalty payments to corporations (including a Limited Liability Company (LLC) that is treated as a C or S corporation) are not subject to 1099 reporting requirements.

Note: Royalty payments and tax withholdings paid to foreign persons are reported on Form 1042, the Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.


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1.3 EASY ROYALTIES In the contributor (author) record enter the tax withholding percentage in the More… > Administrative screen’s Withholding rate on royalty revenue (%) field.

When royalties are calculated the withholding amount will be calculated using this percentage.

1.4 QUICKBOOKS: CREATE A FEDERAL TAX WITHHOLDING LIABILITY ACCOUNT Create an account in the Chart of Accounts to enter the federal withholding amounts.

1. Go to Lists > Chart of Accounts. 2. From the accounts drop down box; at the bottom of the chart of accounts record list, select new. 3. Create an Other Current Liability account. 4. Name the account "Backup Withholding."













1.5 QUICKBOOKS: CONFIGURE 1099-MISC REPORTING FOR BACKUP WITHHOLDING If you are using QuickBooks 2016 follow the steps below to map the Backup Withholding general ledger account to the appropriate box on the IRS 1099 MISC form.

1. Go to the Edit menu and select Preferences. 2. In the left column, select Tax: 1099. 3. Click on the Company Preferences tab. 4. Click the click here link under If you want to map your accounts to boxes on the Form 1099-

MISC option. 5. Select Show all accounts from the drop down menu. 6. Scroll down to the "Backup Withholding” account and select Box 4: Federal Tax Withheld. 7. Note: Your royalty expense account and royalty advance account should be mapped to Box 2:

Royalties.







1.6 QUICKBOOKS: SETUP ROYALTY RECIPIENTS AS 1099 VENDORS Royalty recipients should be setup as 1099 vendors. Only payments to 1099 vendors will be reported on Form 1099-MISC.

• From the Vendors menu, choose Vendor Center. • Right-click the vendor you want to change to a 1099 vendor, and click Edit Vendor. • Click the Tax Settings tab. • Enter the vendor's tax ID number. If the vendor is a sole proprietor, enter the vendor's Social

Security number. Otherwise, enter the vendor's nine-digit Tax Identification Number. • Click the Vendor eligible for 1099 checkbox. If you don't see this checkbox, you need to set up

QuickBooks for 1099 tracking. • Click OK.

Reminder: Royalty payments to corporations (including a Limited Liability Company (LLC) that is treated as a C or S corporation) are not subject to 1099 reporting requirements.

Tip: QuickBooks can print a report of all vendors and their 1099 status. To do this select Reports > Vendors & Payables > Vendor Contact List. Select Customize Report and add a column for: Eligible for 1099.




1.7 EASY ROYALTIES: PAYMENTS EXCEL FILE

1.7.1 Include the withholding amounts in the payments export file Export the Withholdings amount and the Withholdings GL Acct (Account).

1.7.2 Change withholding amounts to a negative dollar amount In Excel change the amounts in the withholding column to a negative dollar amount. Transaction Pro Importer will import the amount as a credit (a liability) into QuickBooks.

In Excel there are several ways to change a positive value to a negative value.

Method 1. Place -1 in an empty cell. Select copy. Then select the cells with withholding amounts. Then select Paste Special > Multiply. This will multiply all selected cells by -1.

Method 2. In an empty column add an IF formula to multiply positive amounts by a negative one.

Example:

=IF (A2>0, A2*-1, A2)

• If A2 is greater than zero multiply A2 by -1 • If AR is not greater than zero, use the value of A2




1.8 TRANSACTION PRO IMPORTER: CONFIGURATION FOR WITHHOLDINGS If you payments file includes deductions for Backup Withholding select Program Options > Advanced > Bills > Enable columns as rows for bills.

This configures the software to import more than one expense account and expense amount for a single payment record.

Transaction Pro will import the Gross payment (a positive number) and the Withholdings (a negative number). QuickBooks will add these two amounts to arrive at the amount due.




An example of the field mapping for the payments import is shown in the three images that follow.










WARNING: QuickBooks assigns the tax withholding amount to the tax year derived from the bill’s transaction date, not the check date. You need to insure that the Bill is paid in the same year as the transaction date for correct 1099 MISC reporting.




2 QUESTIONS? If you have any questions about the information in this document please contact your customer support representative or email [email protected]


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Easy Royalties Withholding Tax & QuickBooks · 1. Go to the Edit menu and select Preferences. 2. In the left column, select Tax: 1099. 3. Click on the Company Preferences tab. 4