- In Accounts Payable, Records, create an invoice for the vendor that is subject to the 3% withholding.
- Create a new Credit memo for the 3% of the total invoice amount.
- Edit the 1099 Distribution on the Credit Memo to record withholding to a Box 4 (Federal Income tax withheld.)
- Apply the Credit memo to the invoice to reduce the balance of the invoice by 3%.
- Produce 1099 Forms.
For more information on the 3% withholding requirement, refer to the IRS website
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