Manage vendor tax compliance determinations when paying US and foreign vendors
The increased IRS audit focus on payments made to US and foreign vendors, along with significant recent uplifts in information reporting penalties, have made it more critical than ever for companies to have effective compliance procedures in place.
Vendor Tax Solutions from IHS Markit provides web-based tools used by accounts payable and tax departments to allow vendors to complete an online interview and provide information about the products and services they provide.
Rather than requiring staff to manually determine and capture vendor tax information, our solution translates vendor domicile along with products and services information into a straightforward tax form requirement for the vendor, so accounts payable teams can focus on their core business functions.
Our solutions allow you to automate your vendor tax determinations required for vendor tax due diligence, withholding and reporting obligations.
Compatibility – Integrate our Vendor Tax Portal tool with a vendor onboarding platform or ERP to create seamless flow of data and process for onboarding and re-certifying vendors. The tool comes with MD3® and Digital W-8® electronic form certification functionality, enabling pre-population of various form fields and an end-to-end tax determination for vendors
Efficiency – Minimize time, effort and unnecessary correspondence between your accounts payable department and your vendors; reduce judgment calls for accounts payable professionals who are not subject matter experts; and manage vendor expectations for both information submission and year-end reporting requirements
Protection – Maintain an automated audit trail for documenting foreign-source or non-FDAP payments to foreign vendors and make determinations upfront on vendor documentation so that the income-sourcing determination is collected upfront, not solely based on invoice information and pressured by strict payment timing terms
Change management – Enables withholding agents to use the most recent tax rules and regulations in your certification and validation processes
Regulatory compliance – Distinguish between FATCA and non-FATCA payments while automatically directing vendors to complete the full FATCA certification on a Form W-8 for FATCA payments or the substitute Forms W-8 for non-FATCA payments
Online banks and broker dealers
Private equity firms
Tax Vendor Solutions
Vendor Tax Portal
The Vendor Tax Portal assists accounts payable and tax departments in managing tax determinations when making vendor payments. Vendors complete a short, online interview to provide information about the goods and/or services they provide. The Vendor Tax Portal then determines any tax form requirements for the vendor and notifies the withholding agent of reporting (and potential withholding) requirements for payments made to US and non-US vendors. This tool comes paired with the tax form validation/creation tools MD3® and D-W8®.
MD3® for vendor payments
MD3® is a web-based platform that helps withholding agents validate US tax Forms W-8, W-9, and 8233 as required by US withholding and reporting regulations. MD3® simplifies the process of validating tax and documentation in accordance with IRS regulations, to help withholding agents improve efficiency and reduce cost. The complex validation process for Forms W-8, W-9 and 8233 is distilled into a series of simple “yes” or “no” questions. The withholding agent answers these questions based on information from the applicable tax form as well as the agent’s books and records. An audit trail is maintained of the validation history, including questions asked and answered. Validation results and form expiration dates are archived, so you can retrieve them to support re-solicitations, tax and management reports, as well as IRS audits. MD3® is regularly updated to align with changes in IRS regulations.
Digital W-8® automates the creation, renewal, and validation of electronic Forms W-8, W-9, and 8233 for vendor payments using the same validation engine featured in our popular MD3® and E-W8™ applications. Upon processing tax forms this tool provides critical tax characteristics for each vendor including income type, withholding rate, validation result, expiration date, and the necessary data elements for 1099 and 1042-S reporting.
Reporting for vendor payments
The Tax Reporting module enables filers to generate the appropriate Forms 1099 and 1042-S information returns for submissions to the IRS. Clients may choose to use this tool as an installed application or as a managed service through our Outsourcing group.
Outsourcing services provide a comprehensive solution for compliance with domestic, non-resident, and FATCA tax withholding and information return reporting needs. Services include tax form validation, withholding rate calculations, GIIN/TIN matching, information return reporting, and periodic reviews of compliance.