How to account for Withholding Taxes in IC
For catalogs that must withhold tax totals from payees within their royalty accounting, withholding taxes can be easily accounted for within IC using transfer transactions.
To do so, withholding tax totals must be calculated from the Period's Current Payable total of each applicable payee, and the tax amounts to be deducted can be entered as negative transfer transactions corresponding to each applicable payee and falling within that Period, representing the withholding tax total to be deducted from that corresponding payee's payable amount.
For example, if a 10% tax was being withheld in full from each payee's total payable amount in 2023, you would first want to navigate to the corresponding Period (in this instance, 2023), and click the Payee Balances tab from the Period Dashboard to view each payee's Current Payable for that Period.
In this example, the Rose Mayfield payee has a Previous Payable of $1271.59 carried over from the previous Period, and a Current Payable of $3,021.13 for their balance within this Period. If their withholding tax was calculated in the previous Period, we'll want to use the Current Payable total (i.e. their 2023 payable balance) to ensure the withholding tax total is not applied to any previous totals for which it was already calculated. If there is no previous balance, the Total Payable (i.e. payable to date) can also be used.
This Payee Balance table can also be conveniently downloaded using the "Download" button in order to retrieve this data in CSV format and work with these totals in bulk. Data can also be transposed to a copy of our Additionals worksheet to more easily import these withholding tax totals in bulk.
As Rose Mayfield is owed $3,021.13 for the current period - we'll want to calculate the withholding tax (in this case, 10% of $3,021.13, or -$302.113) and enter it as a negative transfer transaction in the system, either individually or in bulk via the Additionals worksheet. We've included a helpful example below which shows how this negative transfer transaction would be entered for this payee.
Please note! You'll always want to make sure that the Paid Timestamp of the negative transfer transaction falls within the Period that the Withholding Tax is being calculated for.
Once you have done so, the total amount of the negative transfer transaction representing the withholding tax will be deducted in full from each payee's payable balance for that Period, successfully reducing their payable total by the amount being withheld.