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Objective
This document will explain what a pass through credit is, how calculate the credit(s) and how the credit(s) is reported on the 1099-PATR form.
What are Pass Through Credits
A pass through credit is a credit that the Co-operative can use to lower its tax liability. If the Co-operative does not use any or all of the credit then it can pass it on to the patrons and the credit is reported on the 1099-PATR. There are seven credits at this time that AGRIS can handle. They are:
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The system doesn't make a transaction for the pass through credits, so it is important to keep a copy of the report that is generated. This will be important if you have to reprint a 1099 for a patron for a prior year. The system does hold the information until the option to Clear All Totals is performed.
For this discussion we will look at Alternative Minimum Tax and Qualified Production Activities. The pass through credits can be calculated by the system or imported. First we will discuss how the system calculates the credit.
Clearing Totals from Prior Year
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Before allocating any pass through credits, be sure and clear all totals |
This only needs to be done once per 1099 reporting period.
Go to Patronage > 1099 Reporting > Pass Through Credits
Select 1. Clear Totals for All Patrons, then confirm Y to each option to clear out
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Example: Alternative Minimum Tax
A prorated share of a co-op's alternative minimum tax (AMT) can be passed on to patrons. The amount is not a part of the refund, does not impact Accounts Receivable or Accounts Payable and does not change the patron's stock/equity balances, but the patron will have to report it as income.
The formula for calculating each patron's share of the AMT is: (Individual patronage allocation divided by Total patronage amount) times Alternative minimum tax allocated = Patron's alternative minimum tax allocation.
Steps to Process AMT
PAT > 1099 Reporting > Pass Through Credits > 2. Alternative Minimum Tax
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Alternative Minimum Tax Amount to Allocate : Type the total alternative minimum tax to be used in the calculation of each patron's share of the alternative minimum tax. Refer to the formula above. There will a report generated when the process is finished, it is recommended that this report be sent to the spool.
For the Calculation Option select 1 – Refund Based
Begin/End Transaction Date – Type the dates that define the range in which a patronage refund was completed and is to be used to calculate each patron's share of the total patronage refund.
Enter in any other parameters that may be necessary.
Example of Alternative Minimum Tax (AMT) Report:
Example: Qualified Production Activities (DPAD)
The Qualified Production Activities is based on grain purchased from the member patrons during the Co-operative's fiscal year.
Steps to Process DPAD
PAT > 1099 Reporting > Pass Through Credits > 7. Qualified Production Activities Credit
Key the Amount To Allocate: Type the amount of the credit to be allocated to the patrons.
Calculation Option:
Option 1 will calculate the credit based on refund dollars
Option 2 will calculate based on activity.
Transaction/Activity Date:
If using Option 1, enter the date range of the refund to be used to calculate the credit
If using Option 2, enter the date range of the activity that is to be used to calculate the credit
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Click OK.
If using Option 1, at this point the credit will be calculated
If using Option 2, there are additional parameters to enter.
Because the allocation is based on activity, enter the parameters that you use to specify who is eligible to participate in a patronage refund.
Purchase/Sales: Enter a P, beginning and ending
Accounting Type: The options are 2 – 4. Enter the accounting type that is designated on the commodity patronage code
Product Code: Enter the range of the commodity patronage codes for which the credit is to use in the calculation.
Location Code: Enter a location range if there is activity in a direct ship location that they do not want to allocate on.
Proration Option – Enter 1 – Quantity Based or enter 2 for Amount Based.
Click OK, the credit will now be calculated.
Example of Qualified Production Activities Report:
How to Edit a Patron’s Pass Through Credit
A pass through credit can be corrected or re-entered for a patron.
Go to PAT > Account Balance Inquiry > select the patron you wish to make a change to.
Select the Edit button to open the fields to be edited
Edit the Qualified Production Credit
Building a Spreadsheet to Import DPAD
To utilize this function, Excel must be installed on your computer or the terminal server.
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