Producing 1099s for Vendors
A 1099-MISC form is a tax form used to report miscellaneous income, such as income earned as a non-employee, as well as fees, commissions, rents, or royalties paid during the last tax year. You can think of the 1099 form as the equivalent of a W-2 form for independent workers; both forms are information returns. Whether you hire people to perform services that help your business run smoothly, or you receive payment for services as an independent contractor, 1099-MISC is the form you’ll need.
1099s – Requirements and Timeline
- Due to Recipient:
- February 1st, 2016
- February 16 if payments are in Box 8 or 14
- Due to IRS:
- February 29, 2016 for Paper Forms
- March 31, 2016 electronically
(NOTE: Filing electronically is required when filing 250 or more forms)
- Who Receives a Form 1099?
Any person who is paid $600 or more in a calendar year for services or rent will be issued a 1099-MISC form. A person = individual, trust, partnership, estate, corporation or LLC. Corporations are excluded except for Attorney’s fees, medical or health care, fish payments or substitute payments in lieu of dividends. Payments for telegrams, telephone, freight, storage and similar items are excluded. Employees receive a W-2, and therefore, are not issued a 1099. When in doubt it is safer to file a 1099 than not. Attorney’s fees of $600 or more paid in the course of trade or business are reportable in Box 7. Proceeds paid to attorneys are reported in Box 14, as it relates to a settlement agreement or any other amounts not reported in Box 7.
Note that payments made to vendors via Paypal or credit card should be excluded from 1099s. These are reported by the payment process. (QuickBooks 1099 processing ignores these payments as well)
Resources for More 1099 Information
Below are links to the IRS website for 1099 Instructions and for the Form 1099-MISC:
Instructions for 1099-MISC:
Producing 1099s from QuickBooks – Common Errors and Fixes
- Account Mapping is Incorrect
It is important to ensure that your chart of accounts are mapped to the proper 1099 boxes on the form. Box 7 is mostly used, however, gross proceeds in the case of a legal settlement would be reported in Box 14.
To correct, use the instructions below to properly map your accounts in QuickBooks:
- Go to Edit Menu, Select Preferences.
- Scroll down to Select Tax 1099, and then highlight the Company Preferences tab.
- Choose “If you want to map your accounts to boxes on Form 1099-MISC click here.”
- Show All Accounts to ensure proper accounts have been selected for 1099 expense activities
- Click on drop down box to select the box needed (Box 7 most typical
2. Duplicate Vendors Appear in QuickBooks
If you have two vendors listed in your Vendor List, but they have the same name and Federal Tax ID, they should be merged together.
One way to identify duplicate vendors is to run a Vendor List report in QuickBooks, and include the Tax ID on the report. If you sort the report by Tax ID, the duplicate vendors will be adjacent to each other on the report.
In order to merge the two vendors into one:
- Ensure QuickBooks is in Single User Mode (User mode is listed under the File Menu. If it says ‘Switch to Single User Mode’, Select to activate. If it reads ‘Switch to Multi User Mode’, then you are already in Single User Mode.)
- Go to Vendor Menu, then Select Vendor Center so that your Vendor List appears.
- Locate the Vendor Name you want to merge, double click on Vendor Name to edit.
- Re-Type the Vendor Name exactly like the duplicate vendor record.
- QuickBooks will ask if you want to merge the vendor; say Yes
3. Missing Information or Changes to Vendor Information
- A W9 Form should always be collected when working with a new Vendor. The W9 Form will list all of the needed information to ensure the 1099 Form will be completed accurately. However, in the event a W9 was not collected, or the information changed and you were not notified, the 1099 will need to be corrected.If a W9 was not collected, this would be the time to send your Vendor a W9 form to complete and send back to you so you can complete the 1099 Form needed by the deadline.In order to add Vendor Information to the QuickBooks file, or to make changes to Vendor Information, use the steps in #2 above to edit the Vendor.
4. Vendor notifies you that the 1099 is inaccurate due to a typo or misinformation
Sometimes errors are made and a new 1099 Form needs to be created. This is a good reason to wait to file the 1099 Forms with the IRS until the deadline. It gives you about 4 weeks to hear back from your Vendors in case an error has occurred.
If the 1099 Forms have not been sent to the IRS, simply edit your QuickBooks file with the correct information, recreate the 1099 Form for that Vendor, and then discard the incorrect form.
If the Forms have already been sent to the IRS and you need to amend a Vendor’s 1099 Form, you will need to:
- Edit the QuickBooks file with the correct vendor information.
- Print out a new 1099 Form for the Vendor (make sure to check off the box at the top of the Form that says “Corrected” – see 1099 Form above).
- Revise the 1096 Form for your Company (this is the Form that goes to the IRS along with their copy of the 1099 Forms you completed for your company).
- Check off the box at the top of the incorrect 1099 Form that says “Void” – see 1099 Form above.
- Mail updated forms to the IRS, along with a copy of the voided form. Need assistance or have questions? VBS provides 1099 support services for our existing clients upon request. If you have questions or need our assistance, please let us know by December 23, 2015. We would be happy to set up a call to discuss the scope of support you are looking for! **Vector Business Solutions Consultants are not tax advisors and specific tax advise should be obtained by your CPA**