How to file 1099 Misc via Quickbooks ?
- Identification of 1099 Vendors
- Vendor setup in Quickbooks
- Transactions Recording
- Filing Process
Identification of 1099 Vendors
If it considers a regular business entity, all associated VENDORS are not qualified as a 1099 Vendor. There are few criteria to be evaluated before categorize a vendor record as a 1099 record.
Please refer to the article – 1099 Filings 2020
Vendor setup in Quickbooks
Before we create a vendor record in Quickbooks, we need to know the below details on the specific vendor.
- Legal Name of the Company/Person
- Correct Address
- Email and other contact details
- Business ID Number (FEIN/SSN )
So when it requires creating a new vendor record in Quickbooks, it is a recommended practice to send a W9 to that vendor and get all information via W9 form. Then it can be uploaded to Quickbooks vendor record as well. (under attachments)
Track payments for 1099: If the vendor record is 1099 qualified record it requires to mark the record as Track Payments for 1099. This option is right below the Business ID Number field. If the accountant misses this action item when creating the vendor record, it is a huge mistake and that record is not captured as a 1099 vendor. So at the end payments to this particular vendor will not be reported to IRS and finally, the vendor will not receive 1099 from at the yearend.
When the accountant records the dashboard transactions, he/she must tag the Vendor/Customer record for each transaction. Then all transactions are flowing into relevant Vendors or Customer records in Quickbooks. If the entity receives and records Bills prior to the payments this action is much easier, only need to match the payment with relevant bills created in Quickbooks.
So at the year-end,
- Vendor Ledger balances are accurate
- Aging summaries are accurate
- Filing process will be able to capture 1099 balances accurately
There is a concern about having a huge Vendor list after implementing this action item. But still, it is a good practice to tag Vendor records for each and every payment entity process out of its bank and credit cards.
Quickbooks have an inbuilt 1099 filing portal which is the easiest way to file 1099 at the yearend. So it will take care below action items,
- Quickbooks will e-file with the IRS on behalf of the company. There is a small charge for filing (first 3 forms $14.99 and after that $3.99 per a form)
- Quickbooks will e-deliver 1099s to vendors/contractors and print and mail hard copies as well.
Pretty much 100% automated filing process.
During the filing process, the accountant has to go through 4 steps.
Review the Company Information:
Update company Name, Address and Tax Id
Categorize payments to contractors:
In a 1099 Misc form, there are 14 different payment types, and the company needs to use these boxes to report payments.
- 1 Rents – Rents payments for office space, farmland or pasture
- 2 Royalties – Royalty payments over $10, which generally covers license fee for copyrights, patents, and trademarks
- 3 Other Income – Reportable payments not specially covered elsewhere, price wining and termination payments not wages
- 4 Federal Tax Withheld – Backup Federal Withholding, payments that are required to be reported in another 1099 category but were not because, for example, an individual didn’t provide a tax ID
- 5 Fishing Boat Proceeds – Certain proceedings paid to working fishing crews. The earning could be a portion of the catch, proceeds of the catch as a distribution in kind, or the fair market value of the catch.
- 6 Medical Payments – Payments to Doctors, Nurses, or healthcare providers for goods and services. Like vaccine injections, drug screening, and lab services. Do not include Health Insurance Premium paid to an insurance company for full health coverage
- 7 Non-Employee Compensation – Compensation for service performed by an individual or business contractor who is not considered an employee.
- 8 Substitute Payments – Payments in lieu of dividends – over $10
- 9 Direct Sales – Payments made for the purchase of certain consumer goods
- 10 Crop Insurance Proceeds – Crop Insurance Proceeds paid to a farmer in the event of natural or other disasters that affects their crops
- 13 Excess Golden Parachute – Payments that qualify and calculated an excess golden parachute payments
- 14 Gross Proceeds to Attorney – Payments to an attorney in connection with legal service
Here it requires selecting the appropriate GL accounts for each box. Then the system will automatically track the amounts for each box.
Review Contractor Information
Before the filings, it can review contractor information and update the records including Contractor name, Address, Tax ID, and email.
Review the Payments for each Vendor
It can review the total for each vendor by payment Boxes. Only shows contractors paid above the minimum threshold of $600.
Once all 1099s are ready, it can file the forms via Automated E-file and Delivery option. Here system allows users to download a PDF copy of each 1099 from as well. As the payment method, it requires a credit card and it will charge filing fees fro the credit card at the end of the filing process.