As a business owner, you are required by the IRS to issue 1099 forms to your non-employee contractors and vendors if you paid them over $600 for services provided during the year. QuickBooks makes it easy to generate these 1099 forms directly from your payroll and vendor payment data. In this article, I’ll walk you through the step-by-step process to generate 1099s in QuickBooks.
Why Issue 1099 Forms?
The IRS requires you to report payments made to non-employees for services if those payments exceed $600 in a calendar year. This allows the IRS to make sure your contractors and vendors are accurately reporting their income on their tax returns.
As a business, you must complete a 1099 form for each non-employee contractor or vendor you paid over $600. The most common 1099 forms are:
- Form 1099-NEC – For non-employee compensation. Used for contractors and freelancers.
- Form 1099-MISC – For miscellaneous income. Used for rents, royalties, prizes, and payments to attorneys.
- Form 1099-INT – For interest income paid to individuals.
Failing to issue 1099 forms can lead to penalties and interest charges from the IRS. So it’s important to comply with 1099 reporting requirements. The good news is QuickBooks makes the process very simple.
Generate 1099s in QuickBooks
Follow these steps to generate 1099 forms in QuickBooks Desktop:
1. Update Contractor and Vendor Info
Make sure you have complete and accurate name and tax ID information for each contractor or vendor you paid over $600.
- Go to the Vendor Center or Contractor/Employee Center in QuickBooks
- Select the vendor or contractor
- Click the Additional Info tab
- Enter their Tax ID # (EIN or SSN) and verify their legal name and address
This ensures their 1099 will have accurate information.
2. Categorize Payments Correctly
Make sure payments made to contractors and vendors are correctly categorized in QuickBooks as follows:
- Contractor payments should be marked as 1099 reportable
- Vendor payments for services like legal fees should use the appropriate 1099 Payment type
- Payments for goods/products are generally NOT 1099 reportable
It’s important payments are properly categorized from the start. If not, you may need to go back and recategorize transactions.
3. Run Payroll for the Year
Before generating 1099s, be sure to complete all payroll runs for the year. This includes issuing any bonus checks or manual checks to contractors marked as 1099 reportable.
The total payments to each contractor in payroll will then flow over to their 1099 form.
4. Generate 1099 Reports
Once your transactions and contractor/vendor information is up to date, you’re ready to prepare your 1099s.
Go to: Reports > Vendors & Payroll > 1099 Wizard
Select the type of 1099 you need to generate (NEC, MISC, etc). Walk through each step of the wizard:
- Select vendors/contractors to include
- Verify information like name, address, and tax ID
- Map payment accounts to the appropriate 1099 box
- Set print and filing preferences
- Preview forms to confirm accuracy
- Print or e-file directly from QuickBooks
Be sure to print and mail out the 1099s by the IRS deadline. The copies for contractors/vendors are due by January 31. The copies you submit to the IRS are due by February 28 if filing by paper, or March 31 electronically.
5. File 1096 Transmittal
The last step is to file Form 1096 which is the transmittal that summarizes all the 1099s you issued.
Go to Reports > Vendors & Payroll > 1099 Summary to generate this 1096 Transmittal form. Print and file it with a copy of each 1099 form issued.
Get 1099s Done Right in QuickBooks
Issuing accurate 1099 forms doesn’t have to be a headache. By following this process in QuickBooks, you can easily generate complete 1099 tax forms for your contractors and vendors.
The key steps are:
- Enter complete vendor and contractor info
- Properly categorize payments for services as 1099 reportable
- Run final payroll for year
- Use the 1099 Wizard to generate forms
- Print, mail, and file by IRS deadlines
Taking these steps will help ensure you meet all IRS requirements for 1099 reporting. This prevents penalties and keeps your business in compliance. Don’t wait until the last minute – start preparing your 1099s well in advance using QuickBooks.
In Summary:
- Issue 1099s to any contractor/vendor paid over $600
- IRS requires forms to report non-employee compensation
- QuickBooks makes generating 1099s easy
- Update vendor/contractor information
- Categorize payments correctly as 1099 reportable
- Use 1099 Wizard to prepare forms
- Print, mail, and file 1099s by IRS deadlines
Following this QuickBooks 1099 guide can save you time while ensuring IRS compliance. Know the requirements and properly track payments, then let QuickBooks handle the 1099-form preparation.