If your business makes payments over $600 in a year to any non-employee contractors or service providers, you must report those payments to the IRS using 1099 forms. QuickBooks makes it easy to track payments to 1099 vendors and generate the proper 1099 tax documents at the end of the year.
Overview of 1099 Reporting Requirements
First, let’s quickly review what payments require a 1099 form:
- Payments of over $600 in a calendar year made to non-employee contractors and service providers (attorneys, accountants, designers, etc) must be reported on Form 1099-NEC
- Rent, royalty, and other miscellaneous payments over $600 made to non-employees must be reported on Form 1099-MISC
- Interest income over $10 paid to an individual must be reported on Form 1099-INT
As a business, you are required to collect tax information from these vendors and report payments made on the appropriate 1099 at year-end.
Setting Up Vendors for 1099s in QuickBooks
Here are the key steps to set up vendors for 1099 reporting in QuickBooks:
1. Collect Vendor Tax Information
- Legal Name – The official registered name of the individual or entity. Avoid nicknames.
- Taxpayer Identification Number (TIN) – This is either their Social Security Number (SSN) or Employer Identification Number (EIN).
- Address – Get their full legal addresses including apartment/suite number.
Collect this info directly from vendors and save for your records. Never use a TIN number you find from other sources.
2. Enter Vendors in QuickBooks
Go to Vendors > New Vendor and enter the vendor’s info:
- Vendor Name – Enter their legal name exactly as it should appear on the 1099
- Print on Check Name – Optional nickname if their legal name is very long
- Vendor Type – Select Individual, Business, etc.
- Additional Info tab – Enter their TIN and address
3. Classify Vendor Payment Types
For each vendor, identify the types of payments you make to them. Different payments may require different 1099 forms.
- Attorney fees, contractor payments, commissions, etc require a 1099-NEC
- Rent, medical payments, royalties require a 1099-MISC
- Interest paid requires a 1099-INT
- Goods/products purchased are not 1099 reportable
Classify the payment types during vendor setup.
4. Track 1099 Payments in QuickBooks
When paying a 1099 vendor, be sure to:
- Select the proper Preferred Payment Method (check, bank transfer, etc)
- Choose the correct Expense Account for the type of purchase
- Enter details like invoice number in the transaction memo field
- Most importantly – Use the right 1099 Payment Type (1099-NEC, 1099-MISC, etc)
This ensures the payments are tracked as 1099 reportable.
5. Run 1099 Reports at Year-End
Once 1099 vendors are set up properly, you can easily run 1099 reports:
- Go to Reports > Vendors & Payroll > 1099 Summary
- Select which 1099 form you need
- Verify vendor information
- Map expense accounts to the correct 1099 box
- Preview, print, and e-file 1099s directly from QuickBooks
Be sure to send 1099s to vendors by Jan 31 and submit copies to the IRS by Feb 28 (paper) or March 31 (e-file).
Best Practices for 1099 Vendor Setup
Follow these tips for smooth 1099 reporting:
- Collect complete vendor tax info upfront
- Enter details accurately during vendor setup
- Classify and track payment types correctly
- Pay bills using proper 1099 Payment Types
- Confirm 1099 totals at year-end
- Send forms and file with IRS by deadlines
Quick Summary
- Get vendors’ legal name, TIN, address for 1099 reporting
- Enter details when setting up new vendors in QuickBooks
- Classify payment types that require 1099s
- Select correct 1099 Payment Type when paying bills
- Run 1099 Summary report at year-end
- Send 1099s to vendors/IRS by filing deadline
Setting up vendors properly in QuickBooks ensures you have accurate information to generate 1099 forms on time. Classify payment types, track 1099-eligible transactions, and leverage QuickBooks to file required 1099s with ease.