Form 1099 MISC is a Federal “information” tax return that all businesses must produce for every non-corporation vendor (individual, partnership, or estate). Today we’ll talk about how to set up your 2013 1099’s in QuickBooks for Windows, QuickBooks Online, and Xero. See my post about using Track1099 for details on preparing, e-delivering, and e-filing FORM 1099.
While there are several different types of 1099s (1099-MISC, B, C, DIV, G, and INT), this article addresses IRS FORM 1099 MISC, which is the most common form that most small businesses must produce for their vendors.
Editor’s Note 1/7/2015: We have posted an update for QuickBooks desktop 1099’s for tax year 2014 at http://www.sleeter.com/blog/2015/01/preparing-quickbooks-1099-misc-forms/
To determine who in your vendor list needs to receive a 1099 MISC from you, here is an abbreviated quote from the (excruciating) IRS instructions:
File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year:
… At least $600 in rents, services (including parts and
materials), prizes and awards, … to an individual, partnership, or estate;
- Any fishing boat proceeds; or
- Gross proceeds of $600 or more paid to an attorney.
In addition, use Form 1099-MISC to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment. You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
In addition some payments to corporations (e.g. Attorneys) are also reportable, so read the IRS instructions carefully to make sure you identify and track all vendors who should receive a 1099.
To properly track your 1099 vendors in your accounting software, start by requiring all of your vendors to fill out Form W-9, the Request for Taxpayer Information.
Recording the Information Correctly
Now that you have collected the information you need to record it in your accounting software correctly, so that it will print in the proper place in the 1099 forms. This may seem easy, but unfortunately many accounting software programs don’t make it easy to figure out what data from the W-9 should go into which field in the Vendor records.
In the picture below, you can see an example of a form 1099 that is “properly filled out.” The example is from the IRS site and it’s an example for how a sole proprietor should be reported. Notice the following:
- Line 1 is the First and Last Name of the individual taxpayer.
- Line 2 is optional, but it should start with “dba/ “ and then the company name.
Recipients identification Number:
- If it’s an individual (sole proprietor), you can use their Social Security Number or their Employer ID (EIN). See IRS instructions for more specifics.
Let’s take a look at how to properly enter this information in several commonly used accounting products.
Here is how to fill in the QuickBooks for Windows vendor fields so the 1099 MISC prints correctly.
Here is how to fill in the QuickBooks Online vendor fields so the 1099 MISC prints correctly.
Xero.com differs in that you record this information in a “contact” record. Here is how to fill in the Xero contact fields so the 1099 MISC prints correctly.
Once you have recorded the information in the proper way you can generate your 1099 MISC forms in the required format. Next up – how to easily deliver and file your forms.
In my next post, I’ll show you how to prepare, E-Deliver, and e-File your 1099s.