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Top 5 Questions: 1099s

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Here in the QuickBooks Community, we’re gearing up for our busiest time: Tax Season! Our goal is to give you all the tools you’ll need to make this as stress-free as possible. That's why this week's Top 5 is focusing on 1099s. Let’s jump right in.

1. How can I print a Year to Date report of payments to 1099 vendors in QBO?

If these vendor payments were from last year, you can follow these steps for generating the year-to-date report:

  1. Click Expenses on the left navigation panel.
  2. Select the Vendors tab and click Prepare 1099s from the dropdown menu.
  3. Click the Continue your 1099s button.
  4. Follow the on-screen instructions until you reach the Review 1099 vendors and payments window.
  5. Click the Print Information Sheet button.

There isn’t a way to generate a report for 1099 vendor payments for this current year. No worries though! You can customize the Transaction List by Vendor report.

Here’s how:

  1. Click Reports on the left navigation panel.
  2. In the search field, type in Transaction List by Vendor.
  3. Click the Customize button.
  4. Pick your date range on the Report period drop-down menu.
  5. Select Filter and click the Transaction Type drop-down arrow.
  6. Put a checkmark in the Payment box.
  7. Choose the 1099 vendors you want to run the report by.
  8. Click Run report.

Transaction List by Vendor Report.png

2. Why aren’t my vendors who are 1099 eligible showing up on my 1099 summary?

There are a couple of reasons eligible vendors might not be showing up:  

  • Only vendors you paid via cash or check should be reported, and only if the payments total $600 or more
  •  If you entered a check for payment but used Paypal as the check number, it will be ignored
  • Check the mapping to your accounts.  If the account you used when you entered the bill or paid the vendor is not mapped correctly, no payments will show

Note: The IRS doesn't allow electronic payments to be reported on Form 1099-MISC or 1099-NEC. You do not need to report payments you made to them electronically, such as by credit card, debit card, gift card, or PayPal payments. QuickBooks Online automatically excludes these for you. The payment companies will report those payments so you don't have to.

3. I have a customer that needs to be changed to a Vendor and I need to issue them a 1099. How can I ch...

The first thing we need to do is determine if that customer has any transactions tied to them. If they do, follow these steps first before making that customer inactive.

  1. Go to the Invoicing menu on the left and then the Customers tab.
  2. Click on the Customer’s name to open up their transactions. 
  3. To the right of each transaction, click on the arrow beneath Action and choose Delete.

Customer Delete Transaction.png

Great, now we’re ready to move to the next step! Let's make that customer inactive and recreate it as a contractor/vendor. That way, when the time comes, you can issue a 1099 form in QuickBooks Online.

  1. From the Invoicing menu, choose Customers.
  2. Find and click on the Customer's name.
  3. Click on Edit.
  4. Then, click on the Make inactive button.
  5. Select Yes to confirm. 

Customer Make Inactive.png

Lastly, we need to create a vendor profile and recreate any of those transactions we deleted under the customer profile that need to now reflect our new vendor.

  1. Tap the Plus icon at the top and choose any of the following: Check, Expense, or Bill.
  2. Enter the correct contractor’s name in the Payee field as well as the Payment account where you want to post the information.
  3. Go to the Category/Item Details section to record the account or item.
  4. Next, type in the amount and other information in the field boxes.
  5. Click Save and New to continue.

4. How do I bill a 1099 employee?

It's important to understand the differences between employees and contractors in circumstances like this because the term "1099 employee" mixes the two together, and for the IRS' purposes, everyone is one or the other. Here’s a quick outline of the difference between contractors and employees:

If your worker is an employee, an employer must:

  • Withhold payroll taxes like income and Social Security taxes.
  • Match the employee's Social Security and Medicare taxes.
  • Pay federal and state unemployment taxes on employee earnings.
  • Issue a Form W-2 after the end of the year.

If your worker is an independent contractor, an employer:

  • Is not required to withhold any payroll taxes like income and Social Security taxes.
  • Does not match the Social Security and Medicare taxes.
  • Does not pay federal and state unemployment on employee earnings.
  • Sends a form 1099-MISC after the end of each year.

The IRS also has resources for you to help as well: Independent Contractor (Self-Employed) or Employee?

In this case, using the word “bill” is a keyword that most likely indicates you’re dealing with a vendor. Here’s how you would record a bill from them:

  1. Select + New.
  2. Select Bill.
  3. From the Vendor ▼ dropdown, select a vendor.
  4. From the Terms ▼ dropdown, select the bill's terms. This is when your vendor expects to be paid.
  5. Enter the Bill date, Due date, and Bill no. as they're recorded on the bill.
  6. Enter the bill details in the Category details section. From the Category dropdown, select the expense account you use to track expense transactions. Then enter a description. Tip: You can also enter specific products and services in the Item details section to itemize the bill.
  7. Enter the Amount and tax.
  8. When you're done, select Save and close.

If you’re interested in paying your contractors with direct deposit, check out our YouTube Video:

5. ​​How do I correct my 1099 after submission to IRS?

QuickBooks Online allows you to file your 1099 once but any updates or corrections can be made in a printed copy and sent in by mail to the IRS.

Here's how to file the amended form:

  1. Order 1099-NEC IRS forms online at IRS Online Ordering for Information Returns and Employer Returns or over the phone at 800-829-3676.
  2. Fill out the 1099-NEC form and be sure to select the Corrected checkbox.
  3. Once done, mail the form to the IRS.
  4. After that, mail an additional copy to your contractor as soon as possible so that they can file their taxes.

Remember, the QuickBooks Community is here for you for tax season and beyond! Here’s an article with some more 1099 tips: How to Add Independent Contractors And Track them for 1099s in QuickBooks Online.

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