Why do vendor credits applied to invoices appear as 1099 payments?

My question is similar... A vendor credit was used for debt settlement (debit a/p, credit other income) and applied to outstanding bills on the vendor account. This credit for the debt settlement shows as a payment to the vendor on their 1099. Is that correct? It seems inaccurate since they didn't receive payment for those bills but settled the debt. 

Hello, Catherine243.

The transactions that will report on 1099 are the payments that were recorded via cash or a check. Since you recorded the vendor credit using an Income Account, then this will not report and will not show as payment in 1099. You should only use an Expense Account and map this account to report in Box 7.

To help guide you more in preparing your 1099, you can check these interesting resources below:

• Prepare and file 1099s.
• Create a 1099 report for vendors and vendor payments.

I'm always here whenever you have questions while working with 1099's in QBO. I'd be glad to answer them for you.

The payment is showing on the vendor's 1099. 

The vendor credit was created for debt settlement and was applied to income because the debt wasn't paid it was forgiven. Not income for the vendor, income for me since the vendor forgave the debt.

My question is should the debt settlement show on the vendor's 1099 as payment when it wasn't actually paid? 

Thanks for your help.

Hey there, @Catherine243. Thanks for posting an update.

I'm here to clarify on my colleague's answer above. @Rose-A provided you with steps to change the account on the expense and make sure it isn't mapped to Box 7 on the 1099. Your credit should be mapped to an account that isn't mapped to your 1099 setup so that it doesn't show as a 1099 eligible payment, since no actual transaction was provided by you.

For more information on Box 7, check out: 1099-MISC box 7: Nonemployee compensation

Please touch base with us here if there's anything else you need, I'm determined to ensure your success. Have a great week!

I have a similar question. My client paid a contractor via direct deposit and it shows in both the Vendor record and the register but it has not cleared the bank. QBO said they don't see it on the back end but can see it on my end. I tried to do a Vendor Credit back to the COS: Labor account but it it shows up as a positive on the 1099 Detail report. QB's said they cannot delete it and could not figure out how to get rid of it. Can anyone help with this? TIA

Thanks for joining the thread @feinbergks,

You can void or delete the bill payment to remove the transaction on the 1099 Details report. Once done, you can process the direct deposit again. Let me walk you through the steps on how to void or delete bill payment in QuickBooks Online. Here's how:

1. On the left panel, click the Expenses tab.
2. Select Expenses and look for the bill payment transaction.
3. Click the View/Edit in the section of the transaction to expand the view.
4. On the bottom portion, select More.
5. Choose Delete.

If you want to remove the deleted bill payment in the list of your Expense Transaction. Follow these steps:

1. Go to the Expenses tab.
2. Select Expenses.
3. Click the deleted transaction to expand the view.
4. Choose More.
5. Select the Delete option.

You can read these articles to learn more about Vendors Credit:

• Applying vendor credits in QuickBooks Online
• Enter a credit from a vendor in QuickBooks Online

If you need further assistance, just fill me in by leaving a message in the comment section. I'll be happier to help. Have a nice day!