QuickBooks does have a good way to track and issue 1099 payments made to your independent contractors. I will focus on the QuickBooks end of 1099s in this blog post and talk about the tax end of things in another blog post.
First, I will tell you how to let QuickBooks know that you have independent contractors that you need to track payments for and issue 1099-Misc forms to. At the top of the QuickBooks screen go to Edit and scroll down and select Preferences.
At the bottom of the Preferences menu is an option called "Tax: 1099"; select that option. On the Company Preferences tab click "Yes" next to the phrase "Do you file 1099-MISC forms?" Now you need to map the expense so QuickBooks knows where you expense your independent contractor expenses. In Box 7 in the 1099 Category column select an account to link to where you expense your independent contractor expenses.
Typically most people use "Professional Fees" to expense independent contractor expenses. If you need to track this in further detail make subaccounts under the parent account and make sure to select the parent account when mapping your 1099. The last thing you need to fill in is the "Threshold" column at the far left. Check with your CPA on current thresholds but for Box 7 it is currently $600.
Now you need to verify that all of your company information is correct in QuickBooks. Again at the top of QuickBooks go to Company then scroll down and select company information. It is very important to verify your company name, address, Federal ID # or Social Security #, phone, fax, email and website.
All of this information is required on the 1096 form that needs to be filed with the IRS and QuickBooks will pull the information from your company information section in QuickBooks.
Now I will tell you where to enter your 1099 information into QuickBooks and how to let QuickBooks know you need to issue a 1099 to this vendor. Go to the Vendor Center on the main Icon Bar. Next find the vendor you need to mark as a 1099 on the list and double click on the vendor name.
Make sure to fill out the vendor name and address exactly as it appears on the W-9 form that you received from your vendor. Next click on the tab called "Additional Info." On the lower left you will see a box that says "Vendor eligible for 1099"; put a check mark in that box.
Just above that box is where you will fill in the Tax ID #. Again make sure to copy this number exactly off of your vendor's W-9 form.
After you have completed all of the above steps you are ready to verify all of the information for your 1099 vendors and print your 1096 and 1099 forms. At the top of QuickBooks go to File, then Print Forms and select 1099's/1096.
Now you just follow steps 1-4 to make sure you create and submit accurate 1099's and a 1096 form. This is a good place to review all 1099 vendor information and account mappings.
If you run the report in step 3 and you have a 1099 vendor that does not have complete information of name, address and tax ID # then you still have some work to do to track that information down. The last thing you want to do is submit incomplete information to the IRS.
If you have any questions on setting up QuickBooks to process 1099's and 1096 forms please feel free to call or email us.