Preparing 1099s with QuickBooks
If you have independent contractors or pay rent or royalties, you will most likely need to prepare 1099-MISC forms. Here's a step by step guide to preparing these forms with QuickBooks.
Step 1: Turn on the 1099 Preference
Select Preferences from the Edit pull down menu. On the company tab for Tax: 1099, select yes to the question "Do you file 1099-MISC forms?" Save and close the preferences. We'll come back later to map the accounts.
Step 2: Identify Target Vendors
You probably know who most of your 1099 vendors are, but a quick way to check that you haven't forgotten anyone is to create a report that lists your vendors sorted by the total amount you paid them last year. From the reports menu, select Custom Summary Report. On the Display Tab, select the settings shown below.
On the Filters Tab, verify that Accounts is set to "All income/expense accounts" and run the report. Draw a line at $600 and look for anyone you might have overlooked such as the electrician who re-wired your office or the handyman who installed shelving for you. For more information on who should receive a 1099 from you, refer to the 1099-MISC instructions available at http://www.irs.gov/instructions/i1099msc/index.html
Step 3: Verify Vendor Information
Edit the vendor and verify that the name and address fields are correct. QuickBooks uses the following fields to complete the 1099 form:
Recipient's Name Line 1: <First Name> <M. I.> <Last Name>
Recipient's Name Line 2: <Company Name>
Street Address: <Address Line 2> <Address Line 3> <Address Line 4>
City, state, and ZIP: <City> <State> <Zip>
On the Additional Information Tab, verify that the "Vendor eligible for 1099" box is checked and that the tax id has been entered correctly. Social Security numbers should be formatted as xxx-xx-xxxx and EINs as xx-xxxxxxx.
Step 4: Map Your Chart of Accounts
On the Reports Menu, under Vendors, select the 1099 Detail Report. Change the 1099 Options shown at the top of the report to include "All allowed accounts". This report will give you a list of all the accounts that you need to map to the various boxes. I run this report every year and verify that the mapping is correct and up-to-date.
Return to the Tax: 1099 Preference and map the accounts. Click in the account column and select the appropriate account. To map more than one account, select "Multiple Accounts" and then check all appropriate accounts.
Step 5: Verify the 1099 Report
On the Reports Menu, under Vendors, select the 1099 Summary report. Set the 1099 Options to: Only 1099 Vendors, Only 1099 Accounts, Use Thresholds. This report will show you for whom QuickBooks will prepare a 1099, and what amounts will appear in what boxes. Verify that it is as you expect. Make any necessary corrections before proceeding.
Step 6: Printing the 1099s and 1096 Forms
QuickBooks only prints the vendor information; you will need to purchase pre-printed forms. Forms are available for purchase at office supply stores or can be ordered online. In addition to the appropriate number of 1099 forms for your vendors, you will need at least one 1096 transmittal form for each company for which you are filing forms. I recommend buying extra quantities of all forms. No matter how careful I am, I always end up reprinting some forms and you will need the extras if you have to file any corrected forms.
Selecting Print 1099s/1096 from the Vendor pull down menu will take you to the 1099 and 1096 Wizard. We've already completed steps 1 - 3 on the wizard, so go directly to Print 1099s. Follow these steps:
- Select the date range.
- Select the first two vendors only.
- Select your printer and print on blank paper to use as a test sample.
- Verify that your company information is correct. Make any necessary corrections on the Company Information screen available from the Company pull down menu.
- Hold your sample and a 1099-MISC Copy A form up to the light. If you need to adjust the alignment, repeat steps 1 - 3, selecting Align rather than Print in Step 3. Use the arrows to adjust the alignment. Print a new sample. Repeat as necessary.
- Verify how the forms are inserted into the printer; they will go in the same way (face up or face down) as your checks do.
- Print your forms in small batches by selecting two, four, or six vendors, for example, to minimize waste if something goes wrong.
You must mail the vendor copies of the 1099 forms no later than February 1st. However, Copy A and Form 1096 do not need to be filed until March 1st. I recommend waiting until close to the deadline to print these forms, so that any corrections requested by vendors can be made.