As you wrap up your business books for the end of the calendar year, it’s time to prepare to file your 1099 forms. Beginning in 2017, the due date for submission to IRS has changed. In order to deter the filing of fraudulent tax returns, both W-2s and 1099-MISC for Box 7 Nonemployee Compensation are now due to not only the recipients by January 31, 2018, but also to IRS for 1099s and to the SSA for W-2s.
The other change is an increase in the penalties for not filing information returns, filing with incorrect EINs, or for filing late.
That means that now is the time to prepare for your information return filings.
QB Desktop and QB Online both provide means within their programs to assist you in the mechanics of creating your 1099-MISC forms. However, the preparation begins with you collecting a Form W-9 from your vendors.
There are numerous types of payments to report on a 1099-MISC form. The most common for my clients are rent, royalties and nonemployee compensation. See the full list and instructions from the IRS here.
A good practice is to obtain a Form W-9 from a vendor you are paying for services or rent before you remit payment to them. You can get a copy of the form here and forward it to the vendor for them to complete and return to you. The completed form allows you to correctly enter the name, current address, and EIN or SSN they use on their tax return where they report the income earned.
Once you have obtained their correct information, your obligation is to provide them with a 1099-MISC by January 31, 2017, showing the total of all direct payments you have made to them by check, cash, ACH, etc. You are not responsible for including in your total any payments that have been made through a credit or debit card or other third party payer (such as Pay Pal). Those third party payers will report that portion with the issuance of their own 1099-K.
The 1099 “wizards” in QB are to assist you in:
Entering all of the correct vendor information and identifying that they are potential recipients of a 1099; the correct dollar reporting thresholds will be computed by QB.
- A couple of hints not provided by the wizard:
- Be sure all of your provider names are entered as “Vendor” types in QB, or the wizard won’t know how to include those payments.
- Be sure you have not used variations on the vendor name for different payments. If you have, merge the names into the one correct vendor type name.
Correctly mapping all of the accounts from your Chart of Accounts to the correct Boxes and Categories on the 1099-MISC.
- I suggest you preview the detail of transactions in all of your accounts and identify ahead of time which accounts contain entries where you paid for someone’s services (of any kind, not just subcontractors) or made rent payments (including equipment, not simply office or storage space), etc.
- Don’t forget to look at Fixed Asset accounts, where you may have entered improvements provided by subcontractors.
Excluding any payments made through a third party payer.
- QB provides instructions on how to mark “check” transactions that are actually debit cards or credit cards so they are not included.
You will have a chance to proof the 1099s before you print them or efile them. It is prudent to get these forms right the first time, as it is time-consuming to file amended returns or have to answer IRS inquiries down the road when the information provided does not match a vendor filed return. Also, be sure your own company information is up to date with your correct business name and address as shown on your tax return and your correct EIN or SSN.
To locate the 1099 Wizard in QB Desktop, go to the Vendors menu at the top of your screen and choose “Print/Efile 1099s” from the drop down menu, then choose “1099 Wizard” and follow the instructions. In QB Online, go to the navigation bar on the left side of your screen and click on Vendors. In the top right, there is a box where you can click on “Prepare 1099s” with detailed instructions to follow.
On a final note, if you intend to paper file, you should purchase those forms now. In the past, the stores would run out by mid-January. This year, with the IRS filing moved up from the end of February to the end of January, they may run out quickly.