The start of a new year means providing tax information to both the IRS and contract laborers with Form 1099. QuickBooks’ user-friendly interface painlessly generates 1099s for the independent contractors you hire to support your business.

Even if you haven’t been tracking 1099s correctly throughout the year, it’s easy to capture the details now and complete filing before the January 31st deadline.

Which vendors require a 1099?

With few exceptions, any unincorporated vendor from whom you contract labor (or labor combined with materials) will need to be sent a 1099.

You must ask each contractor to fill out a W-9 with relevant tax information, most importantly their Federal Tax Identification Number or Social Security Number. These details are required before you can register a vendor with QuickBooks.

Setting up QuickBooks to process 1099s

As not every company utilizes contract labor, you will need to adjust your preferences to activate 1099 processing:

  1. Select Edit > Preferences.
  2. Click Tax: 1099 on the left.
  3. Click the Company Preference
  4. Tick “Yes” where it asks, Do you file 1099-MISC forms?
  5. Select OK to update and save.

Now you’re ready to begin inputting vendors into the software.

Adding a new vendor

To input a new contractor into QuickBooks, select Vendors > Vendor Center, then click and pull down New Vendor.

Feel free to enter the vendor as you would like it to appear on your vendors list under the Vendor Name field, but for every other tab use the information as listed on the W-9. For individuals, you may want to use the Last Name, First Name format for consistency. Double-check the address and tax ID number for accuracy.

Tip: Select the Track Payments for 1099 checkbox to ask QuickBooks to automatically compile payments for the year and determine whether the vendor is 1099 eligible. Alternately, manually checkmark an individual vendor to receive a 1099 by entering the Edit Vendor mode, clicking on Tax Settings and selecting Vendor Eligible for 1099.

When you’re ready to file

With vendors and payments entered properly into QuickBooks, generating 1099s is a breeze. An easy-to-follow wizard guides you effortlessly through the process. To open the wizard, select Vendors from the left sidebar, pull Prepare 1099s down in the upper right and click the Let’s Get Started button.

The first screen will ask you to confirm your company details and Tax Identification Number. Don’t skip this step! Take a moment to confirm that the information is correct.

Next you’ll assign vendor payments to 1099 categories. The most commonly used category for small businesses is #7, Nonemployee Compensation. Talk to your accountant to determine if any of the other categories apply to your business.

Then choose the account used to make payments to vendors in each category.

After clicking Next you’ll be asked to confirm your 1099 vendors. Be aware that adding/subtracting vendors from the list will update their tracking tab in the system. For example, if you did not use a vendor in 2016 but plan to hire them in 2017, you will need to go back and re-select Track Payments for 1099 for this vendor prior to making a payment in 2017.

At this stage, you should double-check each vendor’s details to ensure they are correct. If changes are required, click Edit and Save to revise the name, address or tax ID number.

Prior to filing you will be given an option to Print Information Sheet. Be sure to do so and save a copy for your records.

Choose a filing method

At the completion of the wizard you will be given two options for filing:

  1. Go to 1099 E-file Service
  2. Print and Mail Forms

Choose your preferred filing method and be sure to follow alignment instructions carefully if you’re printing and mailing your forms.

After using QuickBooks to file your 1099s just once, it’s unlikely you’ll go back to the “old way” ever again!

Need help capturing information or setting up QuickBooks? Get the QuickBooks help you need now.