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1099 Master Instructions

AccordusU

Quicklinks:

What are 1099s? (useful to TLs and Accountants)

Who Should Receive a 1099? (useful to TLs and Accountants)

How to Prepare 1099 Filings – Overview

Legal Details

How to File 1099s – Detailed

What are 1099s?

A Form 1099 is what contractors receive to show what they were paid for contracted services. It is similar to Form W2s that employees receive. By definition, a 1099 contractor pays all taxes related to their income whereas a W2 would show taxes already paid out. 

 

The information for 1099s must be submitted to the IRS by the employer by January 31st or a fine may be incurred. Accordus works throughout the year to ensure payments out to vendors are easily identified as a payment for services rather than a reimbursement or other payment. 

 

In order to file a 1099, the organization needs a W9 from all qualified contractors. The W9 simply contains the contractor’s legal name (or business name), type of filer (individual vs. LLC, etc.), mailing address, and social security number or EIN. An email address is also useful if we wish to send the 1099 electronically.

Who Should Receive a 1099?

We do send 1099s to:

  • Individuals
  • Individually owned companies (LLCs)
  • Vendors as noted above who were paid $600 or more in the calendar year for their contract work
  • Contractors who file taxes in the US

We do not send 1099s to:

  • Corporations
  • Individuals/individually owned companies who were paid less than $600 in that calendar year for their contracted services.
  • Contractors who do not file US taxes (foreign contractors)
  • If the foreign contractor is not a U.S. taxpayer, and all the contracted services were performed outside the U.S., a Form 1099 is not required. Instead, you will need to ask the contractor to complete a Form W-8BEN. The Form W-8BEN certifies that the foreign contractor is not a U.S. taxpayer.
  • S and C Corps are exempt from 1099s. An LLC could also be an S Corp. If you are not sure what type of organization the vendor is registered as, then we can search the state government website to see how they are registered.

IMPORTANT NOTES:

  • $$ reported on 1099 should only include services rendered. This means neither reimbursements nor products purchased should be included in the amounts reported. 
  • 1099s are created based on a cash basis, so the date the check payment is issued will determine the year it falls into
  • $$ reported on the 1099 should only include payments made by check, cash, or bank transfer. It should not include any payments made by credit card or PayPal.
  • The 1099-NEC form is used to report non-employee (i.e. contractor) payments. The 1099-MISC form is used to report payments for rent, awards, and prizes.

How to Prepare for 1099 Filings - Overview

Accountants:

  1. Audit QBO and confirming which vendors require a 1099: 
    • Determine who should receive a 1099 – see the above list.
    • Here is a video showing how to audit QBO
    • Here is an article with full details about the steps, timeline throughout the year, and legal requirements 
  2. Confirm if the payroll system (i.e. Gusto, QBO) will file them, or if Accordus needs to file them in an external system (Track 1099)
    1. If an external system is needed, then populate Track1099’s template with required data. Here is a video detailing how to do so: https://www.track1099.com/info/csv_home
  3. Confirm with Accounting Department Lead who will be actually completing the filings

Team Leads:

  1. Review the “Who should receive 1099s” section above.
  2. Talk with Accountant to get status of QBO readiness (status of audit, do we need any W9s, do we know the cost for filing based on the software that will be used)
  3. Talk with client – let them know we plan to handle the filings (and give the client opportunity to discuss alternatives if desired). Explain an overview of the process, our status, and the timeline.

How to file 1099s (completed by a designated member of the Accounting team)

HOW TO PREPARE FOR 1099 FILING – CHECKLIST & TIMELINE:

1099 Prep Process

  1. First, review these helpful resources:
    1. What is an IRS 1099 form? – Intuit
    2. Who should receive a 1099 form? – see above list.
    3. Instructions for Forms 1099-MISC and 1099-NEC (01/2022) – IRS. Bookmark this page for any specific questions that arise.
  2. In each client folder, navigate to the ‘Accounting / 1099s, W2s, and Vendor W9s / 1099s CY 2023’ folder in Dropbox to find the file named “Client Name – 1099 List DRAFT – yyyymmdd.”
      1. You’ll see the tabs: Transaction Report, Vendor Contact List, 1099 List – DRAFT, and 1099 Tags.
  3. The Transaction Report tab is the list of expense transactions through yyyymmdd.
    1. If some vendors have differences in the “Name” and “Vendor” fields, I’ve included both columns in this tab. In your client’s QBO, please make sure that “Vendor” is correct and the field of record.
    2. Then, enter the appropriate ‘tag’ in the right-most column.
      1. The tags you should use are in the “1099 Tags” Tab and have instructions there.
      2. If helpful, use the other column called “Payment Method” to keep notes as you research the history of the transactions.
  4. After you’ve tagged each transaction, create a Pivot table with the vendor names in Column A, sub-grouped by Tag, and the total CY2023 amount for each vendor in Column B.
  5. Next, populate the ‘1099 List – Draft’ tab using VLOOKUP, grabbing information from both the Pivot tab and the Vendor Contact List tab. The cell you base your VLOOKUP on should be the Vendor Name. You may need to manually populate some columns.
  6. Reach out to Hannah/TL to resolve open questions on your TBD Tags.
Click here

Throughout the Year:

  • For reimbursements, code payments to a “Reimbursement” account. Always add “Reimbursement” to the memo of the transaction.
  • Complete 1099 Prep process regularly. These are run on cash-basis, so you could refer to previous month’s 1099 Prep files to make this go faster.
  • Request W9s for any new vendors paid by check, cash, or ACH.
  • In QBO Vendor account, select “Track for 1099” for the vendors who qualify for this calendar year
  • Be sure to indicate the payment method on all transactions.
  • Be sure all expenses are tied to a vendor (as applicable)

December

  • Complete 1099 Prep process
  • Determine (with TL and/or Hannah) if Accordus will file 1099s via Track1099 or the client’s payroll company (QB, Gusto, Thread, etc.)

January

  • By the 15th of the month, complete one last 1099 Prep process and provide the final 1099 list to Hannah/the TL, highlighting what information is still missing or needs to be reconciled.
  • Be sure to check for any payments made toward assets or prepaids that would be eligible for 1099s (paid via check/cash/ACH, for an eligible expense, and to a vendor with an eligible tax ID) but would not be expensed in the current year.
  • Communicate clearly to the TL/Client – “let us know if you see any changes by the 19th of the month.”
  • By the 20th of January, file the 1099s
  • By the 24th, view all filed 1099s and confirm if they were delivered successfully. Resolve any not delivered.
  • By the 25th, provide the client with a PDF of filed 1099s and save to Accordus Dropbox.
  • By the 27th Ask client to confirm again that all vendors and amounts look accurate.
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