Step-by-Step Guide for Completing 1099 Forms in Quickbooks Online

The purpose of Form 1099 is to report payments made to independent contractors and other non-employees during the tax year. This information is used by the IRS to ensure that these individuals are properly reporting their income.

Step 1: Generate a Transaction List by Vendor Report in Quickbooks

Generate a Transaction List by Vendor Report to compile all the transactions related to each vendor for a specific period. This report provides a summary of payments made to vendors that may qualify for 1099-NEC or 1099-MISC reporting.

To generate the report:

1. Go to Reports function in QBO
2. Run the Transaction List by Vendor report

Customize the report

1. Add vendor as a column
2. Change the report dates from January 1 to December 31 of the year for which you are preparing 1099s
3. Filter by the transaction types such as checks, bill payments, expense, and non-credit card expenditures
4. In the Rows/Columns section, select ‘None’ under ‘Group by’ so individual transactions are no longer grouped by Vendor

Export the report to Excel

1. Delete the report titles
2. Eliminate any blank rows
3. Add a new ‘Payment Amount’ column and use if function to change negative values for payments to positive
4. Add a new tab to the worksheet and title it ‘Pivot’

Create Pivot Table

1. Highlight everything
2. Click ‘Insert’ in the top Excel menu and select ‘Pivot table’
3. In the ‘Create PivotTable’ menu, ensure all rows in your report are in the table or range and place the pivot tab in the existing ‘Pivot’ tab you created above
4. Put vendor in ‘Rows’, account in ‘Filters’,  and payment amount in ‘Values’
5. Filter the Account to only checking, savings, and other bank accounts. Do not include any credit card accounts.
6. Add another tab to the spreadsheet and call it ‘List’
7. Copy/paste the pivot table to the ‘List’ tab and customize the columns to ‘Vendor’, ‘Sum of Amount’, ‘Y/N’, and ‘Reason’

Filter out payments that total <$600

1. Highlight the list and select ‘Sort & filter’ Excel function
2. Select ‘filter’
3. On the ‘Sum of Amount’ column, select the filter and filter the list to payments Greater than or equal to $600

Review the purpose of payments to identify if the vendor is qualified for a 1099-NEC or 1099-MISC (marked as Y – for yes and N – for no)

For the 1099-NEC

1. Include payments for services to those who are not employees (including parts and materials)
2. Payments to attorneys in 1099-NEC

For the 1099-MISC

1. Include payments for at least $10 in Royalties – box 2 (not common)
2. Include payments of at least $600 for:
   • Rents – box 1
   • Prizes and awards (box 3);
   • Other income payments (box 3);
   • Generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3);
   •Any fishing boat proceeds (box 5);
   • Medical and health care payments (box 6);
   • Crop insurance proceeds (box 9);
   • Gross proceeds paid to an attorney (box 10) (see Payments to attorneys, later);
   • Section 409A deferrals (box 12); or
   •Nonqualified deferred compensation (box 15)

If payments do not qualify for either of the above, mark “N’ in the ‘Y/N’ column and give the reasoning for not including the payments

Tip: Add a filter to the ‘Y/N’ column to continuously filter out all non-qualifying payments

Step 2: Preparing 1099s

Generate a list of 1099 payments in the QBO’s “Prepare 1099s” function to compare it to the Transaction List by Vendor. If the payment amounts match between the two reports, we can be confident that the 1099 preparation process is accurate. However, if there are discrepancies between the reports, you need to investigate and potentially adjust the GL accounts selected in the QB 1099 function or include explanatory notes on the ‘Transaction List by Vendor’ report to clarify any missing payments.

To generate the list of 1099 payments in the QBO’s “Prepare 1099s” function:

1. Hover over Payroll
2. Click on Contractors
3. Click “Prepare 1099s”
4. Continue to 1099s

Follow the steps below for each section in “Prepare 1099s” function

Company

Review that all your company information is correct

Accounts

Map the GL accounts to the proper 1099 payment type

Common payment types:
• Non-employee compensation Box 1 1099-NEC
• Rents Box 1 1099-MISC

Tell Quickbooks Online to which account should code the 1099 by using the dropdown arrow to see all GL accounts

Contractors

1. Review your contractors’ info but do not add any information until step 4 review
2. To see which contractors meet the 1099 threshold, click next

Review

1. Review the list of 1099 payments for accuracy
2. Enter any missing information for vendors
3. Check that the payments add up: Only those contractors you paid above the threshold (usually $600) get 1099 Important: Third-party payments such as credit card or Paypal are excluded from 1099s
4. Print out an information sheet (QBO Report) to compare with the Transaction List by Vendor.

Compare the information sheet from the “Prepare 1099s” function to the Transaction List by Vendor

If payments match, then you are done! If payments do not match, you may need to adjust:

1. The accounts selected in the QB 1099 function
2. If there are still payments not showing up, include a note on the ‘Transaction List by vendor’ report

Step 3: Review and Submit 1099

Review the 1099 reports for accuracy and completeness of the vendor information before submitting the final 1099s to the IRS.

1. Ensure that 1099 information sheet matches the 1099 Transaction List by Vendor Report
2. Ensure all 1099 vendor information is entered
3. Review excluded payments for accuracy

Submit the Final 1099s to the IRS utilizing the “Prepare 1099s” function

1. Hover over Payroll
2. Click on Contractors
3. Click 1099 Function
4. Print 1099 information sheet
5. Save Files (Vendor 1099 Sheet_FINAL)
6. Finish preparing 1099s

1099 E-File Service

Continue to e-file

1. Review your info – to make sure details are correct. You don’t want to be penalized for a tax mistake!
2. Pay for service
3. Choose delivery option
4. File and deliver
5. Download a copy of each 1099 for your records
6. Print for Contractors
7. Click View & Save
8. Click Continue
9. Print your records
10. File and Submit
11. Print Screen for the filing confirmation
12. Sign out

1099s are submitted successfully!

Need helping preparing 1099 Forms?