Generating 1099s

1099 forms are used to report the income, generally income other than wages, salaries, and tips, for independent contractors or Vendors. The Internal Revenue Service (IRS) defines 1099s as: An Internal Revenue Service (IRS) form with which an individual reports his or her distributions from annuities, profit-sharing plans, retirement plans, IRAs, insurance contracts and/or pensions.

Any time you are paying a Vendor that is classified as an independent contractor, you need to complete a 1099. An independent contractor is defined as a person who contracts to do work for another person according to his or her own processes and methods; the contractor is not subject to another's control except for what is specified in a mutually binding agreement for a specific job. An independent contractor contracts with an employer to do a particular piece of work. Examples of Independent Contractors include: landscaper; IT consultant; consultants.

Vendors requiring a 1099 form in DEACOM must be identified accordingly, either on the vendor record or individual purchase orders. This difference is discussed later on this page. 1099 Vendors must also have a taxpayer ID or social security number. Payees use the information provided on the 1099 forms to help them complete their own tax returns.

DEACOM also offers the option to use 1099 Form Types. 1099 Form Types allow customers to differentiate various 1099 types and which 1099 forms to use (1099-MISC, 1099-DIV) during purchase order entry. This feature is optional and works in conjunction with the process detailed below.

Configuration

The configuration required for generating 1099s is discussed in the process section below.

Process

Configuring 1099 forms

How are the forms designed?

1099 Form Types are maintained under Purchasing > Maintenance > 1099 Form Types. The "Name" field is used to specify the naming mechanism that will be used on Vendor records and Purchase Orders to identify this 1099 Form Type, Ex: Box 1. The "Field Name" will then be automatically populated using “u_” followed by the name entered above (if the name has spaces the spaces will be replaced by underscores) Ex: U_Box_1.

DEACOM 1099 Forms can then be built under Print Outs > Maintenance > Report Layouts > tax1099 (System Report name). These forms can be built to align their text boxes and fields with pre-printed 1099 forms. The "Field Name" that was used in the 1099 Form Type will be used on the Report Layout to insert the total dollar amount of purchases for that Vendor and that 1099 Form Type. Information on configuring the 1099 Report Layout can be found on the Managing Report Layouts page.

Managing "1099 Required" status

When are 1099's needed?

The 1099 vendor designation is applied to suppliers that generally have the following characteristics:

  • Professional services fees
  • Commissions paid to non-employees
  • Fees paid to independent contractors
  • Taxable fringe benefits for non-employees
  • Director's fees
  • Golden parachute payments
  • You made the payment to someone who is not your employee
  • You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations)
  • You made the payment to an individual, partnership, or estate
  • You made payments to the payee of at least $600 during the year.

Generally, the designation for a 1099 is for a supplier entity that is not a corporation.

Other considerations when identifying someone as an independent contractor may include:

  • If the worker supplies his or her own equipment, materials and tools
  • If all necessary materials are not supplied by the employer
  • If the worker can be discharged at any time and can choose whether or not to come to work without fear of losing employment
  • If the worker controls the hours of employment thus indicating they are acting as an independent contractor
  • Whether the work is temporary or permanent

What Vendor configuration is required?

Prior to generating 1099's in DEACOM, Vendors who receive the 1099 form must be flagged as such and have a 1099 Form Type assigned.

  • Navigate to Purchasing > Vendors and identify the Vendor that will require a 1099 form.
  • Click the "Modify" button to display the Edit Vendor form.
  • On the Order Defaults tab, check the "1099 Required" flag and select a "1099 Form Type" to use.
  • On the General tab, enter a "Social Security Number" or "Taxpayer ID" in the appropriate fields.
  • When finished, click the "Save" and "Exit" buttons to complete the process.

No additional configuration on the Vendor record is required, however, there are other options when cutting 1099 checks as discussed in the next section.

Can individual orders or order lines be excluded?

Yes. The "1099 Form Type" and "1099 Required" flag established on the Vendor record are used to populate these same fields on the Purchase Order header, which in turn are used to populate the same fields on each individual purchase order line.

For situations where a purchase order or purchase order line should not be counted on the 1099 or where the 1099 Box may differ from the default box, users can manually alter the “1099 Form Type” and “1099 Required” fields, either on the PO header via the Purchase Order Misc 2 tab, or the General tab on the Purchase Order Line form. Altering the fields on the Misc 2 tab will affect all the same fields on all purchase order lines. Altering the fields on the Purchase Order line will only affect that line.

When considering what Vendors will require a 1099 to be printed, the filter via Accounting > 1099 Forms evaluates the 1099 flag on each individual Purchase Order line.

Note: The ability to set a 1099 requirement at the order level was added for situations in which clients have 1099 Vendors for whom reimbursement checks are also cut, which are not 1099 reportable. In this situation, the 1099 flag may need to be modified after the check has been paid. To support this, the 1099 flag is available on the "Modify Info" form when viewing, not modifying, the PO and may be changed on this form.

Printing 1099 Forms

  1. Navigate to Accounting > 1099 Forms.
  2. Enter the appropriate information on the pre-filter.
    1. Note that the name of the form name will change accordingly to the type, such as tax1099 or tax1009nec.
  3. Click the "Print" button. This will generate one 1099 form per Vendor summarizing their income through the start and end dates specified on the pre-filter.

Generating a 1099 comparison report

A 1099 comparison report can be used to verify the necessary 1099 forms have in fact been created. The steps to create the report are as follows:

  1. From Purchasing > Order Reporting, run an "Order Detail" report with the following parameters: Include Backorders, Status = Paid, Date based on = Paid, Enter Start date and End date same as entered when printing the 1099 forms.
  2. On the Advanced filter at the bottom of the Purchase Order reporting pre-filter, click "Add" to open the Edit Custom Criteria form.
  3. Set "Table" to "Purchase order lines", "Field" to "Flag for line 1099 eligibility", "Operator" to "=", and "Value" to "T". Save and exit the Edit Custom Criteria form.
  4. Back on the Purchase Order reporting pre-filter, click the "View" button to generate the report.
  5. On the report, click the "Subtotal Report" button and set Subtotal results to "Vendor".
  6. Finally, click the "Summary" button to view Vendor and Total Amount. This report should match 1099 forms.

FAQ and Diagnostic Tips

Tip: The Facility Name (wa_name) is available to print on the 1099 forms. Additional information on setting up the parameters and fields that will print on forms in DEACOM is available via Print Outs > Maintenance > Report Layouts. Additionally, the Facility (lc_facility) and Facility Group (lc_facilitygroup) names are available to the 1099 Tax Report via Accounting > 1099 Forms. These fields help customers that have more than one legal entity and need to separate this information on 1099 reports.