How to Setup 1099 Vendors in QuickBooks?

If you have already set up your vendors on QuickBooks Online, follow the steps below to set them up for 1099s. If you haven't yet set them up on QBO, see How to Setup your Vendors on QuickBooks Online. A 1099 is to be prepared for all contractors and non-employees that you have paid $600 or more within the tax year. Except Corporations, all individual contractors and LLCs who are within the $600 threshold, must be issued a 1099. A Form 1096 must also be prepared and sent with the IRS 1099 copy forms, as a summary sheet.

There are two general deadlines: 

• January 31st, following the year you are preparing 1099's for - must issue 1099's to all qualified recipients by this date.
  
• February 28th, following the year you are preparing 1099's for - must send forms 1099 along with a form 1096 to the IRS by this date.

Steps to Set Up 1099s in QuickBooks

Turn on the 1099 feature:

• Open QuickBooks Desktop, go to the Edit tab and select Preferences
• Select Tax:1099
• Choose the Company Preferences tab
• Click Yes to file the 1099-MISC forms option
• Select OK to save the settings.

Make sure your vendors are set up properly:

• You can find your 1099 eligible vendors in the Vendor Center and double-click them to edit. Ensure their names and addresses are correct. Then, click on the Tax Settings tab and verify their tax ID is correct.
• All eligible 1099 vendors should complete IRS Form W-9 (Request for Taxpayer ID) when engaged for services. If you do not have a vendor ID number, have them complete this form as soon as possible. You should deduct backup withholding from payments you make to vendors who refuse to provide their ID numbers.

Read more: Create and Set Up File 1099s in QuickBooks

How To Prepare Setup and Print 1099's in QuickBooks Online?

Step 1: Setup Vendor for 1099:

• Go to the Vendors section in the left menu bar.
• Double-click the vendor you want to edit.
• Enter the vendor's tax ID number in the Tax ID field.
• Check the "Track payments for 1099" box at the top right of the screen.
• Ensure the vendor's address is correct.
• Send W9 forms to each eligible vendor before year-end.
• Ask vendors to complete, sign, and return the form.
• The W9 form will provide the correct address and tax information.
• It will also show if the vendor is a corporation and exempt from 1099.
• Click Save.

Step 2: Map 1099 Vendors to Accounts:

• Click on Vendors in the left menu bar.
• Select Prepare 1099s at the top right.
• If you’ve already started setting up 1099s, click Continue your 1099s.
• In this section, your company name and tax ID number should already be filled in if the setup process was completed.
• If not, enter your company’s address and tax ID number.
• Click Save in one section before moving to the next.
• To edit the Tax ID or Address, click the pencil icon on the right.

Before

After

• The most common type of compensation is box 7: Nonemployee compensation.
• Click Next and select the box that matches your type of compensation.
• I recommend using box 7 if you're unsure.
• Ensure all eligible monetary recipients receive 1099s within the threshold. This is the most important step.

• Click the dropdown at Choose an account.

• Click Next (This section will show you all the vendors that you have set up for 1099's as shown in the screenshot below).

• Click Next again.
• This section will show vendors who are eligible for a 1099 in this period.

Note: Have a vendor summary list with eligible vendors noted.

• If some vendors are missing, it means you didn't check their accounts during the mapping phase.
• Use the Back button to add accounts for vendors or make corrections.
• If everything looks correct, click Next.
• You will be taken to the "Hooray" screen.
• Click Go to 1099 E-file Service to have Intuit file your 1099s for a fee, or click Print and mail forms to print and mail them yourself.

Note: You cannot print 1099 forms on regular paper. Use specific preprinted forms available at office supply stores like Staples or OfficeMax.

• There are forms for laser printers (single sheets) and multi-sheets for typewriters.
• Check if your form aligns with the preprinted form by printing it on plain paper.
• If it aligns, great. If not, follow the troubleshooting tips for your current step.
• If you're within the deadline and frustrated, you can opt for Intuit to e-file for you.

Read more: Set Up E-Pay in QuickBooks Desktop

How to Troubleshoot 1099 Print Alignment Issue?

Here are a few steps to help you correct printing issues with 1099s:

• Go to Vendors on the left and then click on Prepare 1099s in the top right corner
• Click on View Preview and print sample in Section 3. For the following test, you will need plain paper. You can hold this printout against your preprinted 1099 form to make sure everything lines up correctly. If it does not line up, click No, it does not line up.
• Set the Vertical and Horizontal fields to "0" in the Fine-tune alignment Section 2. If it is still not aligned, play around with the horizontal and vertical numbers until it is. It is usually aligned at "0."
• To print, click Next, then Next when it's properly aligned.

How to Setup Direct Deposit for 1099 Vendor in QuickBooks Enterprise?

To pay 1099 vendors via direct deposit, you must first subscribe to QuickBooks Payroll and activate direct deposit, even if you aren't paying any employees.

Here’s how to activate direct deposit for paying 1099 vendors:

• Select My Payroll Service from the Employees menu.
• Click Account/Billing Information.
• Click Activate next to 1099 Vendors in the Direct Deposit section of the Account Maintenance window.
• Provide your Direct Deposit PIN (the same PIN you use for sending payroll direct deposits).

Note: In this section, you are not asked to provide a company bank account since direct deposits to 1099 vendors are made from the same bank account you use for payroll direct deposits.

To set up a 1099 vendor to receive direct deposit payments:

• Click Vendor Center from the Vendors menu.
• Choose the 1099 vendor you want to set up for direct deposit from the list on the left.
• In the Vendor Information section, click Set Up Direct Deposit.
• If you select the Use Direct Deposit checkbox, QuickBooks assumes that you want to pay this vendor by direct deposit whenever you pay this vendor.
• Enter the Vendor’s bank account information.
• Select the checkbox if you want Intuit to send an email notification to the 1099 vendor when the payment is processed, and make sure the email address is correct (which comes from the vendor's account information).
• Click OK.

Frequently Asked Questions