Pay a Restaurant Contractor with a 1099

By John Nessel
Restaurant Resource Group

It's that time of year when restaurant owners and their accountants are scurrying to tie up all the financial loose ends in preparation for filing Taxes. One of those tasks is to make sure that any independent contractors that you paid more than $600 in the prior fiscal year be issued an IRS Form 1099. You must also file an IRS Form 1096 with the Feds that indicates the itemized total paid to all such contractors so that they can "cross reference" these amounts to each contractors individual return.

So, who are these "Independent Contractors" who gets these 1099's, and how do you set up QuickBooks so that it can generate both the 1099's and the 1096 forms effortlessly?

Independent contractors (ICs) are simply people who are in business for themselves. They earn their livelihoods from their own independent businesses instead of depending upon an employer to earn a living. Independent contractors are sometimes called consultants, freelancers, the self-employed and even entrepreneurs and business owners.

As for creating 1099's for your IC's you must first set up each one as a 1099 Vendor.

Set Up A 1099 Vendor
To set up a vendor as a 1099 vendor:

1. From the Lists menu, choose Vendor List.
2. Select the vendor for whom you want to file 1099-MISC forms.
3. Click the Vendors menu button, and choose Edit.
4. At the Address Info tab, make sure the vendor's address contains the two-letter state abbreviation and the zip code.
5. If the vendor is a person, the vendor's legal name should appear in the First Name, M.I., and Last Name fields
6. If you know the company name but not the person's name, leave the Company Name field blank to avoid double names on the 1099-MISC form.
7. Click the Additional Info tab.
8. Select the "Vendor eligible for 1099" check box, enter the vendor's tax identification number.
9. Click OK.

Set Up A 1099 Account
To set up an account as a 1099 account:

1. From the Edit menu, choose Preferences, and then select Tax:1099.
2. Select the Company Preferences tab.
3. Click Yes, for "Do you file1099-MISC forms?".
4. Choose an account or accounts to associate with the 1099 categories for which you report amounts to the IRS.
   1. Click the Account column and choose an account from the drop-down list.
      Or
   2. For more than one account, choose Selected Accounts from the list and place a checkmark next to each of the accounts you want to use.
5. Click OK.

The accounts you select should be the same accounts you use to track payments related to your 1099 vendors. An account can belong to only one 1099 category. For example, if you set up an expense account named "Payments to subcontractors" and you have selected it to track the 1099 category "Non-employee compensation", you can not use "Payments to Subcontractors" for any other 1099 category.

Typically, the accounts will be expense accounts but you can also associate an other expense account, a long term liability account, an other current asset account, etc. with a 1099 category.

Note: Your business may not need to report on all 1099 categories, many businesses report amounts only for Box 7: Non-employee compensation.

Verify 1099 Data

1099 Detail Report
This report helps you verify the information that QuickBooks prints on the 1099-MISC tax form. It provides more detail than the 1099 report.
For each vendor, the report lists the individual transactions that contribute to the vendor's 1099 total. The totals themselves appear in the Balance column.

The report initially shows only the vendors specified as 1099 vendors. To list all vendors in the report, regardless of their 1099 status, choose All Vendors from the 1099 Options drop-down list in the report button-bar.

Likewise, the report initially shows only transactions assigned to 1099 accounts. To list transactions that may have been assigned erroneously to non-1099 accounts, choose All Allowed Accounts from the 1099 Options drop-down list in the report button-bar.

To go directly to one of the transactions listed, double-click the transaction.

To create this report
From the Reports menu, choose Vendors & Payables and then 1099 Detail.

Verify 1099 Vendor Information

Create A 1099 Report
To create a 1099 report that will verify your 1099 vendor information:

1. From the Reports menu, choose Vendors & Payables, and then choose 1099 Summary Report.
2. Note: Be sure the date range for the report is the same as the one for your 1099-MISC forms. Change it if necessary.
3. Examine the report for missing 1099 vendors.
4. In the 1099 report button-bar, choose "All vendors" from the list. If a missing 1099 vendor appears, you need to set up the vendor as a 1099 vendor.
5. After all 1099 vendors are set up correctly, if some are still missing, choose "All allowed accounts" from the list for accounts.
6. Choose "Only 1099 vendors" from the list for vendors.
7. Double-click any amounts in the Uncategorized column.
8. In the Account column of the 1099 Detail report, if you see any accounts that you need to set up as 1099 accounts.
9. Repeat Steps 7 and 8 for each amount in the Uncategorized column. Choose "Only 1099 accounts" from the list for accounts.
10. Choose "Only 1099 accounts" from the list for accounts. Note: You should now see all expected 1099 vendors to whom you have paid amounts that total or exceed the threshold for the 1099 category.
11. If a vendor is still missing, choose "Ignore thresholds" from the list for thresholds. The vendor may not have met the threshold for the year.

Note: The report covers actual payments made during the year, regardless of the original date of the vendor's bill.

Print And Mail 1099s

Printing Form 1099-MISC Or 1096
Create 1099 reports to verify all 1099 information (vendors, accounts, and amounts) before printing the forms.

Note: You must be in single-user mode to do this.

Print 1099s
To print 1099s:

1. Make sure your printer is turned on and is online.
2. Make sure you have pre-printed 1099-MISC or 1096 forms in your printer.
   • If you have a continuous printer, you may need to adjust for additional thickness due to the copies
   • If you have a page-oriented printer, it's simpler to print copies separately than all at once. Do not collate your pre-printed forms before putting them into the printer. Instead, start by loading all the Copy 1 forms. After you have printed all the Copy 1 forms for each vendor, load and print the Copy 2 forms.
3. From the Vendors menu, choose Print 1099s/1096.
4. Select the time period covering the 1099-related payments you want in the forms, then click OK. You can print up to 249 forms. What to do if you have 250 or more 1099 vendors
5. Click Preview, and verify that each vendor's address will print correctly.
6. To see details of each address, click Zoom In. When you're satisfied with the accuracy and appearance of the addresses, click Print 1099.

Print 1096
To print 1096

1. Follow Steps 1 through 4 above.
2. Click Print 1096.
3. Enter Contact Name (name of person to contact at your company) on 1096 Information window. If you will not be required to file Form 1099 in the future, check "This is my Final Return".
4. Click OK.
5. On the Print 1096 dialog, click Preview to review the document then click Print.

Correct Invalid Addresses For 1099 Vendors

Resolve 1099 Errors
The message "You have selected to Print 1099s for one or more vendors who do not have a valid address on file. Are you sure you want to continue?" occurs when a vendor's address begins on the first line of the address box instead of the vendor's name. To resolve the problem, edit the vendor's record in the Vendor list and begin the vendor's address on the second line of the address box.