Top 1099 Errors Made in QuickBooks
It’s 1099 season and there are a few more days until the deadline, January 31st.
I keep seeing some of these common errors made in QuickBooks Online when it comes to 1099s. Here are some things to look out for:
#1 Make sure your vendor is listed as a vendor
I’ve seen several occasions where a vendor was listed as an employee or maybe even a customer! QuickBooks ignores those types of names when figuring out what 1099s to prepare. My recommendation is to run the transaction detail for the entire year by “Name”. Then, scan through there to make sure you aren’t missing any names on the vendor list.
#2 Multiple vendor names for one vendor
If you have ABC Consulting and then ABC Consulting, LLC in your QuickBooks file, QuickBooks sees those as 2 separate vendors and you might end up under the threshold for 1099 preparation. Make sure you go through your vendor list and merge any duplicate vendors first.
#3 Expenses aren’t booked to the right account
These can be missed when you are pulling only certain accounts from QuickBooks to prepare the 1099. Guess what I do? I run the transaction detail for that vendor to make sure I’m not missing anything. Actually, I’m saving that report in my clients’ files this year so when a vendor comes back and questions an amount, I can reference that spreadsheet.
#4 Make sure you are getting the right number in the right box
Remember, 1099s have several boxes on them and now you even have a separate form (1099-NEC) for non-employee compensation. Make sure you are mapping rents to the rent box, attorney fees to the attorney fees box, etc.
#5 The vendor’s TIN and address don’t match up
How are you supposed to know? You honestly aren’t. There are some products out there that let you do a TIN match to confirm the information is correct with the IRS. It is a pretty cheap check and prevents the letter 2 years from now notifying your client that there was an error on the 1099. (Really, that’s all they read in that letter and freak out and call you.)
#6 Preparing 1099s for contractors that don’t need one
There are so many rules when it comes to 1099 prep. Remember that if you paid a vendor by credit card or PayPal, you don’t have to include those payments on a 1099. On the reverse side, 1099s have to be prepared for attorneys even if they are a corporation. In the end, really read through the instructions to see which rules you need to be aware of.
#7 Don’t email the vendors their 1099 unless you have their permission
When in doubt, make sure you are also mailing out the 1099s. As a backup, you can email the 1099s, but I heard long ago that there is some rule that they have to give you permission if email is the only form of delivery.
What other 1099 errors have you seen in QuickBooks? Just like any software, you need to understand how the program is determining what ends up in what box. If you haven’t used QuickBooks correctly, then you are more prone to errors at the end of the day.
If you want help streamlining the preparation of your practice’s 1099s, check out my 1099-MISC and 1099-NEC Control Sheet Template. It has saved me tons of hours each year keeping myself organized.