Important AlertsExclude nonreportable payments from Form 1099-MISC for Quickbooks 2009-2011 users.
Article ID: 1002600
PrintOverview
This article explains how to exclude nonreportable payments from Form 1099-MISC.
Assumptions
You are using Quickbooks 2009, 2010 or 2011 and want to manually print your 1099-MISC Forms and you paid only a few vendors this payment types other than cash or check.
Expected Outcome
You will be able to file accurate Form 1099-MISC for tax year 2011.
Details
Beginning with tax year 2011, the IRS requires you to exclude certain payment types you made to a 1099 vendor on Form 1099-MISC that will be included on third party payment processors such as credit card companies, PayPal etc. on forms 1099-K. QuickBooks 2011 or earlier does not automatically exclude the non reportable payments made to vendors from Form 1099-MISC. If you use QuickBooks 2011 or earlier, you can comply with the new IRS requirements by following the steps below.
NOTE: Only third party payment processing companies file 1099-K. This forms is not filed by business owners that have paid vendors/contractors.
FAQ: What is a 1099-K Form?
A form that is now required for third party payment processing companies, credit card processors, PayPal, etc. to report payments that have been processed to vendors and contractors.
Note: Small Business owners do not file a 1099-K.
Note: Small Business owners do not file a 1099-K.
Determine whether you made any nonreportable payments to 1099 vendors during the tax year. You can do that in either of the following ways:
- Option 1: From the Vendor Center, select a 1099 vendor, show All Transactions, and select a date range for the reporting period
- Option 2: Create a 1099 Detail report by choosing Reports >Vendors & Payables: 1099 Detail. Look for nonreportable payments such as credit card charges, check transactions that represent credit or debit card charges (indicated by a notation in the check number or memo fields, bill payments made by debit or credit cards, payments made from accounts that represent PayPal or other third-party payer) or any general journal entries that represent nonreportable payments.
Note: Only consider payments made from accounts that you have mapped to boxes on Form 1099-MISC.
If you have any 1099 vendors that you paid exclusively by nonreportable payments paid, do NOT create 1099_MISC forms for them. To remove them from 1099 processing, edit the vendor's record and uncheck the Vendor eligible for 1099 box on the Additional Info tab.
If you have any 1099 vendors that you sometimes paid by nonreportable payments, you need to exclude those nonreportable payments for the 1099-MISC forms for those vendors, as follows:
- Total the nonreportable payments for a vendor, and subtract the nonreportable payments from the total payments for that vendor. The result is the total reportable payments.
- If the amount of the reportable payments for a 1099 vendor is less that the IRS reporting threshold amount, you do not have to prepare the 1099-MISC for the vendor. Remove the vendor from processing as in step 2 above.
- If the amount of reportable payments for a 1099 vendor exceeds the IRS reporting threshold amount, create a journal entry for the vendor that offsets the nonreportable amount:
- Date the journal entry with the last day of the tax year.
- On the first line of the entry, specify an account (such as "Opening Balance Equity") that is not mapped to a 1099 box. Create a debit to this account in the amount of the vendor's nonreportable payments.
Note: Be sure to include the vendor's name in the name column. - On the next line(or subsequent lines if you paid the vendor from multiple accounts), enter the account from which you made nonreportable payments and create a credit to this account in the amount of those nonreportable payments.
Note: these credit entries reduce what is reported on Form 1099-MISC and must total the amount of the first debit entry.
Create your Forms 1099-MISC for the year as usual.
If you created journal entries to exclude nonreportable payments, void those entries once you have finished your Form 1099-MISC reporting (sent forms to the vendors and submitted forms to the IRS) so they do not impact your financial statements going forward.
For additional information on the new IRS requirements, visit the links below:
- Explanation of final regulations published by the IRS on the new payment card reporting requirements: http://www.irs.gov/govt/fslg/article/0,,id=226894,00.html
- IRS Third Party Reporting Information Center Link: http://www.irs.gov/taxpros/article/0,,id=225080,00.html
- Related article: Changes to IRS Reporting Requirements for 1099-Misc Tax Year 2011
