Utilizing PROCAS to Help Streamline your 1099 Process author avatar

PROCAS has built in procedures to help clients automate their 1099 & 1096 process.

Every January, accounting staff & business owners walk into the same old confusing process as they wake up from their holiday slumbers…

*Grabs coffee and begins annual research*

“What is a 1099 again?”

“How do I determine who should receive a 1099?”

“What are the different types of 1099s that need to be reported?”

Ok, I think I remember this process,

“Now where do I print these forms out?”

“THAT’s right, I can’t print them online. Need to swing by Staples to pick some up.”

“Wait, I only bought a box of 50 forms, why are there a billion papers in here?”

“Oh yeah, I have to complete FIVE forms for each contractor/vendor…”

“Ok… (takes deep breath), now who do I send all these forms to and when are they due?”

And most importantly…

“Can I get in trouble if I mess this up?”

Frustrated accountant attempting 1099 reporting

Fear not! We will break down this process in detail below and explain how PROCAS can help you simplify the reporting requirements. So, keep the Tylenol up in the cupboard, we aren’t going to need it!

Editor’s Note – This post takes into account the changes the IRS has made to reporting 1099MISC Nonemployee Compensation for 2019 fiscal year, which is covered under the Penalties section.


What is a 1099 and why is it important?

1099-MISC forms are used to track income of organizations who are not established as corporations (or LLCs taxed as C or S corps). For most companies, 1099-MISC forms will be used to provide an accurate representation of how much non-employees, vendors, sub-contractors, and consultants have been paid throughout the prior year. Because these people and businesses do not receive W-2’s for work performed, 1099s are what the IRS depends on to know how much they owe in taxes for the calendar year.


Who receives a 1099?

Determining who receives a 1099 can be a tricky process. To help, we’ve broken the decision-making tree into the following points:

1) Is the person in question an employee of your organization?

  1. YES – No need, they should have received a W-2.
  2. NO – Independent contractors and consultants will most likely need a 1099, proceed to Question 3.
  3. NOT SURE Consider the following questions:
    1. Do you provide benefits to this individual?
    2. Do you provide equipment, office space, or materials for the individual to complete their job?
    3. Do you reimburse business expenses incurred by the individual?
    4. Are you the sole client or primary client of the individual? And do you completely control their weekly workflow?
  4. NOT SURE – If you answered NO to all the above sub-questions, proceed to Question 3.
  5. NOT SURE – If you answered YES to any of the above sub-questions, you may be considered that individual’s employer in a court of law and may need to start providing W-2 information. Consider seeking a labor lawyer’s advice.

2) Is the vendor you purchased services from a corporation?

  1. YES – No need to send a 1099.
  2. NO – Sole Proprietorships and Partnerships will most likely need a 1099, proceed to Question 3.
  3. NOT SURE – LLC’s are the most confusing of the bunch. To determine how the company is taxed, please send a W-9 to that vendor’s accounting staff. Once returned,
    1. If taxed as S Corp or C Corp, no need to send 1099.
    2. If taxed as sole proprietorship or partnership, proceed to Question 3.

3) How much money was paid to individual or vendor?

  1. Anything less than $600 total for the calendar year does not require a 1099.
  2. Any payments totaling $600 or more will require a 1099.
  3. Common Exceptions:
    1. $10 or more in royalties will require a 1099
    2. In general, payments made to law firms will require a 1099
    3. If paid via credit card, a 1099 is not required (even in excess of $600). The credit card company will take care of the reporting for you.
    4. Business expense reimbursements for employees will not require a 1099.


Forms & Deadlines

1099-MISC forms contain 5 parts to be filled out and sent to their appropriate recipient(s):

  1. Copy A - For Internal Revenue Service Center
  2. Copy B - For Recipient
  3. Copy C - For Payer or State Copy
  4. Copy 2 - To be Filed with Recipient's State Income Tax Return, When Required
  5. 1096 - Completed with 1099

While these forms can be generated around the same time, they typically are sent separately at different deadlines:

  1. January 31st
    1. If reporting Box 7 - Non-employee compensation, mail Copy A forms and 1096 to the IRS
      1. DO NOT mix in other 1099-MISC forms for Copy A if other boxes are selected
      2. Can also e-file if preferred
    2. Send Copy B to recipients if payments are NOT reported in Boxes 8 or 14
  2. February 18
    1. Send Copy B to recipients if payments reported in Boxes 8 or 14
  3. February 28
    1. Mail remaining Copy A forms and 1096 to the IRS
      1. Make sure no payments we in fact recorded in Box 7
  4. April 1
    1. Deadline to e-file to the IRS for Copy A forms and 1096
      1. Again, make sure no payments we in fact recorded in Box 7



You may have noticed in the above deadlines that I reiterated multiple times to not include Box 7 payments with other payments. This is a new change the IRS has made for 2019 and subsequent years as there is a newfound focus on capturing all non-employee compensation. There are two large penalties you want to avoid in regards to this change:


1) Be sure to file BOX 7 - Non-Employee Compensation payments by the Jan 31 deadline!

If you do not mail these 1099 MISC forms by Jan 31, you can almost be guaranteed to be hit with late penalties. Depending on the severity (in both # of forms and tardiness), you can expect the penalties to be of substantial monetary value.


2) DO NOT file all Copy A forms together by the Jan 31 deadline.

You may think it would be a good practice to play it safe and file all your 1099 MISC forms by the Jan 31 deadline. However, the IRS specifically wants only Box 7 - Non-employee compensation payments to be filed together and before the rest of your submissions. IF you file them together, you can be hit with monetary penalties for having the two batches mixed.


For more information related to 1099s and all the associated forms, deadlines, and penalties, please click here.


Utilizing PROCAS to complete your 1099s & 1096s

PROCAS currently supports three types of 1099s: 1099-MISC (all payments), 1099-INT, and 1099-DIV, as well as 1096s. Each form can be generated out of the system by following these 3 steps:

  1. Determining which vendors/subcontractors require 1099s
  2. Establishing 1099 form type and box by vendor/subcontractor
  3. Generating 1099/1096 forms from PROCAS


1) Determining which vendors/subcontractors require 1099s

In order to find out who you paid money to in the prior year, please go to the following:

Accounting --> General Ledger --> General Ledger

Here, use the parameters next to the orange arrows below to generate a report for cash payments made in the following year.

Once you’ve printed your report, please follow the above section “Who receives a 1099” to whittle down you’re list of possible vendors to those who should receive a form.


2) Establishing 1099 Form Type & Box by Vendor or Subcontractor

Now that you have your list of vendors and subcontractors, time to label their records as to which type of form they should receive. Please navigate to:

Setup --> Purchasing --> Vendors

And select the “Find” button or “F8” function key to begin searching for those vendors/subs. Once on the record of an applicable vendor/sub, select the “Payment Info” tab of the record to locate a box called “1099 Type & Box.”

If you click in this box, you can then select the “Lookup” button or “F9” function key to see the list of possible 1099 types.

From the above list, make the appropriate selection for each vendor/sub in your list.


3) Generating 1099 & 1096 forms from PROCAS

Once all 1099 types and boxes have been determined, navigate to the final menu:

Accounting --> Accounts Payable --> Forms 1099/1096

This screen will be broken into two separate parts to get the appropriate items needed to print your forms:

The header section of Forms 1099/1096 has specific parameters to determine which items will generate in the detail grid:

  • Reporting Year Date - Use the prior calendar year for as is required for reporting 1099/1096 amounts.
  • Cash Account - Use the cash account recorded in the GL for payments made to each vendor/sub (if left blank, all accounts will generate).
  • Batch Liability Account - If you make payments in batch from your bank account, enter the liability account used here.
  • 1099 Type - Choose applicable 1099-MISC, 1099-DIV, or 1099-INT.
  • Minimum Amount - This will limit the minimum amount recorded in each transaction. Use applicable minimums if needed.
  • Search - Will populate below detail

In this detailed grid, select the payments made to each vendor if you are looking to include them on your forms. When all appropriate rows have been selected, print the proper 1099 or 1096 report from the below report bar.

  • Each column has the ability to sort items if you click the name of each column
  • Each column also has the ability to filter items if you select the filter icon to the right of each column header
    • Editor's Tip - Filtering on "1099 Type" is very useful if you want to separate out your Box 7 Non-employee compensation forms from the rest for the IRS 01/31 submission!!


Extra Help & Form Alignment

For additional help completing your 1099/1096 forms using PROCAS:

  • In the upper right hand corner there is a "?" symbol, which will provide in-system help for detailed instructions on any of the menus!
  • Feel free to reach out to our Support Team at support@procas.com
    • We can help align your report forms to your printer specs as well as help explain the process.



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