If you pay consultants or contractors for work during the year, you’ll most likely need to issue them 1099s the following January. These are required when you pay an individual or company $600 or more during a calendar year, unless the recipient is a corporation or a nonprofit. If you’re paying for legal services, the exemption for corporations and nonprofits doesn’t apply. Any time you’re setting up a vendor in QuickBooks that may need to receive a 1099, check the “Track payments for 1099” box, and put in their Social Security Number or EIN.

To calculate whether you meet the $600 threshold, add up all the payments you made to the contractor by check, ACH, debit card, or wire payments. Don’t count credit card payments, since those get reported by the credit card processing company. The same applies for third party network payments, like PayPal.

1099s need to be postmarked by January 31 of the following year; e.g. if you paid a vendor in 2019, you would issue the 1099 in January 2020. Plan to prepare them in QuickBooks at least a week before the deadline, due to the time needed for processing. When you’re ready, follow these steps.

  1. In the left menu, hover your cursor over Workers, and click on Contractors.
  2. Click on Prepare 1099s, then Let’s get started.
  3. Review your company’s information. This will appear in the return address on the 1099s. If anything needs to be changed, click on the pencil icon on the far right, make the changes, and save them. Click Next to continue.
  4. Mark the boxes that correspond to the types of payments you’re reporting. The most common are Box 1, for rent you pay to a landlord, and Box 7, for payments to consultants and contractors for work they did for you. Review this article to confirm what kinds of payments need to be reported. For each box you check off, you’ll get a dropdown menu that links to your chart of accounts. Check off any accounts that you charged payments to, that should be reported on each 1099 box. Click Next to continue.
  5. Review vendors’ information and edit any vendor whose information is incomplete or incorrect. Add an email if you want to send 1099s to a vendor electronically. Click Next to continue.
  6. Confirm the amount of payments made to each vendor is correct, as well as the box they are being reported in. Click Finish preparing 1099s.
  7. You can file 1099s with the IRS either electronically, or by mail. For the former, click E-file for me. For the latter, click I’ll file myself.
  8. If your state requires you to file 1099s with them, you’ll need to print the state copy and mail it in, as QuickBooks doesn’t currently support e-filing the state copy.
  9. QuickBooks will send 1099s to contractors. If you added an email address in step 5, it will send them an email with a link to download it. Otherwise, it will send a copy in the mail.