As a U.S. business, you’re legally obligated to issue Form 1099-NEC to independent contractors you pay more than $600 annually for services.

QuickBooks Online simplifies this process if you track your contractors correctly.

Article: Preparing 1099s: The Challenges and Solutions

This guide walks you through setting up and managing contractors, ensuring compliance when filing your 1099 forms.

Setting Up Contractors in QuickBooks Online

Step 1: Access the Contractors Tab

1. Navigate to Payroll: On the left-hand menu, click Payroll, then Contractors.
2. View Contractor List: You’ll see all vendors marked as contractors. If someone is missing, you might not have set them up correctly.

Step 2: Add a Contractor

1. Go to Expenses > Vendors.
2. Find the vendor’s profile and click Edit.
3. Scroll down and check Track payments for 1099.
4. Enter their Social Security Number (SSN) or Employer Identification Number (EIN) and address. This information is essential for filing.

Identifying Missing Contractors

If you suspect that some contractors are missing from the list:

1. Run a Vendor Expense Report:

• Go to Reports and search for Expenses by Vendor Summary.
• Select the relevant date range (e.g., last year).

2. Review Vendor Payments:

• Look for vendors paid over $600 for services.
• Ensure they are marked as contractors in QuickBooks.

Filing 1099 Forms

Step 1: Prepare the 1099s

1. Click on Prepare 1099s under the Contractors tab.
2. Confirm Information: Ensure vendor details are accurate, including names, SSNs/EINs, and addresses.

Step 2: Select Relevant Accounts

1. Assign accounts from your Chart of Accounts to match service-related expenses, such as Labor or Professional Services.
2. Avoid selecting expense categories like reimbursements for supplies, which aren’t 1099-reportable.

Step 3: File Electronically

1. Preview the 1099 form to verify details.
2. Pay the e-filing fee through QuickBooks.
3. Submit the forms electronically.

Important Notes

• Individuals vs. Businesses: Generally, only individuals—not corporations—should receive 1099s.
• Address Accuracy: Ensure contractors’ addresses are correct to avoid form rejections.
• Filing Deadline: File by January 31st to avoid penalties.
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