1099 Process

Resources

By January 31st each year, Form 1099s are to be sent out to all vendors/suppliers/contractors who meet the following criteria:

• Received > $600 in cash payments from you during the year
• Are not corporations (limited liability companies still get them)
• Are not selling your business merchandise or inventory
• Are an attorney (even if organized as a corporation)

1099s are cash that has been paid, not accrual basis (i.e. vendor bills that are due but not paid)

1099s are probably one of the most misunderstood aspects of the code

• Many people request 1099s who really should not get them
• Vendors/contractors are required by the IRS to report income REGARDLESS of whether or not a 1099 has been issued. While it is considered a best practice to issue 1099s, it is the vendors responsibility to report any income they received from your business.
• Many contractors feel that the cost of materials that they supply should not be included on their 1099s, which is false – any monies paid to the vendor/contractor is fair game

AS SUCH, IT IS NOT UNUSUAL FOR PEOPLE RECEIVING 1099s FROM YOU (OR NOT RECEIVING THEM) TO COMPLAIN AND REQUEST CHANGES. THIS IS NORMAL AND DOES NOT REFLECT ERRORS ON THE PART OF QBO IN PREPARING AND SENDING OUT 1099s.

QBO’s procedures for sending out 1099s are as follows:

1. QBO sends out 1099 Proposals in early October. Once accepted a deposit will be required to engage the work. Proposals will provide for an auto debit for QBO’s fees once client approves the final 1099 list in January.
2. In the Proposal, QBO will confirm with the client how the client wants their name, address and tax ID presented on the Form 1099. once agreed upon by the client, no changes will be made without an additional charge
3. Clients must complete and return the Proposals by no later than October 31st Failure to do so will result in a double charge of normal 1099 fees.
4. QBO will prepare a preliminary list of 1099s needed for client’s review and approval in November. Client must approve the list by no later than November 30th. Any December additions will be at no charge – any additions to the original list through November will result in an addition charge
5. Any vendors that are missing a W9 (or FEIN/SSN and addresses) will need to be followed up with by the client. If the client would like to have QBO contact vendors it will be an additional charge for W9 info collection.
6. QBO will update the list of 1099s and amounts through year-end in January, and send the updated list to client for approval, which must be done within 3 days of receipt.
7. Once client approves the filing of the 1099s, QBO will process an auto debit against client’s bank acct for QBO’s fees.
8. QBO will prepare and mail 1099s
   1. The tax ID for the party receiving the 1099 will be masked (just the last 4 digits showing on the 1099).
   2. The tax ID of the party sending the 1099 must be listed on the 1099, it cannot be masked.
   3. QBO will send the 1099s in electronic form to be reviewed by the client BEFORE printing. Any changes outside of QBO error will be an additional charge.
   4. Once approved, QBO will print and FedEx the forms to the client to mail out to their vendors (QBO will provide the correct envelopes for the forms. It is the client’s responsibility to mail the forms in a timely manner.
9. QBO will extend the filing requirement for Form 1096 (lists the 1099s for the IRS) with the IRS through the end of February. This will allow QBO to make any changes to 1099s in February without having to amend the Form 1096 with the IRS. QBO will submit the 1096 to the IRS
10. QBO will not send any state 1096s unless specifically instructed to do so by the client.
11. QBO will retain records of the client’s 1099 in their secure filing system for future reference if needed.

QBO Fees

1. QBO will pay all envelope and Forms cost in addition to FedEx fees for mailing paper copies to the client.
2. 1099s processed on time per the above schedule will be $12/1099 with a $125 minimum (deposit to be paid upon acceptance of engagement)
3. Changes to 1099s or re-issuing 1099s will be free if due to an error by QBO, otherwise they will be billed at $20 each.
4. Issuing a 1099 to a vendor/supplier who really should not get one will also be $20 each and QBO will not include these 1099s on the Form 1096 processed with the IRS as they are not required and hence should not be filed with the IRS.
5. For clients who do not respond to the Proposal timely or make any changes after January 17, 2020, QBO’s fees will be $20 for all 1099s.

Privacy Concerns

1. 1099s sent via mail must include the tax ID number of the entity sending the 1099.
2. The SSN or tax ID of the person or entity receiving the 1099 can be masked (just the last 4 digits can be listed).
3. Any vendor requesting a 1099 must do so through the client – no direct email to QBO staff or 1099 processing team. This is to protect the client and vendor privacy.
4. All W9s are filed in a secure filing system managed by QBO.