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Maintaining Dynamics GP : Providing correct tax information by Updating 1099 information

4/24/2013 6:01:13 PM

A common problem arises at year end in the United States with vendors that were not properly set up as 1099 vendors. 1099 vendors are vendors who are required to be sent a 1099 tax form from the company. The types of transactions that can require a 1099 include rent, legal payments, and contract labor among others. The requirement is broad enough that most vendors who are not incorporated (proprietors, partnerships, and so on) may be due a 1099 if they are paid more than six hundred dollars in a year.

Recent changes to the U.S. law have dramatically increased the number of 1099 forms that will need to be sent in the future. Essentially, all payees who receive more than $600 in payments will need to receive a 1099 in the future. As part of this legislation the fines for 1099 reporting errors have also been increased significantly. Correctly reporting 1099 information is more important than ever and this recipe can save companies a lot more than just lunch money.

The specifics of 1099 requirements often meant that vendors were incorrectly set up and the amounts required for tax reporting on 1099 forms were not collected for that vendor in Dynamics GP. The preferred solution is to use SmartLists or built-in reports to determine what the correct 1099 amount should have been. These amounts are then added to the vendor record so that they will print correctly on the 1099 form.

The specifics of figuring out what should be on a vendor's 1099 form are beyond the scope of this recipe. For this recipe, let's look at how to serve up correct 1099 forms in the sample company once the right amounts have been obtained.

How to do it...

To correct 1099 amounts for a vendor:

  1. 1. Select Purchasing from the Navigation Pane. Select 1099 Details under the Cards section of the Purchasing Area Page.

  2. 2. In the Vendor ID field enter COMPUTER0001 and click on Tab.

  3. 3. Set the Tax Type to Miscellaneous and the Display to Month.

  4. 4. Change the Month to December.

  5. 5. In the Amount field, next to 7 Nonemployee Compensation, key in $1,100.00 to represent the 1099 amount:

  1. 6. Entries must be made at the Month level. Selecting Year won't allow users to make an entry in the amount field. When catching up vendor 1099 amounts companies can make an entry per period but most simply put the catch-up amount in the last month of the year.

How it works...

Maintaining 1099 vendors and amounts is something that many companies do a poor job with. This maintenance recipe will at least correct things for year end and provide correct 1099 amounts for tax filing. Ultimately though, better vendor setup is the answer to reducing this maintenance requirement.

There's more...

A better option to correcting 1099 amounts at year end is to get vendor setup right in the first place.

1099 Vendor Setup

The preferred alternative to correcting 1099 amounts is to improve vendor setup. Often the problem is that vendor setup is rushed and insufficient information is provided. As a result of this, vendor's requirement for a 1099 comes to light later, after invoices have already been processed.

The key is to get control of the vendor process by placing all new vendors on hold until the vendor record contains specific information such as the vendor's tax ID number, whether or not this is a 1099 vendor, and the type of 1099 expenses to be incurred. Most of the required information can be gathered by obtaining a completed W-9 form from the vendor. Vendors are happy to provide the necessary documentation if they know up front that their invoice won't be paid without it. Communicating and enforcing this policy is a step to better 1099 reporting.

Even with proper vendor setup discipline, it is possible for someone to erroneously remove the 1099 amount from a payables voucher. However, the number of vendors that would need to be corrected in this case would be less and this maintenance recipe becomes a simple year-end process, not an onerous one.

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