Friday, August 30, 2013

Dynamics GP - 1099 Vendor

What is 1099 vendor?

A 1099 vendor is a vendor for whom you are required by law to report payment for services to the Internal Revenue Service (IRS) in accordance with Internal Revenue code. Sole proprietorship's, individuals, medical or health providers and partnerships are all considered 1099 vendors and will require a 1099.

A 1099 vendor is a designation, or flag, listed in each of the records in the vendor master file that is part of an accounting software package. If one designates a vendor as a 1099 vendor, the system will print a Form 1099 for the vendor as part of the 1099 batch processing that follows the end of the calendar year. The company then sends the resulting 1099 form to the vendor, which the vendor should use for tax filing purposes.

The software should not print a Form 1099 for any vendor for which the company has issued cumulative payments for the full calendar year of less than $600. One can send a copy of this report to the Internal Revenue Service (IRS). The intent of the 1099 vendor designation is to ensure that suppliers report the correct amount of income to the IRS for income tax reporting purposes.
One should apply the 1099 vendor designation to any supplier that has the following characteristics (this is a partial list)
  • Professional services fees
  • Commissions paid to non-employees
  • Fees paid to independent contractors
  • Taxable fringe benefits for non-employees
  • Director's fees
  • Fish purchased for cash
  • Golden parachute payments
Generally, this designation is for a vendor entity that is not a corporation. The best practice for designating a 1099 vendor is to have all suppliers fill out and submit a Form W-9, Request for Taxpayer Identification Number and Certification, before paying them.

How to handle 1099 Vendor in GP?

In GP, one can setup 1099 vendor through
Microsoft Dynamics GP àTools à Setup à Purchasing à Payables to open Payables Management Setup.

Click 1099 Setup button to set the amount for 1099 Setup Tax type which may be Dividend, Interest, Miscellaneous. 
To check the vendor as 1099 vendor, go to Cards àPurchasing àVendor to open Vendor Maintenance and click options to check the vendor tax type.

Note: Vendor tax type as Not a 1099 vendor option then the vendor is not a 1099 vendor.

More details about 1099 Vendor process will be coming soon in this blog...

Hope this helps!

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