1099 Categories

1099 Categories

Overview

1099 categories in CustomBooks™ are used to properly track payments made to vendors that may be reportable to the IRS on a Form 1099. Assigning the correct 1099 category ensures that eligible payments are captured accurately and included in your 1099 reports at year-end.

These categories help classify the type of payment made (such as rent, nonemployee compensation, or other income) and determine how amounts are reported.

What Are 1099 Categories?

1099 categories represent the IRS-defined payment types that appear on Form 1099. When a category is assigned to a vendor and linked to the appropriate expense accounts, CustomBooks™ can track qualifying payments automatically.

Common examples include:
  1. Nonemployee Compensation
  2. Rent
  3. Other Income
  4. Royalties
  5. Legal Services


When to Use 1099 Categories

You should use 1099 categories if:
  1. You pay vendors or contractors who may require a 1099.
  2. You want accurate year-end 1099 reporting.
  3. You need to track reportable payments throughout the year.

How 1099 Categories Work in CustomBooks™

  1. A 1099 category is assigned to an expense account.
  2. That expense account is used on bills, bill payments, or expenses.
  3. Payments made to vendors marked as 1099 eligible are tracked.
  4. Eligible payments appear in 1099 reports.
Notes
Important: It’s important to understand the 1099 requirements when using the Excluding Payment Methods feature. Typically, only payments made using qualifying payment methods (such as check or ACH) are included. Credit card payments are generally excluded from 1099 reporting. However, please consult with a tax specialist or check the rules and regulations with the IRS or a tax specialist for more information regarding your specific situation.

Setting Up 1099 Categories

Step 1. Assign the Category to an Expense Account
To track 1099 payments, you must link your expense accounts to the correct categories. You may assign the category through the 1099 Category list or directly on the expense GL accounts.
  1. Assigning through the 1099 Category list:
    1. Navigate to Accounting → 1099 categories.
    2. Click the "Setup accounts" link, then check the checkboxes of the accounts you want to assign to the particular category.



  2. Assigning the Category to an Expense GL Account:
    1. Go to the Chart of Accounts.
    2. Open the expense account you use for vendor payments.
    3. Select the appropriate 1099 Category.
    4. Save your changes.
Step 2. Mark the Vendor as 1099 Eligible
For a vendor to be included in 1099 reporting, they must be flagged as "1099 vendor".
  1. Navigate to Lists → Vendors.
  2. Open the vendor card.
  3. Under the 1099 tab, check the box for 1099 Vendor.
  4. Then enter the Name of the person (not the DBA or business name), Federal ID Type (SSN or EIN), and the Federal ID Number.

For a quick overview of the process and guided steps, please watch the video below.




If you need any further help or assistance, don't hesitate to reach out to our support team. You can contact us via live chat, email, or by submitting a support request ticket through our Help and Support page.


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