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.

See How to Update 1099 Settings and Categories

This video shows how to update CustomBooks for the current 1099 reporting year, copy prior-year settings, review IRS box changes, update 1099 categories, and verify the accounts mapped to each category.

Video Summary

To prepare 1099 settings for the current reporting year, go to Admin Panel > Accounting Settings and update the 1099 tax year. You can copy settings from the prior year and review any IRS box-reporting changes before updating categories. From the 1099 Categories area, you can review the 1099 type and threshold for the year, use Setup Accounts to manage the accounts assigned to each category, and also assign a 1099 category directly from an account in the Chart of Accounts.

Key Takeaways

  • Update the 1099 tax year from Admin Panel > Accounting Settings.
  • CustomBooks allows you to copy 1099 settings from the prior year.
  • Red lines in the update screen indicate IRS box-reporting changes from the previous year.
  • The 1099 Categories area shows the 1099 type and threshold for the selected year.
  • Use Setup Accounts to review, add, or remove accounts mapped to a 1099 form box.
  • A 1099 category can also be selected directly on an account in the Chart of Accounts.
＋ Read the Full Video Transcript

In this video we are going to show you how you can update CustomBooks to run your 1099s for the current reporting year.

To start we need to set the tax year. Go to Admin Panel and select Accounting Settings. We can use the green arrows to collapse the sections we are not working with.

Under 1099 settings click on the year and in the pop-up window that appears choose the latest tax year, and then click OK. Then you need to confirm that you want to update the tax year.

Next you need to select if you want to copy the settings from the prior year. This is what we recommend.

Finally on the next screen you are able to choose what settings are copied over from the previous year. Any lines that are red indicate changes made by the IRS for box reporting from the previous year. In this example Box 14 from last year will now be reported in Box 3 for the current year. Click Update Categories to continue.

This will open the 1099 categories. The 1099 type will be listed along with the threshold for the year. You can also select the Setup Accounts link on the right to review the accounts included in 1099 reporting.

From this area, you can view which accounts are currently mapped to each 1099 form box, as well as update those mappings by adding new accounts or removing existing ones as needed.

If you open one of the accounts in the Chart of Accounts you will be able to select the 1099 category as well.

Later in this course we will show you how to specify if your vendors will need to receive a 1099 and how to set them up correctly.

CustomBooks integrates with Avalara 1099, formerly Track1099, and Tax1099 to support streamlined 1099 processing and filing.

Before generating your 1099 forms, be sure to watch our Vendor 1099 Report video. In that video, we'll show you how to review vendor payments, verify report totals, and prepare your 1099 information before exporting or filing.

If you need additional assistance with 1099 processing or any other CustomBooks feature, please contact our Professional Services team to schedule a session with one of our experts.

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.