Time to Prepare for Regulatory Reporting to the IRS

By - December 7, 2020

It is that time of year again where we start thinking about preparing for our year end closes and generating the 1099s to send to our vendors. As you know, these forms must be generated and sent to vendors on an annual basis. They must be postmarked by the end of January. I generally recommend that you begin the review of your 1099 information around this time of year. It gives you a bit of a head start if you have updates to make. There are a few requirements for configuring Microsoft Dynamics 365 Business Central to enable the generation of these report. It should be noted that this blog is to assist you with the elements of Business Central and is not advice about any tax laws/codes.

The first thing to do is to indicate the Federal ID No. of your company on the Company Information page. Then in the Payments FastTab on each of the applicable Vendor Card, you need to indicate the appropriate IRS 1099 Code and the Vendors Federal ID No. Once these are completed, you begin capturing the information about the vendors invoices. The IRS 1099 Liable check box will default to being checked for each of the purchasing document line(s) as you enter the vendor’s invoice into Microsoft Dynamics 365 Business Central. Of course, you can uncheck the box if the entry is not to be applicable to the IRS 1099 Liability code.

As you post these entries, the are written to the Vender Ledger Entry table (Table 25) and captured in the IRS 1099 Code and the IRS 1099 Amount fields. As you create the payments and post those entries, they are also written to the Vendor Ledger Entries, with the applicable IRS 1099 Code. However, no amount is written to the IRS 1099 Amount.

The Vendor 1099 Information Report can be used to review the payments that have been made throughout the year for each of the vendors that have an IRS 1099 code designated on their vendor card in Business Central. You may discover that the information does not capture all of the amounts due to the vendor not having the code designated on their card throughout the year. If you changed the IRS 1099 code on the vendor card, there may have been transactions that were posted without the 1099 information. These can be corrected by editing the Vendor Ledger Entry. Yes, you can update information on the Vendor Ledger Entry. It is limited to certain fields, such as the IRS 1099 Code and the IRS 1099 Amount. You can update these values so that the correct amounts can be reported.

You may have also seen that there are two new 1099 Form Box codes in 2020. Business Central makes it easy if you need to change your vendor from the MISC-07 box to the new NEC-01 box. This is done by editing your vendor card and making the change from one box to the other. If there are associated entries already posted, Business Central will prompt you to decide if you want to update the entries with the new code. This occurs when you tab from the IRS 1099 Code. The Vendor Ledger Entries will automatically update if you choose yes to the message/prompt. It should be noted that this only occurs if the vendor had previously been designated with an IRS 1099 Code. If the vendor was not designated prior to posting entries, then it is still necessary to manually edit the Vendor Ledger Entries.

So, I know many of you will ask why you are not seeing the new codes in your Microsoft Dynamics 365 Business Central instance. It may be that you need to update the form boxes. Beware though, that once you run this update, you will not be able to report on 2019 information. The update makes it impossible, since some of the boxes have changed their meaning. If you are ready to use the update, use the Tell Me (search) to locate the 1099 Form Boxes and choose the related link. You will then be able to choose Process and Update Form Boxes. This update will bring in the new codes to the 1099 Form Box. You will then be able to select the new codes on your Vendor Card(s).

Once you have the information on the Vendor Ledger Entries correct, you can review the Vendor 1099 Information Report to ensure accuracy. If all is correct, you can then print your 1099 forms. The 1099s that can be printed are 1099 DIV, INT, MISC and NEC. You find these in the reports section of the vendor list page or by searching in the Tell Me option. These print the information, but not the actual forms. You will still need to obtain the actual forms from your local supplier. I always suggest that you run a few onto blank paper and compare with the actual form to ensure that your printer is aligned appropriately. It is also possible to submit the 1099 tax forms electronically. You would use the Vendor 1099 Magnetic report. This report specifies the 1099 forms that you can export. The information of course is the same as what would appear on the paper copies. This report can be located on the IRS 1099 Form-Box page in Business Central.

Keep in mind that Microsoft Dynamics 365 Business Central may have additional updates with any regulatory changes in the end-of-year updates.

This blog was originally posted on dynamics-discussion.com

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