As if the rules for 1099 reporting weren’t confusing enough, a few years ago the rules changed so that in addition to who you paid, how much you paid, and what it was for affecting whether or not you need to issue a 1099-MISC, now it also matters how the money was paid.
Because the introduction of the 1099-K required third party payment processors (such as credit and debit cards, PayPal, etc.) to report payments to merchants, those same payments should now be excluded from the 1099-MISC to prevent double reporting.
The IRS 1099-MISC instructions, in the section titled “Form 1099-K” state Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.
Don’t worry, you don’t have to issue a 1099-K now. They’re issued by the “payment settlement entity”, in other words, credit and debit card processing companies and other 3rd party payment processors such as PayPal.
How do you you deal with this in Sage 50 (formerly Peachtree Accounting)?
Payment Method is key – When entering vendor payments there’s Payment Method field. If you’ve ignored it in the past, you need to start paying attention to it. But all you need to do is make sure you correctly enter the payment method (cash, check, credit card, etc.) for each payment. If a method you need isn’t on the list, just click the Payment Method link in the Payments window, or go the Maintain menu > Default Information > Vendors. On the Payment Methods tab you can set up as many as 20 different payment methods. You can be general or specific when setting these up. For example you can have separate entries for AMEX, MasterCard, and Visa, or one entry for Credit Card.
1099 Vendor Report – Before printing 1099s, you should always review the 1099 Vendor Report so you can confirm the 1099 amounts. When viewing the report, click the Options button. In the Payments section click on Payment Method and place a check next to each payment method you want to include, such as cash, check, and EFT. Check with your CPA if you have questions about which payment types to include. You can also add a Payment Method column report if you want to by clicking the Columns button.
Printing 1099s – When you’re ready to print your 1099s, you can filter by payment method. In the filter options hold down the Ctrl key on your keyboard while clicking on each payment method that should be included. Then click the Refresh List button near the upper right corner and to review the list of vendors that will get a 1099 before clicking the Print/Email button. The forms will all be printed even though the button says Print/Email.