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Understand 1099s in Business Central: A Step-by-Step Guide

A Step-by-Step Guide to 1099s in Business Central

Managing vendor 1099s in Business Central has become more streamlined with the latest updates. This guide will walk you through setting up, preparing, and finalizing 1099 forms to ensure compliance and efficiency in your year-end reporting.

Step 1: Setting Up and Maintaining 1099s

Activating the 1099 Feature

Before getting started, make sure 1099 reporting is enabled in Feature Management.

Locate the option Enable using 1099 forms to transmit tax data to the IRS, set it to All Users, and confirm activation. Users will need to log out and back in for changes to take effect.

Upon activation, the IRS Forms Guide Wizard will launch. Here, specify the reporting year (e.g., for 2024 filings, enter 2024) and choose Create New Setup to generate the necessary forms and form box data.

Manual Setup Adjustments

You can modify settings such as:

  • Collect Details for Lines – Stores additional transaction data for better tracking.
  • Protect TIN – Masks sensitive Taxpayer Identification Numbers when printing forms.
  • Email Subject & Body – Customizes email messages when sending 1099s electronically.

Defining Reporting Periods

Navigate to IRS Reporting Periods to specify the reporting year and start/end dates. Copy the setup from the prior year to maintain consistency in your reporting structure.

Each type of 1099 (MISC, NEC, DIV, INT, etc.) is assigned corresponding Form Boxes, which define the minimum reportable amounts for each category.

Step 2: Vendor Setup & Preparation

Assigning 1099 Status to Vendors

To ensure accurate reporting, vendors requiring 1099s must be set up properly:

  • Run Vendor Setup from the IRS Reporting Periods page.
  • Enter Vendor No., Form No., and Form Box No.
  • Populate the Federal ID Number on the vendor card.
  • If vendors opt to receive 1099s via email, enable Receiving 1099 and enter their email address.

Propagating 1099 Data

If 1099 codes weren’t assigned before processing vendor payments, Business Central offers a Propagate Feature to update transactions retroactively. However, use this with caution, as it applies the 1099 code to the entire invoice amount, even if only a portion was taxable

  1. To mitigate risk, export vendor ledger entries before propagating.

Validating 1099 Information

To verify 1099 amounts before submission:

  • Review the IRS 1099 Form Documents page.
  • Drill down into vendor transactions to confirm reported amounts.
  • Export vendor ledger entries for cross-checking.

Step 3: Finalizing & Submitting 1099s

Generating 1099 Forms

Navigate to IRS 1099 Form Documents and select Create Forms. You can:

  • Process all vendors or filter for specific ones.
  • Select a particular 1099 form type (e.g., NEC, MISC) or generate all.
  • Replace previously created forms if necessary.

Each form must be released individually before submission.

Submitting to the IRS

Business Central supports electronic submission via IRIS APIs (available in an upcoming minor release). Once submitted, the status will update to Submitted.

Printing and Emailing 1099s

While Business Central does not support printing directly on pre-printed IRS forms, you can:

  • Print Copy B, Copy C, and Copy 2 for vendor distribution.
  • Email 1099s by ensuring vendor email settings are configured correctly.
  • Automate bulk email distribution for multiple vendors at once.

Before emailing, verify that email accounts are properly set up under Email Accounts.

Final Thoughts

By leveraging Business Central’s 1099 features, businesses can simplify their tax reporting process while maintaining compliance. Regularly reviewing vendor data, utilizing the propagate tool cautiously, and validating reports before submission will help ensure smooth year-end processing.

For more Business Central insights, stay tuned for upcoming posts!

About the Author

Asad Karim is a seasoned Business Central Consultant with extensive experience in ERP implementations, system optimizations, and financial process automation. He specializes in helping businesses streamline operations and maximize efficiency using Microsoft Dynamics 365 Business Central. Asad is passionate about simplifying complex financial and operational processes to enhance business success.

Avoid These Costly 1099 Mistakes in Business Central

Execute Accurate 1099 Processing in Business Central

Preventing 1099 mistakes, by ensuring 1099s are set up correctly in Business Central, is a critical step for companies that work with independent contractors and vendors. While the process might seem straightforward, many users encounter costly mistakes that lead to IRS compliance issues, inaccurate reporting, and additional work during tax season. In this blog, we’ll cover the top mistakes businesses make while handling 1099s in Business Central—and how to avoid them.

  1. Not Setting Up 1099 Vendors Correctly

One of the biggest 1099 mistakes is failing to designate vendors as 1099-eligible when setting them up in Business Central. If a vendor’s “1099 Liability” is not enabled and an appropriate “1099 Code” is not assigned, transactions won’t be tracked for 1099 reporting. Always ensure that vendors who require 1099 reporting are properly configured in the Vendor Card under the Payments tab.

  1. Forgetting to Update 1099 Codes Annually

The IRS occasionally updates 1099 form requirements and classifications. If you don’t regularly review and update the IRS 1099 Code assigned to each vendor, you could end up misclassifying payments. This leads to compliance issues and incorrect filings. Make it a practice to review 1099 codes annually before tax season to ensure accuracy.

  1. Failing to Adjust Historical Transactions

Sometimes, businesses realize too late that they forgot to set a vendor as 1099-eligible at the time of payment. If this happens, simply updating the vendor card won’t retroactively apply 1099 tracking to past transactions. Instead, you need to adjust vendor ledger entries manually by updating the IRS 1099 Code and IRS 1099 Amount fields. Business Central allows adjustments via the Edit Vendor Ledger Entries function.

  1. Mismanaging 1099 Thresholds

Not all payments to vendors need to be reported on a 1099 form. The IRS has specific thresholds for different types of payments (e.g., $600 for non-employee compensation). Some businesses mistakenly assume that all payments require a 1099, while others miss reporting because they don’t track cumulative payments correctly. Use Business Central’s built-in 1099 reports to verify total payments per vendor before filing.

  1. Overlooking Data Validation Before Running 1099 Reports

A common mistake is running the Vendor 1099 Information Report without validating the data first. If vendors don’t appear on the report, it often means that necessary fields in the Vendor Ledger Entries are missing.

Bonus Mistake: The Invisible Vendors Issue

A particularly tricky issue is when vendors don’t show up on the 1099 report even though you know they should. This happens because two critical fields—IRS 1099 Code and IRS 1099 Amount—are not properly populated in the Vendor Ledger Entries.

Why Does This Happen?

  • It may result from incorrect setup of the IRS 1099 feature.
  • There could be data inconsistencies in the system.
  • These fields are not easily visible within Business Central’s standard interface.

To check if these values are populated, you need to create a Configuration Package for Vendor Ledger Entries, export it, and inspect the data manually. If these fields are empty, update them accordingly to ensure the vendors appear on the 1099 report.

Need Help with 1099 Processing?

Handling 1099s in Business Central requires careful setup, data validation, and ongoing maintenance. If you run into issues, don’t stress—we’ve helped many Business Central users streamline their 1099 process and ensure compliance.

Contact us at Implementation Specialists Inc. Visit iscorp.biz for expert assistance.

About the Author

Asad Karim is a Business Central Consultant with deep expertise in ERP solutions, financial processes, and system optimization. He has helped numerous businesses enhance their Business Central workflows, including streamlining 1099 processing for compliance and efficiency. Asad works with Implementation Specialists Inc., assisting clients in maximizing their Business Central investment.

IRS Free File option for 1099 filing

IRS Free File for 1099s: A Simple Way to File Smarter

Are you interested in seeing what the ‘IRS Free File’ option for 1099 filing is all about? Check out the webinar or follow the steps below. The IRS Free File program is a great resource.

If you do wish to get registered for the ‘IRS Free File’ option, please do so ASAP, as it may takes 1-2 months to get approved (and your Transmitter Control Code [TCC] mailed to you in a letter).

Therefore, if you plan to use it to file 1099 forms for the 2024 tax year, YOU MUST REGISTER NOW! It is good for two years if you don’t use it, so you can choose to use it this year, or explore with it this year, or simply have it as a backup plan (Greenshades is still an option for you too).

Here are some guided steps to help with the registration process:

To get started, click on the ‘ACCESS IRIS application for TCC’ button in this link.

  • NOTE: Optional to download the tutorial document in the link above, or directly from here: Publication 5903
    1. Sign in with ID.me (or create a new ID.me account)
    2. In the ‘Select Your Organization’ window, click on the ‘Individual’ button.
    3. In the ‘External Services Authorization Management’ window, click on the NEW APPLICATION button and select ‘IRIS Application for TCC (Information Return Intake System (IRIS)’.
    4. In the ‘Firm Information’ window, fill out the Business name, address, phone etc for your Company.
    5. In the ‘Application Details’ window, in the ‘Role section in the middle, click ADD.
      • Add a role for the ISSUER type.  Continue.
      • In the same window in the ‘Form(s)’ section at the bottom, mark the Transmission Method for PORTAL.
    6. In the ‘Authorized Users’ window, click ADD.
      • Add 2 users with the Role of ‘Responsible Official’.  These should be the people that can approve a Terms Of Agreement contract.  (only add 2)
      • Then add the same 2 users again with the ‘Contact’ role.  (Add as many contacts as you would like. You can add 2-50 contacts,)
      • Note: the same two users will be listed twice.  (One with the Responsible Official role and one as a Contact.)
    7. In the ‘Application Summary’ window, review the data.  Use the tabs along the top if you need to drill in to change any information. Notice the TCC section at the bottom (this is where the code will be when your application is  approved.)  Click Continue.
    8. In the ‘Application submission and Terms of Agreement’ window, each Responsible Official will need to log in to their account, and enter the PIN # they set up and mark the checkbox to accept the Terms of Agreement, and click SUBMIT.
    9. You should receive a letter within 45 days that includes your Transmitter Control Code (TCC). Or log in and you should see it at the bottom of the window in step 7 above.  If a code is there, then it has been approved and you are set with the registration process.
    10. Then when you are ready to file, you can log in and either hand-key your 1099’s in or you can upload a file (up to 100 in a file) to the site and submit. If you wish to use a template, we can help you to set up a Smartlist where you can export the data from Dynamics GP. Look for more information/webinars available in the Dec/Jan timeframe on the actual submission process.

Don’t forget that the IRS Free File option allows you to handle multiple 1099 filings efficiently.

If you get registered now, please let us know so we can be sure that you receive any additional information we share on this process.

Boost Your Productivity

We encourage everyone to take advantage of the IRS Free File registration while it is available.

Please bookmark these links to see our upcoming webinars, or view any past webinars:

Upcoming Webinars

Webinar Archive

Why your compliance solution needs an ROI study

Why your sales tax software needs an ROI study

In today’s business environment, efficiency is key, especially as it relates to tax compliance management. Returns, filing, and keeping up with complex and changing tax regulations all can be time-consuming and burdensome for the teams handling these tasks manually. What’s more, sales tax compliance software can reduce your business’s risk of noncompliance, saving you money on hefty fines and penalties. Having a sales tax software solution is practically a given for businesses that want to get ahead — and stay ahead.

Whether your company manages tax compliance manually or with software, it’s important to know how much the process is actually costing you, and areas where you could be more efficient. That’s where a return on investment (ROI) or a Total Economic Impact™ (TEI) study comes in.

How often are businesses measuring the effectiveness of a solution?

Maybe businesses look only at the overall cost before signing a contract or during contract renewal time each year. Some businesses might even renew without calculating because they know their tax solution is making their jobs easier, and don’t look further than that. Plus, finding the total economic impact of a solution can be a difficult thing to calculate, and your team has more important things to do than dig into a cost-benefit analysis of a solution you’re already using.
It’s a good idea to measure how effective your solution is annually, or at least every few years. Business needs and budgets change, and it’s much more efficient to address a problem in real time than to go years with a solution that isn’t the right fit for your business.

Your solution solves a problem, but at what cost?

Look at it this way: Perhaps you invested in an expensive lawn mower to save time when cutting the spring grass. It saved you plenty of time, but you also learned you don’t really need to mow the lawn that often. Now, when considering the cost of gas and maintenance, you’re unsure if the initial time saved was worth the investment. So, you found a local service that will mow your lawn only when you need it for much less than the price of the mower. As a result, you’re still saving time and effort with a lower upfront cost and less ongoing expenses.

Determining the return on investment for your sales tax solution is similar. You know your sales tax software is supposed to be saving you time and helping to save you money, but is it doing what it says it will? On top of the time saved, businesses should also be aware of the other money they’re saving by avoiding audits, noncompliance, and many hours of manual work.

Is your sales tax solution in it for the long haul?

This is where the graphs and charts come in. Let’s say a software solution is a big upfront cost but the maintenance costs are basically nonexistent, or maybe it looks like a bargain at first but the solution is finicky and requires a lot of manual labor to get it to work right. It’s important to determine the economic impact of these solutions over the long term; how much time and labor do they actually require?

Can your sales tax software grow with your business? A solution that can integrate with existing systems and integrate with future ones could help prevent future friction and provide a return on investment year after year.

How an ROI study works

A researcher like Forrester Consulting takes a look at real customers and creates a composite organization to calculate what customers are getting out of a solution. They run the numbers and create a Total Economic Impact™ study based on their findings. A tax solution software ROI study can determine how much time and money can be saved on tax compliance tasks like:

• Filing tax returns
• Managing exemption certificates
• Preparing for audits and avoiding audit penalties
• Hiring third-party tax experts
• Researching taxability rules, looking up rate tables, and keeping your research up to date

A study can also find unquantified benefits, like the ability to reduce sales tax liabilities and shift focus to business needs rather than tax-decision making.

Automation can help

If you’re managing sales tax manually, you know how costly and time-consuming those processes can be, and that’s before adding in the potential cost of human error in the form of a missed tax update or miscalculated rate. Automation can enable businesses of all sizes to stay compliant and avoid costly mistakes and fines. Plus, it can empower company leaders to focus on driving successful business outcomes rather than grappling with tax compliance complexities.

Ready to see for yourself?

So what does an ROI study look like? We commissioned a study from Forrester Consulting to determine the Total Economic Impact™ (TEI) of Avalara on the companies who use our solutions. Read The Total Economic Impact™ of Avalara for yourself to find out how Avalara helps customers save time managing, streamlining, and filing tax returns; eliminate hours spent managing exemption certificates; gain efficiency in audit preparation; and save money spent on third-party tax experts.

Want to learn more? Tune in to the webinar to hear from Forrester and Avalara experts as they discuss what they learned from the Forrester Research TEI study.

2021 sales tax changes report examines new business trends and shifting tax landscape

Repost from Avalara

The COVID-19 pandemic has affected how we learn, shop, socialize, travel, and work. That, in turn, is influencing tax policy.

After employees across numerous industries transitioned to working from home, states struggled to determine the tax implications of a newly remote workforce. As ecommerce sellers struggled to keep up with a surge in sales, states that tax remote sales benefited from a steady source of sales tax revenue. When education and events moved online, the question of how tax should apply to virtual events arose. And so on.

Our 2021 sales tax changes report examines emerging trends in business and tax. As always, it should serve as a resource for business leaders and tax professionals seeking to better understand the ever-shifting tax landscape.

Highlights from the 2021 sales tax changes report

Ecommerce is more essential than ever.

With social distancing measures in effect throughout much of the country and world, ecommerce has become the preferred way to do business. Companies with an established online sales channel were well-positioned to meet the sudden surge in demand. Many brick-and-mortar businesses lacking an ecommerce channel suffered and scrambled to create one.

Growing BOPIS sales underscore the need for robust POS systems.

Selling online enables brick-and-mortar stores to offer buy online, pickup in store (BOPIS) services, which have grown dramatically since the onset of the pandemic. While a great way to merge bricks with clicks, BOPIS can complicate inventory tracking, logistics, and sales tax compliance. Having a point-of-sale (POS) system that can handle that complexity is therefore key.

Online sales tax revenue has been a boon.

During the third quarter of 2020, nearly $1 out of every $5 spent came from online orders. States able to tax remote sales benefited: Sales tax collections from online retailers and marketplaces have been a steady and even growing source of revenue in much of the country throughout the pandemic.

Florida and Missouri are likely to adopt economic nexus in 2021.

Only two states with a general sales tax don’t tax online sales by out-of-state sellers via economic nexus. Florida has been hit hard by the drop in in-person sales and tourism as well as its inability to tax remote sales. Missouri has fared better but would still gain from requiring out-of-state sellers to collect and remit sales tax. Lawmakers in both states have already introduced economic nexus legislation ahead of the 2021 legislative sessions.

Collection requirements for marketplace facilitators are expected to grow in 2021.

2021 could also be the year Florida, Missouri, and Kansas make facilitators, not individual marketplace sellers, responsible for collecting and remitting sales tax on third-party sales. Marketplace facilitator laws are already in effect in most states.

Marketplace sellers could come under scrutiny for past sales tax.

It’s common practice for marketplace sellers to store inventory in warehouses and fulfillment centers owned or operated by marketplaces. California and Washington are two states that have found marketplace sellers liable for past sales tax because of such inventory. They insist the inventory gave out-of-state marketplace sellers a physical presence in the state, and therefore an obligation to register then collect and remit sales tax, before the marketplace facilitator laws took effect. Other states could pursue a similar path in 2021.

States could crack down on unregistered sellers.

Most states have been slow to enforce economic nexus, understanding what a huge compliance challenge it represents for some sellers. But now that more than 2 ½ years have passed the since Supreme Court of the United States effectively granted states the right to tax remote sales in South Dakota v. Wayfair, Inc. (June 21, 2018), the patience of states is waning. Remote sales tax collections have been surprisingly resilient during the pandemic, so states in need of more tax revenue may turn a scrutinizing eye on unregistered out-of-state sellers making sales in the state.

Supply chains and tax compliance will be challenged by Brexit.

Once the U.K. officially breaks from the EU Customs Union and VAT regime on January 1, 2021, many U.S. sellers and marketplaces will have to be U.K. VAT registered or their goods will be blocked at the U.K. customs border. This is a Wayfair moment for Britain, and it will have an enormous impact on many businesses.

Virtual events could trigger new tax policies.

The growth of ecommerce caused states to push for the right to tax remote sales. The growth of virtual events could have similar consequences. The longer businesses host online conferences and virtual events rather than in-person events, the more states could look to tax these transactions.

Manufacturers expand into new channels.

With face-to-face customer contact on the wane because of COVID-19, manufacturers are rethinking channel strategies. To better compete, some are bypassing normal wholesale and distribution channels so they can sell directly to consumers or other businesses. And this, of course, has tax implications.

Software companies can trigger sales tax nexus in many ways.

State sales tax rules surrounding software are often incredibly nuanced, and since software businesses tend to have customers nationwide, they can be subject to tax laws in numerous states. It’s common for software companies to engage in up to nine nexus-triggering events, from adding subscription-based models to online selling.

The 2021 sales tax changes report covers these issues and more. Get the report.

New IRS Withholding Calculator for completing new W-4 forms for 2018 Tax Year

The IRS has released a new W-4 form and an updated W-4 Calculator. Reviewing and completing a new W-4 form is encouraged to do every year, even more important this year, because of recent changes to the tax law for 2018. The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.

If employees choose to adjust their withholding, they can now complete and submit the revised Form W-4 to their employer.

The IRS also posted new Withholding Calculator Frequently Asked Questions.

“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” Acting IRS Commissioner David Kautter said in a statement.

The IRS is not Requiring employers to obtain new W-4s from their employees, however it is recommended employers notify employees, using the W-4 calculator and if necessary, submitting a new W-4 to their employer’s payroll department is encouraged for a more accurate withholding of taxes for 2018.

Links:

2018 W-4 Form https://www.irs.gov/forms-pubs/about-form-w4

W-4 Calculator https://www.irs.gov/individuals/irs-withholding-calculator

W-4 Calculator Frequently asked questions https://www.irs.gov/newsroom/withholding-calculator-frequently-asked-questions

Changing Income Brackets https://www.shrm.org/ResourcesAndTools/hr-topics/compensation/pages/fica-social-security-tax-2018.aspx#article-section-8

 

I hope you found this information useful!

-Margi Jandro, Consultant with Implementation Specialists