I Got 1099 Problems But a Workflow Ain't One

Nancy McClelland and Rich Kane join us to chat about ways to make 1099s a part of your monthly client services using Keeper.

QB Power Hour is a free, biweekly webinar series for accountants, ProAdvisors, CPAs, bookkeepers and QuickBooks consultants presented by Michelle Long, CPA and Dan DeLong who are very passionate about the industry, QuickBooks and apps that integrate with QuickBooks.

Watch or listen to all of the QB Power Hours at https://www.qbpowerhour.com/blog

Register for upcoming webinars at https://www.qbpowerhour.com/

00:00 Introduction and CPE Credit Instructions
01:09 Welcome to 2025 Power Hour
01:56 Meet the Panelists
06:56 CPE Credit Details and Housekeeping
10:28 1099s: An Overview
18:53 1099 NEC and MISC Fundamentals
30:29 1099 Reporting and Payment Methods
33:41 1099K and Reconciliation Challenges
34:42 Extension Options for 1099 Filing
35:47 Meeting the NEC Deadline
37:25 Handling Multiple 1099 NECs
41:10 Excluding Payment Methods for 1099
52:39 IRS 1099 Matching and Notices
55:07 Effective Workflow Habits for 1099 Season
01:04:29 Closing Remarks and Resources

Transcript

Dan DeLong: 0:30

Welcome everybody to 2025. Another great, great day to be alive, to be alive when you consider the alternative. So we have a star studded, cast with us here, joining us here today for for our first new power hour of 2025. I got. 1099 problems, but a workflow ain't one. So we'll go around the go around the horn here, introduce everyone. And we'll kick it off cause we've got a lot of. Stuff to cover and a short time to get there. So this is like the smoking, the bandit version of QB power hour today. my name is Dan DeLong owner of Danwidth and school bookkeeping worked at Intuit for nearly 18 years. Co hosting today, as well as the workshop Wednesday over at school bookkeeping, doing other things as well. So spot.

Matthew Fulton: 1:33

Matthew Fulton here. My friends call my spot. I am the co creator of QB community, live Facebook group, founder of Parkway business solutions, and happy to be here with all these amazing people to talk about all our 10 99 problems.

Nancy McClelland: 1:48

Hi everyone. I'm Nancy McClelland. Most of you know me as the dancing accountant, and I'm so excited to be here today is my first QB power hour on this side of the camera, and I'm really geeked about that. I have run my own CPA firm for the past 23 years, a hyper local firm in Chicago, Illinois. Have an award winning blog and an MSN column. I'll actually be sharing an MSN article that I wrote on 1099s for you to make your life a little bit easier. And my big passion project is that I run ask a CPA, which is a membership community for bookkeepers who want to ask a CPA questions that they can't for whatever reason, ask their own clients tax repair. And yeah, I'm a dancer too.

Dan DeLong: 2:33

So I need, I do need to ask you which came first, this is a chicken or the egg, dancing or accounting or, Oh, definitely

Nancy McClelland: 2:41

accounting. I, actually didn't become a dancer until 12 years ago. It was yeah. Yeah. As a matter of fact, my company used to be named Nancy McClelland LLC, which was just riveting, exciting name that really says so much about me. And a client who saw me at a dance performance at a pro bono client of mine, a park in our neighborhood. I was in my full go 1960s go regalia and I walked up and saw her there with her kids picnicking and she said, look kids, it's the dancing accountant.

Dan DeLong: 3:19

And then it's stuck,

Nancy McClelland: 3:20

right?

Dan DeLong: 3:22

I actually was a dance mom, raising the kids,

Nancy McClelland: 3:27

oh my gosh, I had no idea. We got so much to talk about.

Dan DeLong: 3:30

Yeah We don't want to, we don't want to take that time now. We'll do that offline because we got to talk about Rich. Rich, the dueling CPAs today Nancy and Rich are going to be.

Rich Kane: 3:43

And we're both dueling from, based in Chicago. We've got good representation here. Now, I'm not like Matt. I don't want to go by a nickname because my nickname would be Dick and it's got very negative connotations. So we're not going to go that route. I'm a CPA, I'm a long term pro advisor and I've been, we're going to offer some wonderful 1099 tips for everybody and try and make it humorous and funny and enjoy this wonderful topic.

Dan DeLong: 4:17

And, I got to say Rich was one of my favorite customers when I worked at Intuit to talk to, right? He was always very. What's the best way to describe it? He was always very gracious, even when because when you have a problem with QuickBooks, it's emotional, right? The last thing you want to do when When you're working inside of a tool, whatever it is, have an obstacle to the, to that solution, whatever it is that you're trying to do it. If you're trying to do 10 99s and there's a, there's an error, as we see in the Facebook group, known issues, as they, come up we call them undocumented program features. He was, a great, one of the greatest people to talk to because he understood that The people on the phone were typically just the messenger and he never took it out on the messenger. So even, when there was a problem, he was very gracious to that. And I always loved to, See his name pop up on the screen pop. Okay, this is going to be a great conversation. I'm not going to

Nancy McClelland: 5:29

notice that Dan cannot say any of those things about me. So and then that's, absolutely true. I am not that person. So bless your heart, rich. Somebody has to be the good guy. Good cop, bad cop, right?

Matthew Fulton: 5:42

And I'm also hearing there is ways to flag people behind the scenes as good person to talk to and not a good person to talk. I always felt it had been flagged that way. But anyways,

Dan DeLong: 5:51

there was there was a guy that worked there and you probably have talked to him Rich and Nancy Tony Calabrese. He ended every, call that said, you're my favorite pro advisor says right here on my nose. Great guy. But a little bit about the QB Power Hour it's every other Tuesday at 12 noon Eastern. The upcoming webinars, as you saw from the, little intro, we are now doing CPE credit with it's the earmark app. We will have poll questions and things like that, but that doesn't count for attending the live the live webinar like today. When you do live CPE credit we will have poll questions, but five to seven days after the live webinar They will create a course for you In the earmark app that you can go into take those take that quiz And that's what gets you your CPE credit. We won't be issuing CPE credit with our friends at makers hub that we're doing the live ones But the good news is that every Kibbe Power Hour will be eligible for CPE credit, just not on the live one, it's going to be in the five to seven days after. So once we have our channel established we will continue to socialize that, so you can always pop into the QB Power Hour channel on EarMark, take your, quizzes after attending, or you'll be able to replay if you forget what we talked about I, have a goldfish brain forget what I did just a second ago. You can review it, take the quiz, get your CPE credit through, earmark if you do need the slides, the recordings, the podcast those types of things, you can always go to qppowerhour. com to watch resources, and I do believe we are socializing the handout, no, I am doing it here on the, stream but the link for the handout for today, we'll put those in the chat. So I already talked about the CPE sessions. If you want to do the QR code to get the, app, there is a free option. Nancy you, do yourself on your mark as well for free. You can do one CPE a month or something like that. If you do know about. Yeah, I don't know. I don't

Nancy McClelland: 8:24

remember the specific. I don't remember the specific rules because I think that what they do is so amazing that paying for it is just, it's like right tool, which, oh, by the way, I'm representing today, right tool. There are certain, things out there where I'm just like, they're doing such great things that I will use the paid subscription just because I want to thank them. I just want them to continue to exist. But I do believe that you can get it. Between one and three CPE per month for free through earmark. You do have to sign up for an account, but they have unpaid, versions of it. Yeah.

Dan DeLong: 8:59

All right. And a little bit of housekeeping. So if you have specific questions about 10 99s, we put them in the Q and a, because it makes it a lot easier to see those as, we're scrolling by because if you put just stuff in the, comments, in the chat that will, quickly, scroll by and if we're not catching it. We don't see it. So if you have specific questions for the topics that we're talking about today, please put them in the Q& A. We have just general things to say. Please put them in the chat, in the comments. And we have the, handouts available on the slides. We also do have the QB Power Hour store. If you want to check out some flag there about the QB Power Hour. Always can do that. So what's on the agenda today? we'll be talking about. In general 1099s really shouldn't be this hard and I was talking to Nancy before before the webinar that it was super easy not, too long ago. It was really just, there was one form that QuickBooks did. There was a sweet

Nancy McClelland: 10:03

spot. Yeah, there was this, it was really hard years ago when you had to do everything. manually and you had to run to the post office right before midnight on the day that they were due to the IRS, right? That was awful. And now things are terrible because there's so many different payment methods and everything's so confusing, but there was this amazing sweet spot that lasted for I don't know, I feel like seven years or something where it, it wasn't miserable, but it is. I don't know. The envelope, trying to find the envelopes. Oh, gosh. Oh, those perforations. Oh, gosh. Yeah, no. From when they started. Three

Dan DeLong: 10:40

forms a page or four forms a page or whatever. Yeah.

Nancy McClelland: 10:45

Oh, God. And when the windows didn't line up. Yeah. Those were the really awful days. What we have today is at least better than that, but it's worse in different ways. I don't know if you saw that I stuck that into this slide. You just had the 1099s should not be this hard and I'm the one that put, but they are, I snuck that in there.

Dan DeLong: 11:02

Always appreciate your your color commentary. All right, but we'll with Rich and we'll be going through the 1099s and W9s fundamentals because it's always good to reframe or rebase yourself, on, What am I, in for this, season? Is there any new changes, those types of things, and then how to streamline that process and then we'll have some Q and a, as we go through a session here today, we'll start our first polling question is a two parter. Do you assist your clients? I got to hit the launch button. Do you assist your clients in preparing 10 99s? And if so, what do you use to help prepare them? And I don't know, did Spot, were you able to put the link for the handouts in the You know what? I didn't get that one.

Matthew Fulton: 12:03

I'll, get on that right away. Just one second.

Nancy McClelland: 12:07

So while this is up I see it says hosts and panelists cannot vote and I'm really bummed about that because I love, polls. But it's interesting because that second one says, what do you use to help you prepare and file them? And one of the options is keeper, which is what we use and, love. And I'll be speaking to that a little bit. Okay. Later, but I want to clarify for anybody who is confused about that answer. You don't actually file 1099 through Keeper. You use Keeper to assist you. It gives you a report of what 1099s you should be filing and the information you would need for it. It does sync with QBO. And then from there. You could either use QBO to prepare them. You could. There's an export for tax 1099 and there's an export for track 1099, which is what we use. So I just wanted to clarify that.

Dan DeLong: 13:03

All right, I'm sending Kathy the slides and now everybody should be able to see which

Nancy McClelland: 13:08

is similar. I'm going to respond to what Roberta is saying that they use both QBO and tax 1099. Again, a lot of these, you can use QBO and file them through QBO. You can use, QBO and file them through tax 1099 or track 1099. You can use keeper, which syncs with QB. There's so many options, which is why they're hard, right? When you.

Dan DeLong: 13:32

And there's so many different iterations of different companies and they all have a similar website, right? Is it track 10 99 com or ten nine com or 99 tracking. I don't even know if that exists, but it, there's somewhere it can be

Nancy McClelland: 13:53

confusing it.

Dan DeLong: 13:54

Yeah. Yeah. It, you could definitely confuse which service it is because the, names are so, similar. I just dropped

Nancy McClelland: 14:04

a link to the Keeper Prepare 1099's help center in in the zoom chat, spot when you have a second, no hurry, if you can make sure to share those to the other socials because actually their help section is, really comprehensive and lovely. So really helpful.

Dan DeLong: 14:23

Go ahead and launch the share the results here. So definitely 89 percent of the folks on the call here in the zoom answered that they do assist. So I appreciate you taking an hour out of your day to attend this in the midst of helping your, client prepare 1099. But, we typically do things when we have to. So those deadlines are fast assuming. Yeah, 1099s really shouldn't be this hard like determining and tracking which 1099s, which clients want the 1099s prepping, identifying 1099 eligible vendors, determining vendor entity types, because that's a Okay. That's something to consider defining what constitutes a service, determining who paid for the service, reimbursement, calculating 1099 eligible year to date spending, dealing with vendors who refuse to fill out that W 9, never happened, missing a 1099 vendor because it was an unusual account, waiting until the year end to identify all those vendors and collect those 1099s,

Rich Kane: 15:42

We're tracking it all in a CSV.

Dan DeLong: 15:46

Thoughts about this, Nancy if you're in your opinion,

Nancy McClelland: 15:52

it doesn't have to be this way. It doesn't have to be this way.

Dan DeLong: 15:57

I'd like to ask Dwight. Is that Dwight with the fire from the officer?

Matthew Fulton: 16:03

Yeah. And an ostrich it looks like also. Question for people real quickly in the chat that are watching this. What month do you guys start this whole process of 1099 ing? We'd love to hear when everybody gets started each time.

Nancy McClelland: 16:19

And actually, while people are thinking about that I, want to mention something far before we started using Keeper, we transitioned to making 1099 part of our year long year round workflow. And I feel like no matter, it's not the technology is an important piece of this puzzle. The fundamentals that Rich is going to go over are an important piece of this puzzle. But, if. Your first as you're closing January, you're identifying potential 1099 vendors and collecting W 9s at that point And you're tracking them throughout the year. Keeper makes that very easy But a couple of years before we started using Keeper We you know came up with some reports in QBO that our team was reviewing every single month as part of the monthly close and that Changed our lives completely. So I would say if you take one piece of information away from this It's your biggest. Your biggest bang for your buck is to start making this i'm seeing a lot of people saying december Somebody said tomorrow which is cracking me up. If you're starting tomorrow for 2025, 10 a nine preparation, then that's awesome.

Matthew Fulton: 17:40

They'll still get done. We've got what 24 days, 23 days. Sorry, not including it's actually less than that, depending on the app, but I'm sure you guys will talk about that.

Dan DeLong: 17:51

Yeah. So let's, speaking of the fundamentals, let's turn it over to rich here and talk about these 10 99 fundamental. So I'm going to be driving the slides, right? So whenever you say.

Rich Kane: 18:05

People

Dan DeLong: 18:05

Ask to the next slide.

Rich Kane: 18:07

Let's take it to the basic fundamental. What is a 1099? And the best way I can describe it. You are tattling to the IRS that somebody you paid somebody some money. That's probably the best way I could tell it. It's an infant. It is. It's an informational return. You're letting the IRS know that somebody you paid somebody some funds and they We'll put it into their system and their expectations are is they will see it on the recipients. Tax return. That's the fundamentals of it. So it's how do we get the information? How do we tattle correctly? And you're going to get all kinds of variations in there but the first thing that I tell my clients if it's an individual in LLC Corporations do not get one S corps don't get one but attorneys do for some reason they have singled out attorneys And we're going to talk about, I

Nancy McClelland: 19:12

said,

Rich Kane: 19:14

the next one is going to become as accountants. And so far we haven't, but, it's funny you, in that last slide, you said when do we get the information? We're always begging our clients in January. Who was this person? Can you get their address? Can you get their tax id number? Oh, they're from another country. They're gone. I can't find them So there is some ramifications if you get audited and they find that you didn't declare it on the Positive side, get the tax ID number before you write the first check or the first payment you make. At least you have their tax ID number. Is it 100 percent correct sometimes? No, but at least we've got some number that we can say that we've at least tried to get it. Now, as you look here on the screen, there's all these variations of tattling to the IRS and you can see, and what they do is they put it on your record in your transcript. They're going to be expecting to see it somewhere in your tax return. So if you'd want to blow it off, the IRS will know. Now the rules are 600 for an NEC. And I hate acronyms. So NEC stands for non employee compensation. That's one of the most common ones that people, outside contractors, they dread. They don't want the IRS to know because they don't want to have to report it. Sorry. You get all these variations of it. However, if the client wants to deduct that expense on their return, they need to give them a 1099. Now, some I guess I get is office cleaning. The people come and they do the office cleaning. So you pop them you give them cash out of the petty cash fund. Technically you're using that as an expense. You do need to get their address, their tax ID and issue the 1099. Anyone that's made over 600 will go on to the NEC, and the other common one that we see is the miscellaneous ones. And really the difference between the NEC and the miscellaneous ones is if you're on an NEC, you must also pay self employment tax on those amounts in that 1099. That's Social Security and Medicare. If it's on a miscellaneous form, you do not need to pay the self employment tax. So Dan can, advance to the next slide. Can

Nancy McClelland: 21:53

I'm sorry, tax preparer here, I, would not, say, if it's on an M, if it's on an MISC, you do not need to pay self employment tax. I would say it's a lot less tax. Likely, but there are definitely instances where you might, for example, receive royalties. And if you receive royalties for intellectual property that you've created, for example, you're an author and you're receiving royalty and you file it as Schedule C, that would go on your tax return. So I just got a thing.

Rich Kane: 22:23

I'll give you that one.

Nancy McClelland: 22:24

Okay. I appreciate it.

Dan DeLong: 22:26

Okay. What I'm hearing is never always is not a thing. With taxes.

Nancy McClelland: 22:34

With taxes. The answer is always it depends. Yeah, always it depends. Now the screen you're looking at right now, I'm sure all of you on this call are familiar with form W 9 but do you see that little thing that's popped out in the chat? The lower right hand corner there. Those are a couple of the screens from within Keeper that is, I'm not going to go through full demo or anything like that, but when we're in Keeper, we get a notification that says, Hey, you have added new vendors since last month's clothes. Please take a look. Some of these might be potential 1099 vendors. They might not have gone past that. They might be a corporation who knows? They're just saying, Hey, maybe, and you go and you take a look. And if you need to request if it's AT& T, you say, no, they're a corporation. I don't need this. Don't ever remind me about them again. But if it's somebody that you need to request a W 9 for, you can actually do that. From within the system, what as long as you obtain the vendor's email address from your client, you can then request it from within Keeper and they can fill it out. The vendor can fill it out and right there. It's an electronic thing and it will create a full W 9. They sign it and everything and it syncs up. to QBO. So even if you don't use the export from Keeper to prepare your 1099s, this is just a really nice way to get those W9s and get them attached to the vendor record in QBO.

Dan DeLong: 24:16

And there was a question,

Matthew Fulton: 24:20

go for it Dan, I think we're doing the same thing,

Dan DeLong: 24:22

sorry. Kathy asked if you could clarify corporations no for C corp, yes for S corp, or? No,

Nancy McClelland: 24:31

no, corporation. And then what about LLC

Dan DeLong: 24:33

that isn't S corp or partnership?

Nancy McClelland: 24:35

So no corporation of any kind, and that would mean C Corp, it would mean S Corp, it would mean non profit, it would mean cooperative, it would mean, housing association in most states. Anything that is, was formed as a corporation or, to the other point that she made, has a corporate election. So if you are, as we are, a single member LLC, and we have made an election through Form 2553 to be treated as an S corp. We are a corporation for these purposes. So anyone who is a corporation of any kind or who has elected corporate tax treatment. Thank you for clarifying that

Dan DeLong: 25:19

with the exception of attorneys

Nancy McClelland: 25:21

because they can't be trusted.

Dan DeLong: 25:28

Okay, so rich. Okay, bring us back to this form. Any C. Here's your NEC

Rich Kane: 25:34

non employee compensation, box number one. That's the amount of services that you have rendered. Now this is supposed to be just for services. Now if you paid somebody some, reimbursed them back for expenses, generally you're able to, in your accounting software, you're able to say, office supplies or supplies is not going to go on to the 1099 form. It's only supposed to be for services, not for any other in what I call incidentals. Also on here in box one is where you would put attorney's fees, For doing normal legal work, so they, you have an attorney, he reviews a contract, he does an employment agreement, he reviews, some documents you have in his normal everyday, of course, of doing legal work. Legal work that goes in box number one. Now if you're paying an attorney to settle a case for you, one of those attorneys that work on personal injury and you're paying the attorney to the settle a case. That will not go on the NEC form. That will go on the miscellaneous form.

Nancy McClelland: 26:57

And if I can clarify, if you're paying the attorney, you're going to want to use the NEC. If the attorney is receiving settle settlement from the case, so like maybe the court gave you the money. And you are paying it normally the court will pay the attorney directly and you won't have to worry about this but every once in a while, you'll receive the settlement funds and you need to pay the attorney their portion of it. That's what rich is referring to here so very unusual situation.

Rich Kane: 27:25

But

Dan DeLong: 27:26

it happens.

Rich Kane: 27:27

MISC form. Now the MISC form that's by, let's see, I'm trying to see here where it says the legal fee. Box 10, gross proceeds paid to an attorney is what we were just talking about. In box one, if you pay rent and you have a landlord and you're paying the rent to a, corporation here, I believe all rents you're saying no corporations for rents.

Nancy McClelland: 27:54

Nope. No corporations. Don't have to worry about it. So if

Rich Kane: 27:57

you rent from an LLC or you rent from an individual, you will need to get your rent in there and send them a 1099 form.

Nancy McClelland: 28:09

So this would be a situation where I would request a W 9 because there are a lot of folks who have LLCs and there's just no way for you to know whether they have a corporate election or not. But for rentals, most folks choose not to be a corporation. So I find that this is one of the biggest mistakes that people make is that they're not reporting rents on the MISC. It's, it happens a lot. And also let's admit it. Landlords hate to actually declare everything that they make, and they are some of the hardest ones to get the W 9s from. So I have a little trick that I use, which is I have language that's actually saved internally in our document that all of our team members have access to. And the language basically says something like, Oh, I'm so sorry. I understand that you don't want to file to prepare the W nine for us. But if you don't, we have to submit the 10 anyway, with the box checked that you refused to give us your tax ID number. And that usually triggers an audit. And none of us want that.

Rich Kane: 29:15

Correct.

Dan DeLong: 29:18

Couple questions. Do you report retainers paid to attorneys or does that go?

Rich Kane: 29:31

Yeah, normal course of business with an attorney goes on.

Nancy McClelland: 29:34

Oh, actually, I'm just now realizing what that question really is. You're saying is this cash or accrual, right? Because the retainer would normally be sitting on your balance sheet in prepaid expense because it hasn't been used up yet. Yes, because all 1099 forms are cash. Basis. So if you paid it to them, same with prepaid rent. If you paid it to them, it goes on the 1099 regardless of whether it has been earned by them or not. I'm thank you for that's a great question.

Dan DeLong: 30:03

Yeah. So when is it not needed?

Nancy McClelland: 30:07

So this is one that I, love this question because this is where 1099problems. io, which is one of my favorite websites this time of year Jennifer Diamond, who I think I saw pop up a couple of times in the zoom chat. She has gone so far into the weeds on this question that occasionally I joke that it's hard to find her. Because she just lives in the weeds of the payment methods question and this is this is The main point that she tries to make, which is instead of deciding when you've got a payment method where NEC is needed, think of it as the other way around. If the payment is reportable on Form 1099 K, which means a merchant services company, like credit and debit card company, or anybody doing third party electronic payments, Some forms of Venmo, some forms of PayPal, etc. and so on. If they are reporting those receipts on Form 1099 K for these services that are rendered, then It is something that you do not have to use NEC to report. And so if you look at it, for me, that was like a game changing perspective. Instead of being like what counts for NEC? What kind of payment methods count for NEC? Find out if 1099 K is being issued by whatever platform you're using. And if so, you're off the hook for the NEC.

Dan DeLong: 31:42

Yeah, we'll talk about what gets excluded and how QuickBooks determines that. Hopefully if we have enough time. Time here. So let's continue on here because this 1099 K is relatively new to the whole 1099 shenanigans, and I think that's what that's maybe a trigger event that started to make this more harder for people who are preparing them is the excluding those certain types of payments because now 1099s are created by somebody else For something that you used to, provide,

Rich Kane: 32:22

remember is you only want to be tattled on once. You just if you, if it's the 1099 cave, because it's a, you use a credit card or a payment platform. If it's on the 1099 K, and you. Don't remember that or you don't think and you put it on an NEC, it's going to get into the IRS two times and they're going to be expecting both of those. So be careful. So you only get tattled on once and you only have to be concerned one time rather than two.

Nancy McClelland: 32:57

Something I want to briefly mention about the 1099k is that you do you, you are going to have to deal with this as bookkeepers. You're going to have to deal with this on the other side of it as well, because your clients are going to be receiving 1099k and there can be a lot of challenges. With reconciling that 1099 K against the revenue line on your profit and loss because everything's included in 1099 K all of the receipts. So it's got things that tips payable gift cards purchased, but not used yet. It's got one of the biggest ones is sales taxes go into that total. It's just, it's awful. It's a really terrible, frustrating form. Go ahead.

Rich Kane: 33:42

All correct. Yeah. Tips, restaurant tips go into the 1099k. You can't really tie out on your sales because you're not including those items. It's just. Very

Nancy McClelland: 33:54

controversial. Lots of challenges there.

Rich Kane: 33:56

Yeah. Okay.

Dan DeLong: 33:58

So if you're not getting to the deadline there is an option to extend it. You can file an extension form because you

Rich Kane: 34:02

haven't filed your 1099s. So if my recollection It's my

Nancy McClelland: 34:10

understanding, Rich, that we, this is not actually something that we're able to do in most situations. There are very specific 1099s that this applies to. And so I would be really careful with this form and look up whether you actually qualify for the extension or not. It's not one of those things like tax returns where you get an automatic, yay, you don't have to have filed your 1099s yet. So I would, look closely at the instructions for this form before deciding that you don't need to worry about that January 31st deadline. This is not as, this is not as all encompassing an extension as most people might think. I didn't see this in the slides and, didn't catch it in time. Sorry,

Dan DeLong: 34:56

audit the audit of the slides.

Rich Kane: 34:58

Yeah.

Dan DeLong: 35:00

All right. Let's talk. Yeah, talk about let's talk about meeting that deadline. So we don't have to worry about the extension.

Rich Kane: 35:11

So the, NEC forms are due to the recipients must be postmarked by January 31st, unless that's a Saturday or a Sunday, then you get a little boosting of a couple of extra days. But the 31st is the NEC of January, and you're supposed to send that in. And the reason for this is to combat fraud. The sooner that the IRS gets notified of it. The sooner that they can be aware of it, and it's not lingering around. The miscellaneous, they give you an extra month for till 228. So that was the reasoning behind getting that out. And you're right, Nancy, several years ago, it was never this hectic, it was always February. Then they pushed in the January date for the NECs, and we're scrambling to get all this stuff out.

Nancy McClelland: 36:05

The deadline's actually the end of March if you're e filing and most of us are required to e file because our clients usually have more than 10. And if we as a firm are filing for more than one client where are usually required to e file. And the deadline for MISC and many of the others is actually the end of March if you're e filing, the end of February if you're paper filing. But oof, that NEC date being the 31st of January, that is where everything changed. That's when everything got so much more stressful. now I wanted to mention here that you or your clients, and I saw a couple of people mentioning this in chat So we, did address it on this slide. You or your clients might end up in a situation how rich was saying you only want to tattle once. So if you have payments going to contractors through gusto, or I believe this happens in payroll service. Payroll, yeah, that's what Gusto is, a payroll service. So yeah, I don't know about the other ones cause we only use Gusto, but yeah. So there are lots of different services that will prepare the, they will pay your contractors for you electronically and they will prepare that 1099 NEC for them, but let's say that I pay rich through Gusto and I paid him however many 700 or something, Gusto sends him a 1099 NEC for seven hundred dollars, but then I also paid him directly from my bank account, right? I wrote him a check or I sent him a Zelle or something like that. In that situation, I would also you can either take those things and fill them in on your payroll company and say Oh, hey, wait Make it for hire, but that's a real pain in the butt. So I have confirmed that you can issue two 10 and nine NECs from the same company. You just don't want to duplicate any of that. So if I paid him 700 through gusto and I paid him 700. With check, then I would issue him another NEC from our company as well, but I'm preparing it for that 700 now. A best practice is in our firm, we will often issue those even if they're below the 600 threshold because the whole NEC, the amount issued by Gusto and the amount issued by us exceeds 600. I have not seen any IRS guidance on that, but that's how we're handling it as a best practice.

Rich Kane: 38:41

You don't have to issue it. You can issue it for less than 600. Do you have an, I have one we get this poll question up and that actually came from me. I'd like to know how to pronounce this particular processing.

Dan DeLong: 38:57

There's three. I did, add another option. It's at Zelle like bell, Zelle like belly or zeal like wheel. All

Rich Kane: 39:09

sorts of ways. There was an instance that I would issue a 1099 for less than 600. Let's say you had a contractor come out and painted your place, and he did a really, for 500, and he did a really crappy job, and he won't come out, he won't adjust it. Boom, I'll cut the 1099 because then he's, I'm tattling on him and he's got to cover it. Another one that I less issues for less than 600 is how many of us have had employees who asked for a loan and they'd have that loan and then they quit on you and you didn't get a chance to recoup it. We'll scroll. Okay. I'm now out the money per se. So I'm going to issue the 1099. At least they got to pay tax on it.

Nancy McClelland: 39:51

Yeah. If they're an employee, I would have run that. I would run that through their final paycheck. As W2 percent. Yeah. Half

Rich Kane: 39:59

of them don't even remember it's on the books and you get to the end of the year. Oh, that person's no longer with us. And if they're a great employee, we let it slide. And if not it's just one way to zing it. All right. I don't think you're allowed

Nancy McClelland: 40:12

to choose on that one. I'm pretty sure you're required to put that on the W 2 there, Rich.

Rich Kane: 40:18

Anyway. Let's see. How do you pronounce it? Another

Nancy McClelland: 40:20

poll question is and this is one I got from Diamond. She actually created this slide. Which payment methods are always excluded when preparing Form 1099? Now, Dan, what was that you said earlier about taxes and the word always?

Dan DeLong: 40:39

Never, always.

Nancy McClelland: 40:40

Yeah. It's not an

Dan DeLong: 40:41

option.

Nancy McClelland: 40:42

Always. So which payment methods are always excluded?

Dan DeLong: 40:46

The adult diaper answer.

Nancy McClelland: 40:53

Yes while people are answering that Susie has a question in Susie has a question in chat. She's got an insurance company trying to get her to not include expenses from subcontracts on the 1099. That is correct. You're not you're correct. Do not have to include the expenses. Just the portion that is for services. But I've seen a lot of folks do this both ways. It doesn't really matter either way because the person who is or the company that is reporting that income is going to put those expenses as A a deduction on their tax return. So it really shouldn't matter whether they're including that total in revenue or not, but that's okay. You, you can go ahead and issue them the 1099 without the reimbursed portion.

Dan DeLong: 41:42

The answer to that, question is it's a trick question because it's a, never always there's always an exclusion or there's always an acceptance. That's why

Nancy McClelland: 41:57

again, I just want to mention

Dan DeLong: 41:59

so if it's a rule it will have an exception

Nancy McClelland: 42:02

This is why I love diamonds 1099 payment method guide. There's not a referral link. I'm just telling you This is, as a matter of fact, Dan, you should get one though, because honestly, I feel like everybody should be using this because I'm, I thought when I first saw this, I was like, wait, not all ACH transactions are included. What's an example of that? And she's actually going to go over some of these things in our Ask a CPA session, which is In just an hour and 15 minutes there are some really weird scenarios where you're, paying a platform via ACH, but the platform is paying the recipient via third party merchant service situation. So there are some super complex ones and she maintains this this website to look at all, what all those crazy exceptions are.

Dan DeLong: 42:53

And if, and that's what I've seen a lot coming in the q and a in the chat about what about this, what about that? If you could share that link to that session, Ansy I think that would be a great a great takeaway for for the folks that are asking a lot of those questions just to make sure we're conscious of our, time here today. So let's talk a little bit about this form. 10 99 k.

Rich Kane: 43:20

Okay, so the 1099 K is reported from a, like a processor, and you've got, and there were some examples, Zelle, now I've corrected my pronunciation, is not included in the 1099 K. So it's your responsibility to any Zelle payments to you for you to issue the 1099 NEC. The 1099 K has got. credit cards, debit cards, Square, Stripe, PayPal, Venmo. But I know that there's an, instance when I, should explain this, where it's not included in the 1099k. And I'm going to use Matt as my, good guy today. Let's just say for Matt, I say, Matt, build me and I'm going to pay me and I'm going to pay me. Hold on. I'm going to write a check to Matt out. I'm going to pay Matt and I write a check. I'm going to pay Matt. And Matt says, send it to my PayPal account. What's the PayPal? And he says, Matt Fulton. Okay. So if it's not a business account. It's not going to go through the processing for a 1099 K if Matt said pay Parkway set up, as a business, it will be processed and he will get the money on a 1099 K. But if he does it because it's his personal, that will not be on the 1099 K because it's going to his personal account. Paypal or his personal Venmo? All right, Nancy. What are you thinking?

Nancy McClelland: 45:01

I wasn't listening to you. I was putting that link in Webinar chat like Dan just asked me to do I have no idea what you just said, right? So let's keep moving. You have to be well, I

Dan DeLong: 45:12

think this is what the government is trying to Get to right is the people that are to skirt the issue of hey pay me this way So it's not necessarily You Needing to be reported. And as we're seeing like the lowering of thresholds and those types of things to be online with, The 1099 NEC form, I think that's where things, the tattling is going to get.

Nancy McClelland: 45:43

Yeah, which makes our jobs harder because I was talking about reconciling that 10 a nine K against the revenue that is in your, that is on your profit and loss is, really challenging. And before it was 200 transactions and. 20, 000 before you were going to be receiving a 1099 K and now it is only 5000. Next year is going to be 2500. Then it's going to go down to 600. So we are going to be seeing a lot more issues here. This is the slide that Dan was referencing earlier when he was talking about when you have questions where you're like, that trick question slide, that poll that we had, where it turns out not all of them are addressed one way or another, there are lots of questions like, Melio, I don't know, I go into 1099problems. io. I don't remember how much it costs, but it is not inexpensive. I think it's a very funny dollar amount for the subscription. It's I don't know, 10. 99 or something like cute like that.

Dan DeLong: 46:42

That would be cute. Yes.

Nancy McClelland: 46:43

Yeah, I don't remember the exact amount. But it is, a very affordable resource. And to my knowledge, this is the only resource out there that actually lists all of the different methods and answers your questions about that. But once you know the method. Rich has got your answers about how to handle that in QBO.

Rich Kane: 47:07

If you're in QuickBooks, both desktop and online, and you're looking at your checking account, if in the check field down below in the lower right corner there, all those little num, acronyms you put in the check number field, it will exclude it from going on a 1099 NEC. And that's in both, that's in both versions. So any of those words, like you were, you wrote debit, anything close. Exactly. You have to have exactly these, but you can tell, then it will not go on the 1099 NECs.

Dan DeLong: 47:48

What, is mb is that

Rich Kane: 47:52

Not mb Mond? That I can tell. Yeah

Dan DeLong: 47:55

If you're paying mb Mary Beth Rami then she gets excluded. Is that, but they card typo could be Mc it might be, might have been a typo for, yeah. Should be for M mc, for MasterCard. Could be, is Master

Nancy McClelland: 48:10

C? Yeah. I dunno. I'll say that, that I, ran this list by Alicia Katz Pollock, who? At this very moment in time is actually teaching her 1099 session through royal wise and she said that there are a few codes missing on this one, rich. So I want to send you, I just found this out very late last night. So I'm, publishing her list in the and, you know what, you're right, Dan it's a, typo. It's actually MC. You are correct. I just put this list in. The chat that she gave me. They were pretty close

Dan DeLong: 48:46

On the, keyboard too. On the

Nancy McClelland: 48:47

keyboard. Yeah. So I do, want to recommend that everybody if you are doing, if you're doing 1099s in QuickBooks, take her class, I think it's just a one hour long class and it's I don't know, 37 or so it's super cheap. And if I were doing them, if I were using QuickBooks online, I would totally take that class because she gives you all sorts of tips on that. And this is one of those gems.

Rich Kane: 49:13

Okay. All

Dan DeLong: 49:15

right. What happens when you don't do this?

Rich Kane: 49:18

There you go. Those are our due dates. And you can see that you, you're, you will, you could get fined. Now, I'm being honest as an accountant, in all my years, I've never seen them come back at me against not filing a 1099. You could file it late and it's, this is really great slide. It gives you the due dates and you don't get a penalty. I've not seen any penalties for filing late, but I really want to. And Nancy did a superb job is if you don't know there's a question on the tax return that asks you about 1099s and this is absolutely phenomenal and she circled it. Thank

Nancy McClelland: 49:55

you.

Rich Kane: 49:56

And if you can. If you're, yeah, I just wanted to highlight that

Nancy McClelland: 50:00

technically, if you look at that middle line, like there are penalties for filing them late but I, and I have been doing this for 23 years on my own and for many years before that and I have seen the occasional penalty come through, but I'm mostly aligned with rich on this one. I rarely see. I rarely see the penalties as long as you're willing to comply eventually. It is better to file late than not at all and the situation that we have that happens semi regularly is you have a client who maybe they don't come to you until extension season. It's September or October and you're filing that return and they have not prepared their 1099s yet or they sent out a couple but then it turns out once their books are caught up that you find you found a few more that need to be issued. You can. As, a, tax preparer, you're not allowed to mark yes on this if you know that they have not filed all their 1099s. But the question is, did you or will you? Not, did you? And, so you can mark yes if you are like, hey, I'm going to go ahead and mark yes, get this filed. And then October, November, whenever you get that, you take care of that 1099 for them, then you are allowed to check yes on that.

Rich Kane: 51:13

Now, the interesting thing is you have a client that hems and haws I don't want to give them a 1099, show them, you have to put it on the tax return. This is then it sways. There

Nancy McClelland: 51:24

are the occasional client that absolutely refuses and we mark no, we say yes, you made payments that would require you to file Form 1099 and then on line J, no, you did not file the required Form 1099. It's just hey, come on at me, please.

Rich Kane: 51:43

Now I know we're raising that red

Dan DeLong: 51:44

flag.

Rich Kane: 51:45

We're short on time here. I'll just

Nancy McClelland: 51:48

briefly cover this one. We don't need to go through the whole thing. I'm just gonna, this is the slide for the people in chat who were asking about it. IRS 10 matching. This is what this slide is about. This is if the name and the tax ID number on that 1099 do not match the way that the IRS has you in there. So for example, if it's your personal name with your EIN or your business name with your social security number, and it doesn't match, they will send the issuer these nasty, scary letters. They can be ignored if the person is on the up and up, and it was simply just a yes, they're reporting it. So we're good there.

Rich Kane: 52:25

And then the only

Nancy McClelland: 52:25

I also Sorry, go ahead.

Rich Kane: 52:27

Yeah, I want to cover before we lose some time a little bit and talk about timing. And I think it's important because you could get a tax notice and I'm going to use Matt as my scapegoat again. I bill Matt for some services I did and I send him the bill in the middle of December. Matt looks his, it is P and L like the end of the December 31st. He says, you know what, I need some more expenses. So I'm going to send Rich Let's say Richard check, okay, it goes into his system and his system is going to process a 1099 for me as of 2024. He's going to tattle to the IRS. They're going to expect to see it. But I don't get the check from him until the first week of January and I'm a cash basis payer. I'm going to deposit it in and going into 25. But when I do the return. It's already in my transcript that it was for 24 and I will get a notice that says you didn't declare this on your tax return. Here's some additional tax for you. So you got to understand the timing of it. But that's okay.

Nancy McClelland: 53:34

You just write back. It's okay. You get that notice and then you write back to the IRS. And you said, that's because I didn't constructive, didn't get constructive receipt of it until the following year. It will be in the following year. And then the IRS says that's, fine. But so you can get notices that It's okay to get a notice. You just need to be able to respond to it.

Matthew Fulton: 53:51

I think the point though is yes, you can get those notices. Every notice you receive is additional time. You have to spend on something and it's more mental power, all that stuff. So if you recognize how those line up and especially if you have good partners in business that you can address it with them ahead of time, it's going to help everybody all the way around.

Nancy McClelland: 54:09

Fabulous point spot.

Dan DeLong: 54:12

All right. So let's talk about in the last five minutes that we have, we may run a little over. If you're fine to stay, great. If not, you got to go. That's totally fine, too. But let's talk about some of the great workflow habits. And you were mentioning this, Nancy, a little bit ahead of time. That adding this to your workflows, not at November, not at tomorrow, actually is a good way to make sure that you're ready for this, month of hell that we have for 1099, right?

Nancy McClelland: 54:46

Yes, absolutely. So I, I love Keeper. I'll try to go through this really quickly. They have in their, system, they've got a process. If you want to go to the next slide, identify, request, update, export, identify what happens is because Keeper syncs with QuickBooks online. And you know what, I believe somebody from Keeper, I saw them in the chat. Laura is here. So if you have questions, please grab her. But yeah, Identify Lauren, thank you for being here. Hi. So, the way that it works is it looks at the fact that you created a new vendor. It says, Oh my gosh, Hey, you might have, this person might be a 1099 vendor. And you just mark yes or no. This is that screenshot. Yes, we need potentially need a 1099 from them. No, we don't. Do we have a W9 on file or not? All of this stuff. Get pops up and it asks you these questions and then you can go in and look at it and take care of it. Go ahead to the next one and then request an update. The request is what I was mentioning earlier where you actually can request that W 9. Through Keeper, this is for people who, have decided to spend the eight or ten dollars a month per client on Keeper, this is, and they're only using one piece of it, this is usually the reason, being able to request W 9s directly from You're welcome. Get that client out of the way, request them directly from the vendor and do it electronically through Keeper. And it syncs back to QBO. It's beautiful. We love it so, much. And I have heard that a lot of people have actually gotten new clients because the vendor gets this request and they go, Wow, this bookkeeper's way more together than me trying to do it on my own. Or than that like Joker CPA over there who only looks at stuff once a year. Yeah, no. Say reach out to them and say, Hey, are you taking new clients? So it's a really great feature and then that vendor update is it's actually Syncing back to QuickBooks online or zero if you're using it. Next slide, please And then at the end of the year and they just implemented this last year This is only the second year they're doing it and it's beautiful You then get all of that 1099 related data in your preferred file format, whether it's CSV track 1099 or text 1099 and you export it. And then you import that file into your program in our case, track 1099. And it is actually seamless and beautiful. I never, when people talk about an integration, I always go it doesn't integrate, but it is an export and import to clarify, but it is beautiful, seamless, it's easy, and it has changed our lives.

Dan DeLong: 57:27

And then there's options inside of QuickBooks. If you are using QuickBooks online there is a new new automated way, which will supposedly in theory, do all of this stuff for you. But how well do we rely on the machines to, to do all the things that we need to do manually? It's supposed to identify who needs a 1099 by looking at All of those things, but again, garbage in garbage out. So if you're not entering things in properly, I wouldn't expect the machines to make those corrections for you to do that, but it's supposed to automate the form completion, email and mail to recipients and track and manage all of that

Nancy McClelland: 58:13

for a small fee of 14

Dan DeLong: 58:16

per form.

Nancy McClelland: 58:17

14 per form. Interesting. I don't know if you got my email late last night. I saw a post on the, your community on the QB Power user, QB Power user community. Which is that the 1099 transaction detail report, several of their 1099 vendors were missing from the report. And they called support and said, it's a, known issue. What did you call that?

Dan DeLong: 58:46

The undocumented program feature.

Nancy McClelland: 58:49

It's an undocumented program feature. So be careful if you're using QBO and review those lists and make sure that they're correct.

Dan DeLong: 58:58

So knowing that maybe not a great plug for the new automated 1099, if there's a known features. Known on, Undocumented features, because there still is the manual processing of 1099s in QBO, which was the old way of doing things where you went through the wizard or make sure your mappings were correct. The thing to keep in mind is that most Intuit services like QBO payroll, contractors and QBO bill pay include the fees, right? So you don't have to pay the form filing fees. For that, if you are using those services, so just bear that in mind. Especially since if they have this or any of these services where they are, already included, the, filing fees are done for you, so if you're going to manage this anyway, by going through and running those reports and doing those things, which may or may not be accurate now that we've had that tidbit from, Nancy, Just keep in mind that those things might be included and I've included links to the demos and videos and if you go to our landing page Blog for this session. We've got all that on the QB power our Website and the tip of the hat to desktop, which is more and more complicated As, the use go on, it's not

Rich Kane: 1:00:29

easy like it used to be,

Dan DeLong: 1:00:31

right? You do add a tax 10 99 plugin, or you use the QuickBooks web connector to synchronize that from QuickBooks desktop to to tax 10 99. So if you are using tax 10 99, you can use it with Keeper. You can use it with QuickBooks Desktop, and then you can use it with QuickBooks Online if you're using it with, with keeper. The link for that as well. So our last polling question is, did you find this useful? And there's a two part, yeah, did you learn something new? I think that's that's.

Nancy McClelland: 1:01:10

Oops, we've still got Avalara in there. I think that's from the early, December.

Dan DeLong: 1:01:15

That's last year. Wait a minute.

Nancy McClelland: 1:01:17

Yeah, that was last month. That's okay. Substitute already using, instead of Avalara, substitute either Keeper or QuickBooks Online or Track 1099 or 1099. Are you already using something? I, hope that if you took one thing away, it was that this really should be a year round process because it makes it so that January isn't as hellish. We all know 1099s. Suck. But as Diamond likes to say, friends don't let friends waste time on 1099s. So there are ways to make this better. There are a lot of resources out there. I'm going to dump a bunch of these in the chat. Again, we've got my MSN article on 1099s, which goes through lots of 1099s in addition. To the NAC and the K. There is an earmark gig that I did with Diamond and Keeper last month on how to integrate 1099 Management into your monthly workflow. There is the Keeper Prepare 1099's Help Center and Diamond's 1099 Payment Method Guide. I am also going to toss some of my info on Ask a CPA in there because, Diamond is actually going to join me in one hour to do and ask me anything about 1099s in ask a CPA. And if you sign up before then you can go into our circle community and, get on it. We'll see you in an hour. And I think Dan you, actually have a a promo code for joining.

Dan DeLong: 1:02:56

Yeah there's a, promo code for our, listeners for for, Nancy's group for 30 percent off for three months. It's on our on our landing page there for you. So it can just go there for the handouts or the replay or anything. You can get the promo code from there. And then also in the handouts themselves, we do have an appendix, that doesn't get an appendectomy, right? So there's some frequently asked questions and a Q& A in there. So if you download the, And those are from all of the,

Nancy McClelland: 1:03:34

I've done like a ton of these 1099 talks before, and I get a lot of questions and I try to go back and answer the questions afterwards. And that's what all of these FAQs are from.

Dan DeLong: 1:03:47

Rich, Nancy Matthew always great to see you. We really appreciate Nancy and Rich coming together for for this fighting, dueling CPAs, and 1099 discussion. Any closing remarks or thoughts from either of you two?

Nancy McClelland: 1:04:08

I'm just so glad that you're providing this resource for people because it's true. 1099s shouldn't be this hard, but. They really are and you need resources and you need education and it's just so wonderful that Dan, that you and Spot are providing this space to invite folks like Rich and I, who've seen, we've seen a few 1099 Seasons in our time.

Rich Kane: 1:04:32

Great. Yeah, we had a bunch of tips here. So at least we've gotten some education out and I feel better about that.

Dan DeLong: 1:04:42

Do those tips need to be reported on the 10 99? Yeah. Funny.

Rich Kane: 1:04:46

You

Dan DeLong: 1:04:47

a funny guy there, guy

Nancy McClelland: 1:04:48

Dan. I'm getting some comments in the chat that the it, there's a save 30% off ask a CPA link on the on your thing, but it just goes to my website and there's no promo code listed. I do not remember what that promo code is. I'll add

Dan DeLong: 1:05:05

it and put it there. Fronto, as soon as we close out the session here today.

Nancy McClelland: 1:05:12

All right. I'm going to take a quick look for those of you who are still on the call and are desperate to know the answer. Give me just a moment here because I can pull it up from one of these emails. Okay, but the discount code. Oh, it's really straightforward. QBPH 30. QBPH 30. So that's QuickBooks Power Hour. 30 QB PH 30. There it is. So for anybody who would like to sign up, you get 30 percent off the first three months. And for any of you who sign up in the next hour, we will see you soon. I also saw a lot of ask the CPA members in the chat, so I can't wait to see you guys later. Thank you so much.

Dan DeLong: 1:05:51

All right. We appreciate you joining us.

Nancy McClelland: 1:05:53

Wonderful day.

Dan DeLong: 1:05:55

Likewise, and next time we're going to be talking about copy QuickBooks online data. So hopefully you join us on the next QB Power Hour for how to copy QuickBooks online data from one file to the other or import, export. So it should be a good,

Nancy McClelland: 1:06:12

I'll be there for that.

Matthew Fulton: 1:06:13

The only thing more complicated than 1099s.