Filing 1099s in 2024

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Hector Garcia: Welcome to the unofficial QuickBooks accountants podcast. I am joined by my good friend Alicia Katz Pollock, the original, the one and only Qbo Rockstar CEO and founder of Royal White Solutions.

Alicia Katz Pollock: And I have the privilege of collaborating with Hector Garcia, CPA, the founder of Right Tool for QuickBooks.

Hector Garcia: In this episode of the unofficial QuickBooks accountants podcast, [00:00:30] we're going to talk about preparing 1099 in QuickBooks online for the 2024 tax season. Hey Alicia, how are you?

Alicia Katz Pollock: I'm actually kind of giddy about this topic. I'm so excited.

Hector Garcia: So this is a necessary evil for most accounting and bookkeeping professionals. We got to help our clients do the 1099 at the end of the year. Sometimes it's easy because they wrote the person one check and they gave you a w-9. Sometimes it's hard because you can't read the checks [00:01:00] handwriting. You don't have the w-9. They paid some in cash, some in Venmo, some in Zelle, and the information is not organized. So we are going to maybe at the end of the episode, talk about maybe some of some of the things that we've done to like solve some of those 1099 issues. But we want to talk about the new platform, the new changes. So in December of 2023, they, um, they released a firm of the future article. They talked about it, I believe in the in [00:01:30] the in the note webinar and they revamped the 1099 screen. And Alicia actually was part of one of the developers, uh, the, the, let's say the, the consulting panel for the developers and beta tested this program. So who who better to talk about the new 1099 platform inside QuickBooks online that you're about to experience? Alicia. Take it away.

Alicia Katz Pollock: Yeah. Thank you. I'm really excited about this. I teach at 1099 class [00:02:00] every single year in January, including in the upcoming year. And so when Intuit decided to revamp the new panel, they came to me and said, can you help us design this? And so I got to give my feedback and they addressed everything that I asked for. And so I really like what I'm going to, what I'm seeing. So the first thing that I wanted to let you know is something that's actually not related to Intuit. But there's a big change now that if you have ten or more ten, 99 [00:02:30] or W-2s for your company, you have to file electronically. You can't file on paper anymore. And this is being handed down from the IRS. So that's just something to know before I get into all of that. And Hector, I'm sure you have something to comment about on that one.

Hector Garcia: No, all I'm going to say is that the paper printed 1099 industry is about to get destroyed.

Alicia Katz Pollock: Yeah.

Hector Garcia: Going into Office Depot and buying those packages of the preprinted, uh, you know, 1099 that's that's not not going to be longer [00:03:00] a thing. And honestly, at this point in 2023, I don't even know how that was still a thing. So thank you, IRS, for like forcing people to get on electronic.

Alicia Katz Pollock: Yeah.

Alicia Katz Pollock: And so as a result, just to give a little bit of minutia on there, the print alignment tool in the show or not show in the 1099 browser is no longer there. And the 1096 form is no longer supported. The 1096 form was the cover form that went with your stack of 1099 when you sent them to the IRS, so there's no such [00:03:30] thing as a 1096 anymore, at least not through, um, Intuit's products. Okay, that's just the the compliance part of it. Let's get into the good stuff that I'm stoked about. Uh, so.

Hector Garcia: I think it's it's just good to mention in context that QuickBooks will be a great product to e-file 1099 QuickBooks online will not be a good product to paper print 1099 is the big question would be, can you still do it with QuickBooks desktop? That's interesting. Uh, something we're not going [00:04:00] to address right now because I have to wait until I actually try to do one with QuickBooks desktop in in the 2024 tax season, but this is within the context of using QuickBooks Online to e-file 1099 and 1099 NEC. I don't know cannot do, you know, off the bat if they can do other 1099 or any of these, only.

Alicia Katz Pollock: Uh, NEX and misc are the two forms that are.

Hector Garcia: Good, but not for rental, not for.

Alicia Katz Pollock: Okc. Okay. Yeah.

Alicia Katz Pollock: No dibs.

Alicia Katz Pollock: Nope.

Alicia Katz Pollock: Um. All right. So yes, that's a great point that this [00:04:30] is specific to 1099 NEC and 1099 misc. And it's one of the things that Intuit's been doing is really making the contractors tools inside Kubota more robust. That originally all you had was vendors, but they started breaking out the contractors and allowing you to manage them. And if you haven't actually checked out the contractors center as a way of managing your your subcontractors all under one roof, you should check it out. There's even the ability to [00:05:00] pay them through if you through your payroll service. If you have qbo payroll, you can add your contractors as payees. And if you don't, but you still want to pay your contractors electronically, there's actually a contractors plan that you can get on to where you can directly send your contractors their payments, and that's pretty much built on the online bill pay platform that is being rolled out. So it's a really seamless way of not having to go write them checks and hand them or go [00:05:30] to your bank and pay them or oh my God, don't pay them through Zelle and don't pay them through Venmo. Keep them all in house. And that way you can just make one bill and it's all automated. Instead of having to manage it in one place to do the documentation, in another place to make the payment. So I'm a big fan.

Alicia Katz Pollock: And when you are subscribed to payroll or when you're subscribed to the new online bill, pay one of the the mid-level or advanced subscriptions 1099 filing is [00:06:00] free for for you, it's you're already paying for the service and so you don't have to pay for it. Uh, something else that's new is last year there was a little bit of a hullabaloo because if your clients went in and ran their own 1099 and they were on your wholesale billing price, meaning that you were paying for their subscription, you were getting the bill for their 1099, and you might not have expected it and it might not have been on your radar. [00:06:30] And maybe they've got hundreds of ten, 99, and all of a sudden you have an unexpected expense that that you weren't prepared for. So as of this year, that is no longer an issue. When you run your 1099, you get the option of paying for it, uh, from through the business owner or paying through for it through your wholesale account. So I'm going to give them applause on that one. That was really major. Did that affect you last year, Hector? No. [00:07:00] Did it affect you? It did on me. I had a couple clients who were filing their 1099 themselves, and I had to come back around and say, oh, by the way, I have to charge you an extra $150.

Alicia Katz Pollock: So it was it was awkward. It was fine, but it was unfortunate. Now the 1099 wizard itself. They have completely renovated it. You get there through the contractor's center. So when you click on either expenses and [00:07:30] contractors or payroll and contractors, there's two different ways of getting there. And there's a button that says prepare 1099. Now that's not new. Um, the deadline's this year for the 1099. You can start using the 1099 wizard right now to figure out who you have to collect information from, or who you're going to be sending 1099 to. But online filing starts being coming available on January 1st, and it'll be available through May 7th. So if [00:08:00] you're a little late, you can still use it. They are, however, offering an early bird discount up through January 15th. So if you're not paying for payroll or the contractor's center and you're paying as a standalone project, I don't have the numbers in front of me. Hector, if you can pull them out. What the what it what the cost is. In the past, it was 1495 for the first three forms and then $5 each on top of that. And [00:08:30] if you filed before January 15th, they shaved off like $3 or something like that. And, Hector, while I'm doing all of this, if you come up with different numbers, please let me know.

Hector Garcia: Um, yeah, I'm looking up the prices now. Uh, one thing to mention, you kind of mentioned it by passing here. If you already have, uh, QuickBooks payroll, any of the payroll products, core premium or, um, elite, you can file 1099 at no cost. This is the, the marketed, advertised, [00:09:00] uh, uh, writing. But it's not clear to me if that's unlimited 1099 or that's only X amount of 1099. Uh, I don't see the word unlimited anywhere. It just says, uh, prepare 1080 nines, uh, at, uh, at no cost. Okay. And I'm making the assumption that preparing also means e-filing. If you have to, uh, print the 1089 and mail it because I. 1089 service used to give you that option, that's always going to be an extra fee. [00:09:30] So we're talking about just digitally signing, sorry, digitally filing and preparing. And you print the PDF or print the, the the 1089 and give it to the to to the contractor. The state filing I believe is still not going to be supported, uh, because QuickBooks has never done state 1089 so you still have to use a different system for that, which is kind of a bummer. Um, if you're in a 10.9 1089 state, uh, because then you have to do the work twice, essentially. Right. But if you're [00:10:00] smart, you can you can export the 1089 report in QuickBooks and have all the information in most systems allow you to import via CSV or something like that. Right. So that's that's a really important point to make. Uh, right off the bat, when it comes to just understanding what's included in the pricing.

Alicia Katz Pollock: Yeah. And actually, the state filing was one of the things that I wanted to talk about that for me in Oregon actually is a deal breaker because we do have to send in our 1099, but we have to do it electronically through Eyewire. [00:10:30] And the export format, uh, from QuickBooks online is not the same format that they want you to import. And so my clients have either had to type in their information or not use the ten shows 1099 wizard to file and instead go over to track 1099 comm or tax 1099 comm and file. From there. There's some integrations between the two, but the reasons for needing to go to the third party software. I'm [00:11:00] going to tell you some more of the benefits than some more of the things that have changed, that have reduced the need to go to external apps. But there are some cases where you still might need to.

Hector Garcia: So I'm looking at the pricing here and on the on the into a website on the 1099 file. Pricing is $15 for the first 20 contractors and then $2 for each additional contractor.

Alicia Katz Pollock: Okay. And so that's actually gone. Is that the the early bird pricing or the the full pricing. Because that's less [00:11:30] than the thing.

Hector Garcia: It shows it as a monthly fee. So, uh, making the assumption that if you have, you know, it turned on with the monthly fee, you can turn it on for one month, 5 or 10, 99 and then turn it off. There's a 50% discount off the first three months. So I don't see specifically, you know, the 1099 early bird deal in the website that you're, that you're talking about. So we'll we'll keep digging okay.

Alicia Katz Pollock: Yeah. It does say it on the when you start going [00:12:00] into the 1099 wizard, it does mention that there's an early bird discount, but I'm not seeing the information for it at the moment. Um, and then the, the third deadline because I'm actually still in the deadline section, is that on January 28th is the last day to send your taxpayer copies and have them come on time. So the the wizard will actually email and snail and snail mail the, uh, the 1099 to your contractors for you. And in order to get them by December 31st. [00:12:30] January 28th is your cutoff. So there's that. Okay. Some of the new.

Alicia Katz Pollock: I.

Hector Garcia: Found the I found the updated pricing which.

Alicia Katz Pollock: Got okay.

Hector Garcia: So the updated pricing is before January 16th. Early bird discount gives you the first three forms for 399 each. So the price I gave you earlier is to turn on the monthly service for contractor payments, which is for both 1099 and also paying the contractors via a direct [00:13:00] payment like a direct deposit type of payment via ACH. Um, uh, via the system. So that would be a monthly fee. And technically, I guess if you turn it on for one month, you can file 1099, you know, for that one month, for the $15 for the first 20 plus $2, any extra if you don't enable that contractor payments and you just do simply just 1099 without contractor payments, Early-bird is $4 or 3.99 per form for the first three, then between form four and [00:13:30] or for the first three, sorry for the $4 for the first three each. Then form 4 to 20 is $3.19, and then form 21, and up is $1.19 per form.

Alicia Katz Pollock: Those prices are.

Alicia Katz Pollock: Down. Those have gone down from last year.

Alicia Katz Pollock: That's great.

Hector Garcia: That's that's early-bird. The non early-bird is basically um it's a pretty similar it's $5 per form on the first three forms. So essentially it's $15 for, for three 1099. That's the easiest [00:14:00] way to to see it. Then forms 4 to 20 is $4 each and then forms 21 and up is $2 each. So essentially it's $5 a form on the low side, $2 a form on the high side, and then on the early bird goes down to $4 a form on the low side, $1.19 or $1.20 on the high side. So it gives you a general idea of what the pricing is.

Alicia Katz Pollock: Uh, perform. Well, the good.

Alicia Katz Pollock: News is that's actually down from last year. So thank you for that. Awesome. Another change [00:14:30] is that it now supports corrections. So if you missed one of your expense accounts and now you have some new forms to run, or if you had a mistake on one of your forms and you need to send it again, corrections are now supported. That is brand new. So very, very happy about that one too, because I've in the past had to I did some in Qbo and then had to go file another one over in in track 1099. So thank you and Twitch.

Alicia Katz Pollock: Yeah same same. We have the same. [00:15:00]

Hector Garcia: Issue in our firm. We do all the corrections in a different system. Yeah.

Alicia Katz Pollock: Okay. So now I want to get into some of the changes in the interface and why I'm so geeking out about this. And so the very first one is that in the past it was challenging because you had to open up a box for the 1099 NEC form or, and a dropdown box for the misc forms, and go through and check off all of the expense categories that [00:15:30] you needed. It was in this little box. Then it gave you this big paragraph. They've kind of flipped it around. You might have to do that the first time, but in my interface I'm actually seeing my chart of accounts. And that could be because I've used it in the past and it's remembering what I did from last year. So I'm kind of unclear on that because I'm an existing user. But once you go down and you turn on which expense fields may possibly have contractors in them, you know, think advertising [00:16:00] and marketing, uh, repairs and maintenance, education and training, legal and professional fees, subcontractors, cost of labor. Those are all very, very common. But once you've identified them, then it gives you a box to map them to the 1099 form and field that it goes into. So it's a complete flip flop opposite of the display. So that's one of the things that I'm really excited about.

Alicia Katz Pollock: And then if you look at your list and you don't need it, there's a trash can. [00:16:30] If you look at your list and you need more, you can add more. But the fact that they reversed it from form based leading to expenses and it's now expenses mapped to the forms, I'm going to give them a big thumbs up for that. There's also a new report for a report on the accounts that you have designated to pay your 1099 vendors, so you can easily print it out and compare it to your chart of accounts, and make sure that you have all the accounts that you need. There's also a [00:17:00] link right on that first screen to run reports of all of the vendor payments. And then those are using the new reports generator. And it's grouped by the expense field. So you can look at the expense field and see all of the payments that are inside it. And then because it's using the new reports generator, if you wanted, you could even make a subgroup underneath that and group it by vendor as well. So you really get some good flexibility with running reports to make sure [00:17:30] that you've done your due diligence when you go on to the next screen. Then it shows you all of your eligible payments.

Alicia Katz Pollock: And this is another big like Hallelujah change because last year, in all the years before, the next screen that would give you is a big list of everybody that you have ever marked as a subcontractor with all of their missing information. You don't have their address and you don't have their ID number. And so [00:18:00] you would be faced with this list of like 30 to 50 people that you had to collect information for. And then on the next screen it would tell you who was actually eligible. So you might have be faced with this big screen of 50 people of missing information, and you might be spending hours chasing down the information you get to the next screen and like, oh, you only have three people qualify. So that was actually what I went into the conversation with Intuit and it said, just please reverse that. Let's figure out who qualifies and then see if we're missing their [00:18:30] information or not. And so those two steps in the wizard have been reversed. So now it shows you who's eligible and who has who did not meet their thresholds so that you can analyze them and say, okay, wait, I know I paid that contractor more or oh wait, I paid them by credit card.

Alicia Katz Pollock: They don't count. And then the once you have your down to your short list of who is actually needing to get a 1099 [00:19:00] form, then it will tell you if the tax ID is missing or if the address is missing. The new layout also makes it really easy to see who vendors you've marked for 1099, and who maybe you've forgot to mark for 1099. And then it also gives you a dropdown to take a look at which kinds of payments are reportable and which ones are non-reportable. Now, I don't want to get into the weeds on this, but if you've paid your contractors through any kind [00:19:30] of third party network where the you pay the money and the money goes to the contractor, like PayPal, for example, or credit cards, they're not eligible for 1099. And this makes it very clear that maybe you paid them part by check and part by credit card. Then it only is counting the actual relevant charges. So they did a really nice job with the layouts. So you can go back and forth between who was who was tracked and not to make sure you've got everybody and which payments count [00:20:00] and which payments don't, so that you can make sure you have the right payment method on all of them.

Hector Garcia: So do you. Do you remember the workaround in QuickBooks desktop for when you're paying a contractor, uh, through one of these type of payments that are not reportable, right.

Alicia Katz Pollock: Like, is it the one where you use the payment method box and then you put in like Deb.

Alicia Katz Pollock: Or knowing the check.

Hector Garcia: Number in the check number, you, you put EFT or something like that, or ACH, like if you put a there's a specific code [00:20:30] that you put in the check number of the check. So remember QuickBooks desktop doesn't have an expense, uh, transaction only has a check. So QuickBooks desktop only has a check and has a credit card charge. Anything that's a credit card charge being paid to that vendor was immediately omitted from the 1099. But sometimes you can use a a debit card from a bank to pay a A contractor, and that contractor process it through a merchant, uh, or [00:21:00] through a, through a credit card machine. And if you pay that way, you're supposed to omit that payment. And the workaround for this was to put a specific code on the on the check number. Do you know if that's, uh, in QuickBooks online works like that too, or.

Alicia Katz Pollock: Well, I know that in the past it did that that that payment method field that you see. So in this one it was not the check number. There's an actual payment method field in your expenses where you can specify how you actually paid. So if it came from your checking [00:21:30] account it could be cash. It could be a debit card, it could be a direct deposit ACH. And so if you use that box and you start with their ready made types, then it will know to include or exclude the payment based on that box. Um, when I first started teaching Qbo what you were saying about the different codes that you could put in the check number reference field was a thing, and I used to teach that, but I have not tried it in so long [00:22:00] that I don't know if it's still relevant or not.

Hector Garcia: Right? Right. It still works in desktop. I just don't know if it if it online you could do such a thing. That was a really that was one of the most interesting workarounds that we ever had to encounter. Uh, and it was like one of those hidden things because it wasn't really that obvious that you have to put some code in the check number to, uh, to make that work.

Alicia Katz Pollock: Right. Well, and then.

Hector Garcia: And then the last and then the last screen you're going to cover, I think the last screen and the 1099.

Alicia Katz Pollock: So then after you have determined the eligibles, then it [00:22:30] gives you your ability to preview your forms. You can actually see what they look like. You can flip between your neck form. Arms and your misc forms. And then there's another tab. There's one. There's a tab for ones that are ready to go, and another one for where your filing is complete. Which kind of leads me to believe that you might be able to go through the wizard twice and do two rounds, but I don't know if that's true or not because I haven't tried it.

Alicia Katz Pollock: But it looks. You know what?

Hector Garcia: Maybe what used to drive me crazy about. Like, I [00:23:00] used to use, um, ESOP for a Intuit online payroll for accountants to to file my 1080 nines, which is a was a great wholesale product. It was like $15 for a one time filing of unlimited 1089 inside, one inside each client. Obviously. Um, I don't know if there's going to be an accountant version of this with a wholesale type of price. Otherwise, I guess we're still we're going to pay this $4. You know, per form on the first couple forms and then, uh, a dollar [00:23:30] to two on the, on, on, on more than 20 on that particular client. But, um, anyway, what used to drive me crazy about that is after I filed the forms, there was no report that gave you, like an e file number that gave you that told you exactly how much, how much, which forms were filed and which ones were not. It just says filed. And you get no, you don't have a summary for the whole amount, like the reporting for post filing wasn't really great in IOP for a. Do you have any insight in [00:24:00] terms of what that's going to look like, the post filing reports, or do we kind of have to wait until we actually file them to see what they're going to look like? Yeah.

Alicia Katz Pollock: Since it's not January 1st yet, I can't actually see it. But when I when you're in the preview forms, there is a summary report that you can view and print out.

Alicia Katz Pollock: And so is it total.

Hector Garcia: Does it does it subtotal.

Alicia Katz Pollock: Yes.

Alicia Katz Pollock: That was the.

Hector Garcia: Thing that drove me.

Alicia Katz Pollock: Crazy. Yeah.

Hector Garcia: The total of all the 1099.

Alicia Katz Pollock: It has your.

Alicia Katz Pollock: Checksum.

Alicia Katz Pollock: It has your payer information. It tells you your [00:24:30] 1099 misc vendors, your 1099 NEC vendors, the total number of forms that are being filed for each, and the total dollar amount reported per, uh, per vendor, and um, in total.

Alicia Katz Pollock: On your forms in total.

Hector Garcia: Exactly. Yeah. That's great because we needed that, like desperately.

Alicia Katz Pollock: Yeah. Awesome.

Alicia Katz Pollock: All of that is there. Um, and so, you know, like I said, you can do corrections now. You just can't do your state filings. And so [00:25:00] for some people, it might still be a deal breaker if you have to file for your state and you can't extract the data. Now, I can't answer whether or not one of the suggestions that I gave them is I wanted a CSV export of the contractors with their addresses, their tax ID numbers, and their boxes and amounts so that we could import it into our state filing systems. I can't see if that's there yet.

Hector Garcia: That's [00:25:30] are there. You can export your vendor, your address, the tax ID, you can export that in a report, but the total amount for the year you can't. So you would have to run a different report or export the report and then like Vlookup stuff and put it back together to be able to have like one single import that you would bring into another system. Right? Obviously, QuickBooks doesn't want you to be using a different system for e-filing, and the corrections themselves were so important because what was happening to you and me and everybody else [00:26:00] is if you had to do a correction, you have to go to another system. If you use another system like tax 1099, which I think was bought by Avalara or tracked in 99, you have all these competitors of Intuit. If we're forced to use other system for corrections, you're giving us exposure to other systems, and we might use other systems for 1099. So like it was very important for QuickBooks to add corrections because you want to keep people inside of the ecosystem.

Alicia Katz Pollock: Right now as far as tax and denied and track 1099 go, they act like apps. You can [00:26:30] actually use the whole 1099 wizard to dial yourself in and know that you're ready to go. And then if you are forced to use one of the other ones because state tax filing, for example, then when you log into tax 1099, you can pull in the data from Qbo 1099 Wizard to use it. And both systems do give you the history, so you can see what you did last year. I do want to circle around on that on that CSV file though. The reason why I want the CSV file is so that I can [00:27:00] use the 1099 wizard, because in Oregon I don't want to have to go to their e-filing system and type things by hand. So for the.

Alicia Katz Pollock: State, if it's for.

Alicia Katz Pollock: State, for state, exactly. Right. So if it turns out when we get to that last step, if it turns out that there is no, um, CSV file export, then I still can't use it, but oh my god, I will absolutely use it for my tracking and analysis and double checking all of my vendors [00:27:30] and all of that to make sure I'm dialed in. So I'm hoping that there's a CSV file. And if you developers are listening to me, that's that's your 2025 roadmap. It has to be there. And then once you do that, everybody is going to be able to use this tool.

Hector Garcia: Absolutely. I think a general rule of thumb is every action you take in QuickBooks, that needs to be a CSV export of the end result of that action. Like if you just make that like a rule of thumb for development, you're always going to have better results. [00:28:00] Alicia, since we're in the 1099 topic and we should probably wrap it up, um, you know, you've been teaching 1099 for so long and doing 1099 yourself. What are like your what's like your top tip on, you know, how to make sure 1099 goes smoothly?

Alicia Katz Pollock: Um, I my top tip is when you first take on a subcontractor for the very first time, Qbo has a tool to actually send them a request for the 1099, and it has them create a free copy of QuickBooks Self-employed that [00:28:30] it will. Then they can fill in their information there. They don't have to use the software to actually use QuickBooks Self-employed, but then it imports the information right back into your portal. And if they're subcontracting, I'm sure they have other clients who are using Qbo. And so they've already done the work and they just have to push the button. So that's the number one suggestion that I can make to you for, um, being not having to chase people down at tax time.

Hector Garcia: So so add them in QuickBooks, add their email address, put the checkbox at their 1099, [00:29:00] uh, but then have them enter the have them enter their, their their own information the actual.

Alicia Katz Pollock: The contractor and tax ID.

Alicia Katz Pollock: Yeah. Sorry, I didn't mean to talk over you use the button to send them the invite and they can then fill in their information.

Hector Garcia: Absolutely. And for the like old school contractors are not going to do that because some people are not going to do that. Just withhold the payment until they give you a w-9. I don't understand why companies don't do this. Like at the end of the year, like, well, they got lost. I can't find them. You know, they're [00:29:30] not answering their emails. They're not answering their phone call. It's like you're supposed to get that w-9 before you release, like do an even exchange like a, you know, like, uh, like, uh, when you're holding hostages, it's like, I'll hold the Czech hostage and you hold the w-9 hostage, and then we'll do the swap on the first on the first payment. Like, don't release a payment until they give you that w-9. That would be like the single, um, most important thing, in my opinion.

Alicia Katz Pollock: Now, the other thing.

Hector Garcia: I like to do. Sorry, the only thing I like to do is I like to put on [00:30:00] the vendor name in QuickBooks. I like to put their name and in parentheses 1099 just for for better visibility. Of course, this could be a hot mess. You know, when, when, when you forget to put it or you put it on the wrong one and and sometimes some companies you have to 1099 uh, so for example, if you pay a lawyer, even if it's a law firm, you're supposed to 1099 lawyers for some strange reason, I don't understand why just lawyers and lawyers only. And in other cases, they could be. You can have a company. Name that sounds [00:30:30] like a like a person's name. Like if I create Hector Garcia Inc, right. And, um, and when I create the vendor in QuickBooks, I don't put Inc in it. I just put Hector Garcia. I'm going to assume that gets 1099. So like by by by by doing the extra work putting Inc LLC, you know, after the company names and then adding the word 1099 on it, letting you know that they do get a 1099 or let's say they don't get a 1099 for XYZ reason. Let's say you have a vendor that you pay 100% [00:31:00] through PayPal. Let's just say, you know, you pay 100% to PayPal. You know, in the vendor name, just put in parentheses in not in the one that that prints and a check. The one that shows in QuickBooks put no. 1099 PayPal or something like that. Again, to just to just keep a sanity check because at the end of the year, you're going to have to check into every single vendor and double check and triple check. And if you do the work proactively in the vendor names, they're just much easier to to identify.

Alicia Katz Pollock: Yeah, that's a great tip. I always at least put in ink. Um, going back to what you just said about withholding payments until [00:31:30] you have a 1099, there is a legal alternative where you're actually going to hold back their tax payments and, and, and pay it on their behalf. And there is a box on your 1099 NEC forms for the withheld, um, self-employment tax. If you are holding it back. Now, I don't know if how many people do that, but the option is there and I want to end it with my little rant about 1099. You know why I hate 1099? Because I think that [00:32:00] it's us doing the due diligence for the IRS, for all the people stressing out about, does this dollar amount belong on the form or not? I think, and please correct me if I'm wrong, that the IRS just looks at how much taxes were reported by the contractor and makes sure that it's more than the sum of the 1099 that they got. And if they got more money on 1099 than they reported, it's a flag. And otherwise I don't think the IRS really cares. And so I think that we are [00:32:30] spending hours and hours of time and wasted resources doing the due diligence for the IRS. That's my.

Alicia Katz Pollock: Now what's.

Hector Garcia: What's just to get some clarification, what's the part that you think are wasting time on on actually issuing 1099.

Alicia Katz Pollock: The fact that we have.

Hector Garcia: Or getting the exact dollar.

Alicia Katz Pollock: Amount, uh, getting.

Alicia Katz Pollock: The exact dollar amount, um, I mean, considering that every time I pay taxes, if the amount was wrong, the IRS always sends me a letter and says, oh, by the way, your amount was wrong. Here's some money back or, oh, you owe us [00:33:00] more money. I don't even I'm sure they quote unquote know the right amounts on these too. So but that's just me, I guess, being paranoid, but the, the the due diligence on the amounts if it's not I mean, has anybody ever been penalized that you know, of for forgetting to send a 1099.

Alicia Katz Pollock: Yes, yes, yes.

Hector Garcia: So as a tax preparer, I got some I got some words on this. Uh, number one, if you're off by 100 bucks, [00:33:30] that's not a big deal. If you underreported $30,000 from a 1099 in an audit, they can disallow that expense, and they disallow that expense. The company essentially pays the tax on that. Okay. Um, I had a situation where the company underreported the 1099, and the contractor had a really good relationship with the company. The contractor actually reported the right amount, like so for whatever reason, the company reported 30,000, but the contractor [00:34:00] reported, let's say 130,000, which was the actual amount. And then the IRS wanted to, um, hit that company up for $100,000 disallowed because there was actual $130,000 of payments to the contractor, but only 30,000 were out there. We actually got in contact with the contractor, and the contractor said no. Yeah, I reported the whole 100, 130. Um, and then the contractor gave us a copy of the tax return, and we, I went to the auditor and said, look, we underreported, um, [00:34:30] and here's the correction. Like, I immediately built the correction before even, like, asking if I should.

Hector Garcia: Here's the correction. And by the way, the taxpayer already, uh, reported the right amount. So, you know, so that taxpayer is not even going to be hurt by this. So the stars obviously aligned on that particular engagement. But the reality is they have the ability to disallow an expense that was 1099 that you didn't that you didn't report on little amounts. Yeah. That's not a that's not [00:35:00] a big, big deal. That's that's not a big problem on the tax side. The IRS wants to make sure that in the schedule C of the person receiving the 1099, the top line of the revenue matches, the 1099 or it's higher. Exactly. Otherwise they really don't care until they unless they audit. Right. Okay. So if you if you if you gave somebody the wrong 1099, you know, let's say it was 40,000, but it was supposed to be 50,000. Um, and that. That person [00:35:30] reports under 40,000. Then there's a problem because the reported under what you reported. Right. But if they always report over what you reported then it doesn't get automatically triggered.

Alicia Katz Pollock: Yes. That's that's where I was going with this. All right. Excellent. Um, great rant at the end. And let's call this one.

Hector Garcia: That's it. That was 1089. Good luck on the 1099 filing season. And we'll see you on the next one.

Alicia Katz Pollock: See you in the next one.