The Ultimate 1099 Checklist Template Every Accountant Needs

Don’t miss a step when it comes to handling 1099s! This Ultimate 1099 Checklist Canopy Template saves the day, making the process smoother, faster, and more organized than ever. Managing 1099s can be daunting without a structured approach. With this streamlined 7-phase template, you’ll have everything you need to simplify vendor management, ensure data accuracy, and boost client collaboration for timely and accurate filings.

Step 1: Review and Update the Vendor List with Client Approval

A solid vendor list is the foundation of accurate 1099 processing. Start by thoroughly reviewing your client’s vendor list in QuickBooks Online or other general ledger systems.

1. Vendor List Cleanup: Check for duplicate entries and merge as necessary. Identify any vendors that have been inactive for years.
2. Working Document: Document inactive vendors in a worksheet and send it to the client for approval. Ensure the client can easily review and approve this list, tracking how the list is sent for future reference.
3. Implement Client Feedback: Based on client feedback, update the general ledger to remove inactive vendors.

Step 2: Prepare and Send 1099 Vendor Detail Report for Client Review

Once the vendor list is updated, generate a 1099 vendor detail report to confirm 1099 recipients.

1. Generate Report: Run a 1099 vendor report. In QuickBooks Online, you can use an expense-by-vendor summary on a cash basis or leverage the W9 request feature. For Xero users, create an expenses-by-contact report using a 1099 group. Export this report to Excel and filter out vendors who don’t require a 1099.

2. Share for Client Review: Copy and paste information to the “Working Doc” and send to the client for review, documenting the delivery method. 

Pro Tip: Google Sheets can facilitate real-time updates and easy progress tracking.

3. Request Missing Details: Create a request for any missing information (e.g., W9 forms with business name, address, FEIN/SSN, email address, and total payment amount).

Step 3: Prepare and Send an Engagement Letter with 1099 Details and Pricing

Send an engagement letter to formalize the process. This letter will outline the anticipated number of 1099 forms needed and the associated pricing, setting clear expectations with the client. In some firms, this step is performed before any work is performed. We choose to do it once we have an idea of the number of 1099s for the given client with an expected price. 

Step 4: Perform TIN Check and Notify Client of Failed Matches

All vendors should be subject to a TIN (Tax Identification Number) check to avoid IRS rejections and penalties. This step helps catch mismatches before the final filing.

1. Run TIN Check: Document the method used for TIN matching, ensuring the legal name, Tax ID, and address align with W-9 records.

2. Notify Client of Failed Matches: If any TINs don’t match, notify the client and confirm who will request updated W-9s from affected vendors.

Step 5: Close Books

Before preparing 1099 drafts, ensure all accounts are reconciled, and all vendor payments have been captured accurately in the accounting software.

1. Confirm Allocation: Verify that all outstanding payments, including checks, app transactions, and cash payments, have been recorded.

2. Year-End Close: If the software isn’t fully reconciled by year-end, connect with the year-end close process owner or client to address any unresolved issues.

Step 6: Prepare and Send 1099 Drafts for Client Review

Now, it’s time to draft the 1099 forms. The client should review these drafts to catch any last-minute adjustments before filing.

1. Create Drafts: Using 1099 software, enter vendor details, download drafts, and save them as PDFs.

2. Send Drafts to Client: If necessary, send drafts to the client, noting the date sent, the due date for feedback, and the delivery method. Document this to keep track of the client’s review.

Pro Tip: Mask Vendor Tax IDs for security purposes. 

3. Revise as Needed: Update the drafts based on client feedback to ensure final accuracy.

Step 7: Complete 1099 Filing, Distribution, and Documentation

With everything finalized, proceed with filing, distributing, and saving copies of the 1099s.

1. Finalize Edits: Post any last updates in the accounting software, and download the final 1099 report.

2. Save Final Copies: Download and save the final 1099s as PDFs.

3. Print Copies (if needed): If mailing physical copies, print them for distribution.

4. Send 1099s: Distribute 1099s to clients via mail, portal, or other documented methods. Send copies to each vendor, and ensure all necessary federal and state filings are completed. Document how each copy was sent to maintain records.

Say Goodbye to Costly Mistakes! This 7-Phase 1099 Process Ensures Accuracy and IRS Compliance.

By following this six-phase process, you ensure that every detail is reviewed, tracked, and completed in a way that minimizes errors and IRS penalties. Each phase is crucial, from initial vendor list reviews to final document distribution. Leveraging tools for clear communication and team collaboration enhances efficiency, making 1099 processing a seamless experience for you, your team, and your clients.