As tax season approaches, businesses using Sage 50 1099 must ensure that 1099 forms are correctly generated and filed to comply with IRS regulations. Proper 1099 setup helps avoid penalties and ensures smooth tax reporting. This guide provides a step-by-step process for setting up, generating, and filing 1099 forms in Sage 50.

Step 1: Verify 1099 Eligibility

Before setting up 1099 forms, confirm which vendors require 1099 reporting. Businesses must file 1099-NEC or 1099-MISC for payments of $600 or more made to non-employee service providers.

Who Needs a 1099?

✅ Independent contractors and freelancers
✅ Attorneys and legal services
✅ Landlords for rental payments
✅ Other non-employee service providers

Who Doesn’t Need a 1099?

❌ Corporations (except for attorneys and medical providers)
❌ Payments made via credit cards or PayPal (reported separately by processors)
❌ Employees (W-2 required instead of 1099)

Step 2: Set Up 1099 Vendors in Sage 50

1. Enable 1099 Tracking for Vendors

1. Open Sage 50 and go to Maintain Vendors.

2. Select the vendor that needs 1099 tracking.

3. Click on the General tab and verify:

   • Business Name Address
   • Taxpayer Identification Number (TIN)
   • Valid Payment Information

4. Click on the 1099 Settings tab and:

   • Check the box for 1099 Vendor.
   • Choose the correct 1099 Type (NEC or MISC).
   • Assign the correct 1099 expense account.

5. Click Save and repeat for all 1099-eligible vendors.

Step 3: Categorize Payments for 1099 Reporting

To ensure accurate reporting, payments to 1099 vendors must be assigned to the correct 1099 expense accounts.

1. Navigate to Maintain Chart of Accounts.
2. Locate or create a 1099-eligible expense account (e.g., Contractor Services, Rent, Legal Fees).
3. Assign this account to 1099 transactions when recording payments.

Step 4: Record Vendor Payments Properly

All 1099-eligible payments must be recorded correctly throughout the year.

1. Go to Tasks Payments.
2. Select the Vendor Name.
3. Enter the Payment Amount and Expense Account.
4. Click Post to save the transaction.

Step 5: Generate 1099 Reports in Sage 50

Before filing, verify that 1099 data is accurate by generating a 1099 Summary Report.

1. Navigate to Reports Forms Vendor Reports 1099 Report.
2. Select the tax year and review vendor payments.
3. Ensure all 1099 vendors appear with the correct payment amounts.
4. If errors exist, update payments in the vendor record.

Step 6: Print or E-File 1099 Forms in Sage 50

Option 1: Print 1099 Forms

If filing by mail, use IRS-approved pre-printed 1099 forms.

1. Navigate to Reports Forms Forms Tax Forms.
2. Select 1099 Form and choose the appropriate tax year.
3. Insert pre-printed 1099 forms into your printer.
4. Print Copy A (for the IRS), Copy B (for the recipient), and Copy C (for business records).

Option 2: E-File 1099 Forms

Sage 50 integrates with Aatrix for electronic filing.

1. Navigate to Reports Forms Forms Tax Forms 1099 E-filing.
2. Select the 1099 form type (NEC or MISC) and tax year.
3. Verify vendor information and payment totals.
4. Click Submit to file directly with the IRS and state agencies.

Step 7: Send 1099 Forms to Vendors

The IRS deadline for sending 1099 forms to vendors is January 31st. Ensure recipients get their copies on time.

✅ Mail or email Copy B of 1099-NEC or 1099-MISC to each vendor.
✅ Keep Copy C for business records in case of an audit.

Step 8: Troubleshoot Common 1099 Issues

Vendor Missing from 1099 Report

✅ Confirm that the vendor is marked as 1099-eligible in Sage 50.
✅ Check that payments are linked to a 1099 expense account.
✅ Ensure payments meet the $600 threshold for reporting.

Incorrect 1099 Payment Amounts

✅ Review vendor payment history for errors.
✅ Run a 1099 Report to verify correct categorization.
✅ Reclassify transactions under the correct 1099 account if necessary.

E-Filing Errors

✅ Make sure Sage 50 tax updates are installed.
✅ Check that vendor TINs and addresses are correctly entered.
✅ Use Aatrix validation tools to verify filing status.

1099 Filing Deadlines and Compliance

To avoid IRS penalties, follow these important 1099 deadlines:

✅ January 31st – Deadline to send 1099 forms to vendors and file with the IRS.
✅ February 28th – Deadline for paper filing (if applicable).

Late filing penalties range from $50 to $560 per form, depending on how late you submit.

See Also: Sage 50 Error 1935

Final Thoughts

Setting up 1099 processing in Sage 50 correctly ensures smooth tax reporting and compliance with IRS regulations. By following these steps, businesses can accurately track payments, generate reports, and e-file 1099s without errors.