Features in Microsoft Dynamics AX That Support Form 1099-MISC Reporting

Prepared by: Greg Griffith of Interdyn BMI

Overview

In the USA, it is tax season every spring from January through April 15.  For enterprises, this includes an obligation to send out IRS forms like Form 1099-MISC’s on a timely basis.

Form 1099 is a document of the US Internal Revenue Service (IRS) that many companies must use to report on payments to small vendors and individuals. For many companies, like manufacturers or distributiors, most reporting will involve Form 1099-MISC reporting for Box 7 – Non-Employee Compensation. This blog article describes features in Microsoft Dynamics AX that support Form 1099-MISC reporting.

Disclaimer: This information is likely to be helpful but please consult your own sources for complete tax accounting and software information.  Please use this information at your own risk.  Thank you.

Vendor Setup

  1. Go to the All Vendors list at one of the following locations:
    1. Accounts payable > Common > Vendors > All Vendors
    2. Procurement and sourcing > Common > Vendors > All Vendors
  2. Select a Vendor or enter a new Vendor.  If needed, enter Edit mode.
  3. Go to FastTab for Tax 1099.
    1. See screenshot for illustration and additional steps below:
    2. If the Vendor needs Report 1099 reporting, then do the following steps:
      1. Select the checkbox for Report 1099.
      2. Enter value for Federal tax ID:
      3. Enter value for Tax ID type.
      4.  Enter value for: Name to use on the 1099. Options are Vendor name; Doing business as.
      5. If applicable, enter value for DBA:
  4. Within the Vendors form on the Vendor tab, go to button for Setup > Vendor state tax IDs. Form will open.
    1. Complete data as needed.
    2. Close the form.

Recording Form 1099 Reportable Transactions

Once a Vendor has been setup for Form 1099 Transactions, then transactions will begin to accumulate automatically:

  • AP Invoice Journal (Non-PO Invoices)
  • AP Vendor Invoices (PO Invoices)

Invoice Journal

On an Invoice Journal, transactions for a Vendor who has been set up for Report 1099 will be automatically posted as 1099 transaction. See screenshot.  The invoice journal has a tab for 1099 activity but no entries are required unless you want to change values such as over-riding the amount to something less than the full amount.  The 1099 tab can also be a place to enter a State code (if needed).

Even if you do not enter a value in the 1099 amount field, any payment that is posted for the invoice amount contributes to the 1099 total for the specified 1099 box. If you do enter a 1099 amount, the amount that you entered is used instead of the posted payment amount.  You can clear the 1099 box field for any invoice line that needs no 1099 tracking.

Vendor Invoice

Similar to an Invoice Journal, the Vendor Invoice will automatically post transactions as 1099 transactions for a Vendor who has been set up for Report 1099. See screenshot below.  The Line Details area of the Vendor Invoice form has a tab for 1099 activity but no entries are required unless you want to change values such as over-riding the amount to something less than the full amount.  The 1099 tab can also be a place to default in a Delivery State code (if needed).  Even though a 1099 amount does not show, it will be recorded.  A Delivery state amount will not be recorded unless a value is provided for Delivery state.  See screenshot below.

Even if you do not enter a value in the 1099 amount field, any payment that is posted for the invoice amount contributes to the 1099 total for the specified 1099 box. If you do enter a 1099 amount, the amount that you entered is used instead of the posted payment amount. You can clear the 1099 box field for any invoice line that needs no 1099 tracking.

Updating Vendor Transactions Mid-Year

If a Vendor is set up at mid-year for Report 1099, then transactions from earlier in the year can be added to the 1099 transactions using the Update process.  Steps are described below:

  1. Go to: Accounts payable > Common > Vendors > All vendors.
  2. Select Vendor.
  3. On Vendor tab, select action button for Update 1099. Form will open.
  4. Enter parameters on the form and press the OK button.

Note: This form provides a way to update the State/province code on existing 1099 transactions, if needed.

  1. When ready, press the OK button.

See screenshot for details:

Adjusting Form 1099 Transactions

  1. Go to: Accounts payable > Periodic > Vendor settlement for 1099’s.  Form will open.
  2. Select text button for Tax 1099 transactions. Form will open.
  3. Set and remove parameters and filters as needed.
  4. Edit fields as available and needed.   Many values can be changed.  See screenshot:

1099 Transactions – Beginning Balances

When going live on AX 2012 during mid-year, you may want to bring in a Form 1099 transaction balance from a legacy system.  In order to do this, one way is to enter a “dummy invoice” equal to the total of 1099 transactions from the legacy system.  Enter an offset account and remove the Method of Payment it so that it does not get selected to be paid.

You may want to use a clearing account such as an AP clearing account.  If so, use an AP invoice journal with offset to Account 2002.  Use an AP Payment journal with Method of Payment left blank and an offset to the AP Clearing Account.

1099 Reporting

For 1099 Reporting options, see the following menu paths:

  • Accounts payable > Reports > Tax 1099 > Tax 1099 summary
  • Accounts payable > Reports > Tax 1099 > Tax 1099 detail
  • Accounts payable > Periodic > Vendor settlement for 1099s

Note: Microsoft has published software “hotfixes” at the end of calendar years to help support Form 1099.  Look for Microsoft hotfixes in the usual places.