I’m in the process of finishing up a data conversion from Lawson to Dynamics NAV 2016. The last piece to figure out are 1099 balances from checks issued before we converted. (We only converted open AP Items, so we don’t have the history necessary to calculate 1099s at year end.)
I’ve looked around the web and found a variety of incorrect and partial answers. Many solutions have a lot of discussion about invoices and credits. But I think I’ve found a much simpler way of doing this.
While converting 1099 balances is a fairly rare occurrence, you may find it useful for other scenarios as well. (For example, in many systems, I use “bank accounts” for clearing things that aren’t real payments.)
But before we start, there are three things you need to remember about NAV and 1099s:
1. If you have paid invoices in the system for the year, it’s easy to update 1099 amounts.
Just go to the vendor ledger, find the appropriate invoice, and adjust the IRS-1099 amount and/or the IRSS 1099 Code. Note that this is done at the invoice or credit memo level, not at the payment level. The fields may need to be added through choose columns:
2. 1099 amounts are specified on the invoice/credit memo and/or purchase journal line level.
You cannot issue a payment to a vendor without a prior document and have the balance affect 1099 output.
3. You must pay a document for it to affect the 1099 balance.
If you just convert the invoice and don’t pay it, you won’t have any 1099 effect.
The Basic Point
To understand this process, you need to remember your T-Accounts. Just like when we convert open items, we want the invoice to represent our credit/debit balance for the same account, thereby having no general ledger effect. We’re going to create an invoice and matching payment that will have no G/L effect, yet still update 1099 balances.
With that out of the way, let’s get started.
Step 1 – Create a One-Time Setup
First, we need to choose an account that will be our “clearing account.” If we only have one payables account, we can use that. Or we can create a special one-time clearing account for this purpose.
To make this easy, let’s create a one-time clearing account:
Now, let’s create a dummy bank account to “create our checks.” (We don’t want to create checks in our regular bank accounts because that will mess up our reconciliation.)
To do this, we go to bank account posting groups:
We set up a new one that points to the new account 22300-1 previously set up.
By the way, I like using accounts as part of my codes on many posting groups. It makes it easier to keep things straight if I only use the groups to specify accounts.
Now that we have our posting group, we can set up the bank account. Let’s name it with a “Z” so it will always fall to the bottom of our list (never to be used again).
We only care about No., Name, Last Check No., and Bank Acc. Posting Group. We’re using the Bank Acc. Posting Group Set Up in our previous setup.
One last point: I’m assuming that all your vendors are setup with proper 1099 information. If you’re not sure, confirm and complete if necessary before continuing.
With that, setup is done.
Step 2 – Create the Purchase Journal/Purchase Invoice
Next, we create the invoice that represents the amount we want to have on our 1099s. Here, I used RapidStart, which allows me to enter 1099 codes and amounts for purchase journals. For the purpose of this example, I’m going to enter the 1099 . (Note we can’t do this from the Purchase Journal page.)
We can enter a 1099 code on Purchase Invoice, so let’s do that:
Now, we only care about a few fields beyond the normal invoice stuff:
- Invoice Number. We put 1099 in front of the invoice number. This makes it easier to find in our check run.
- Due Date. We want to choose a due date that’s before our conversion date. This way we can pay only the dummy 1099 invoices.
- G/L account for the line. This should be the clearing account we set up in the above step.
- IRS 1099 Code. The point of this exercise.
Once we’re done, we can post our records.
If we look at the register for this posting, we’ll see that the system debited our “clearing” account and credited accounts payable:
Step 3 – Cut the Checks
It’s important we set the due date correctly so when we select payments in our payment journal, we find only the records we care about.
When we reach “suggest vendor payments,” we use our dummy bank account for the check run:
Now here’s the payment we want to make:
And we can see it’s going against our dummy bank account.
Once we print the checks and post them, we can look at the entries for our check:
We see that our accounts net to zero.
Now, we can print our 1099s and close our invoice with no effect on our ledger.
Any questions? If so, feel free to comment below.