TL;DR

Dynamics 365 Business Central now supports end-to-end 1099 processing, including vendor setup, transaction tracking, validation, and electronic filing directly to the IRS through the IRIS system. Using assisted setup, workflows, analysis views, and built-in reporting, organizations can manage 1099 compliance accurately while reducing manual effort and audit risk.

Overview: 1099 Processing in Dynamics 365 Business Central

This video walks through the complete 1099 setup and processing workflow in Microsoft Dynamics 365 Business Central. It highlights Microsoft’s newly released functionality that allows organizations to electronically transmit 1099 information directly to the U.S. federal government from within Business Central. The demonstration covers the full lifecycle, including enabling the 1099 feature, setting up vendors, recording transactions, validating results, and submitting forms through the IRS IRIS system.

Setting Up the 1099 Feature in Business Central

The process begins with enabling the IRS Forms feature using Business Central’s assisted setup. Working in a brand-new company, the presenter runs the “Set up IRS forms feature” routine, selects the appropriate reporting year (2025 in this example), and saves the default settings. The setup is intentionally simple and requires only a few clicks to complete.

Once enabled, the IRS reporting period screen becomes available. From this screen, users can view the active reporting period, review supported 1099 forms, and see all available form boxes required to capture and report 1099 information to the federal government.

Configuring Vendors for 1099 Reporting

Assigning 1099 Forms and Boxes to Vendors

Each vendor that requires 1099 reporting must be assigned the appropriate 1099 form and form box. This configuration is completed on the vendor record and is required for every vendor that will be included in 1099 reporting. The presenter reviews an existing vendor already configured with a form and box, then walks through the creation of a new 1099 vendor from scratch.

After entering basic vendor details such as name and address, the missing 1099 information is added by selecting the IRS reporting period, form number, and form box. Once saved, this information is stored directly on the vendor card.

Enabling Electronic Delivery of 1099 Forms

Business Central also supports emailing 1099 forms to vendors. To enable this option, the vendor must agree to receive their 1099 electronically. This preference is recorded on the vendor card and allows Business Central to send the recipient copy of the 1099 by email once forms are generated. Required tax details, such as the federal ID number, are also captured at this stage.

Using Workflows to Support 1099 Compliance

To help ensure compliance, the presenter demonstrates how Business Central workflows can be used to enforce data validation and approvals for 1099 vendors. Two workflows are highlighted: one that triggers when a vendor is created, and another that monitors changes to a specific 1099-related field on the vendor record.

When a vendor is flagged as a 1099 vendor, an approval request is automatically generated and routed to a designated approver. In the example, the approver reviews the request, confirms the necessary documentation is on file, and approves the change. Once approved, the vendor becomes available for purchasing, payables, and payment processing.

Recording 1099 Transactions and Payments

Creating Purchase Invoices for 1099 Vendors

The video then moves into transaction processing. A purchase invoice is created for consulting services using the newly configured 1099 vendor. Because the vendor is marked as a 1099 vendor, the 1099 reporting flag is automatically selected on the invoice.

The presenter also demonstrates a mixed-invoice scenario where part of the invoice is 1099-reportable and part is not, such as inventory items or supplies. In these cases, individual lines can be marked as non-reportable for 1099 purposes. This flexibility is especially useful for vendors that provide both services and goods.

Understanding When 1099 Amounts Are Reported

An important distinction is emphasized: 1099 reporting is based on payments, not invoices. While 1099 information is captured on the invoice, it does not become reportable until the invoice is paid. If an invoice is posted in one year but paid in the next, the 1099 amount is reported in the year the payment is made.

To demonstrate this, the presenter pays the invoice through the Payment Journal in Cash Management, applies the entries, prints the check, and posts the payment. Because the payment is posted in 2025, the 1099 amount is included in the 2025 reporting year.

Reviewing and Validating 1099 Data

Vendor Ledger Entries and 1099 Details

After posting the payment, the presenter reviews the vendor ledger entries. Both the invoice and the payment appear in the ledger, and the invoice displays detailed 1099 information including the reporting period, form number, form box, and 1099 amount. The presenter confirms that the total invoice amount and the reportable 1099 portion are correctly captured.

Using Analysis Views to Reconcile 1099 Totals

To validate totals, the presenter uses Business Central’s analysis feature to create a view that summarizes 1099 amounts by vendor for the reporting year. This analysis is built from vendor ledger entries and provides a clear way to reconcile reported amounts against actual transactions before generating official forms.

The presenter also shows how 1099 amounts can be adjusted directly at the transaction level. These adjustments update the 1099 reporting amount without changing the posted invoice values, helping maintain an audit trail for compliance purposes.

Creating and Managing 1099 Form Documents

With transactions validated, the presenter moves to 1099 form documents. Existing documents for the reporting year are reviewed, and a new form document is created for the newly added vendor. Before finalizing forms, users are encouraged to recheck vendor ledger entries and analysis views to ensure accuracy.

Form documents can be regenerated for the reporting year, replacing prior versions if needed. If corrections are required, they can be made either through vendor ledger entries or directly within the 1099 form document using the manage and edit function. The form document displays the calculated 1099 amount alongside the minimum reporting threshold for the selected form box.

Filing 1099s Electronically Using IRIS Transmission

Submitting 1099 Data to the IRS

Business Central supports electronic filing of 1099s through integration with the IRS IRIS system. Users create an IRIS transmission by selecting the reporting period and submitting the forms. Business Central validates required data, generates the XML file, and sends it to the IRS.

If the IRS returns errors, users can correct the issues and resend the transmission until it is accepted. The Transmission History page tracks submission status, transmission type, and timestamps. Users can also review exactly what was sent using the Unique Transmission ID and download IRS acknowledgement files to review any errors or confirmations.

Correcting Accepted 1099 Submissions

If changes are needed after a transmission has been accepted, Business Central allows corrections. Users reopen the 1099 document, enable corrections, update the amount, and release the document again. The system flags the transmission line for correction, and when the correction is sent, only the affected records are transmitted and marked as corrected once processed.

Sending 1099 Forms to Vendors

After successful IRS submission, the presenter demonstrates how to email 1099 forms to vendors who have opted in to electronic delivery. The recipient copy of the form is sent as an email attachment directly from Business Central. While the visual layout of the form may differ slightly due to recent updates, it represents the official 1099 form sent to the vendor.

Summary: End-to-End 1099 Processing in Business Central

The video concludes with a recap of the full process: enabling 1099 functionality using assisted setup, configuring 1099 vendors, applying workflows for compliance, recording invoices and payments, validating and adjusting 1099 amounts, generating and managing 1099 form documents, submitting forms electronically through IRIS, and emailing completed 1099s to vendors. This end-to-end workflow demonstrates how Business Central supports accurate, compliant, and streamlined 1099 processing within a single system.