How to Process a Bonus Check/1099 Taxable Compensation This article covers how to process a bonus check or other 1099 Taxable Compensation through A/P. It is advisable to consult with your CPA on how you should process bonus checks, as this can vary depending on how the individual is classified per IRS Guidelines, whether an employee or independent contractor.
Bonuses are typically taxable, so you want to make sure the Vendor ID is set to 1099 status by entering their SS# or Tax ID# in the Social Security # field. When posting the payable, make sure the amount of the bonus check is taxable. You will need to enter the G/L Account Number for Bonus Wages.
Review the AP Vendor Set-Up
Navigate to Accounts Payable/Vendor Maintenance
Look-up the Vendor by the Vendor ID
Choose the Select button once the vendor is highlighted
Review that the Social Security # field is complete and agrees to the vendor provided W-9
Review that the Vendor Type is correctly classified – adjustments to the Vendor Type can be made based on selecting from the pre-populated classifications in the drop down menu
Select Save to save changes made to the Vendor Maintenance record
Please note that the Social Security # field accommodates either the 9-digit Social Security # or 10-digit FEIN #. Be sure to include the dash(es) for proper display when printing the 1099.
After reviewing the Vendor Set-up, the next step is to process the payment.
Enter the AP Invoice and Pay the Vendor
Navigate to Accounts Payable/Open Item Maintenance
Look-up or Enter the Vendor ID
Choose the Select button once the vendor is highlighted
Select Manually Enter Invoice
Enter the required information in the AP Invoice #, Invoice Date, PO # (99 if Non-Inventory) and the Balance fields of Current, Beginning, and Taxable amount – this is the total that the check will be written for and included on the 1099 as taxable compensation.
Enter a REF (optional) for further details related to the invoice or expense
Select and choose the GL Acct – Wage or Bonus GL account, as available or instructed by CPA - the GL account defaults from the Vendor Maintenance screen, but can be overridden to any other GL account in the chart of accounts
Select Accept to save the A/P item
Select and process the payment to the Vendor
Please note that based on the executed steps above, the check disbursement will be captured based on the date the check is written. To ensure proper cut-off, be sure to update the A?P Open Item Adjustment Register, as well as the A/P Check Register for all bank accounts that disbursements are paid from as part of the recommended daily/monthly/annual processing requirements. This will ensure that the 1099 information is captured in the correct period and fiscal year for reporting purposes.
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