Set up 1099 form rules

Set up a contractor's 1099 rules so their expenses record to a 1099 form. This way, you're ready to file their 1099 form with the IRS.

How it works

You can set up 1099 rules for your independent contractor so paid US currency bills and spend money transactions (including overpayments and prepayments) in Xero record in their 1099. It excludes payments made from credit card and PayPal accounts, expense claims, and payments made in other currencies. This way, you account for workers you don't collect taxes from.

Decide which 1099 boxes you'll use (IRS website)

Add 1099 form rules

  1. In the Reports menu, select All Reports.
  2. Under Tax, click 1099 Report.
  3. Select the report year.
  4. Click Set up 1099 Rules.
  5. Set up your contractor's 1099 form.
    • Under Payments to, choose the group name you created for your contractor
    • Under Paid from, choose the expense account you'll use to pay the contractor.
    • Under Report as, choose the 1099 boxes you want the dollar amount to display in. If you're unsure, check the 1099 report thresholds.
  6. If you need to add more 1099 rules, click Add rule.
  7. Click Save.
You can add up to 12 rules to your 1099 report.

1099 report thresholds

  • Box 1: Rents = $600
  • Box 2: Royalties = $10
  • Box 3: Other Income = $600
  • Box 4: Federal Tax Withheld = $0
  • Box 5: Fishing Boat Proceeds = $0
  • Box 6: Medical Payments = $600
  • Box 7: Non-employee Compensation = $600
  • Box 8: Substitute Payments = $10
  • Box 9: Direct Sales = $5000
  • Box 10: Crop Insurance Proceeds = $600
  • Box 13: Excess Golden Parachute = $0
  • Box 14: Gross Payments to Attorney = $600

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