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Including K Records in the IRS 1099 E-File in Dynamics 365 Finance and Operations

Dynamics 365 Finance and Operations supports 1099 e-file out of the box, however, it is not immediately apparent how to include “K” records in the 1099 e-file data.

In this blog post, you will gain an understanding of how to set this up so you don't run into this headache.

What are "K" Records?

The first thing you must do when completing this process in Dynamics 365 Finance and Operations is understand what “K” records are. IRS Publication 1220 Publication 1220 (Rev. 9-2024) explains what “K” records are and what the format needs to be in the 1099 e-file. Note: This format can change from year to year, or even during the year so make sure you have the latest publication.

Since the publication is 162 pages, we will summarize the meaning of “K” records for you: A “K” Record is a summary for a given State or US Territory, which includes the total number of payees (Vendors) and the payment amounts for that State or US Territory.

Criteria for Including K Records:

There are two things you have to be sure of before doing this:

• That State must be approved for the CF/SF (Combined Federal/State Filing) Program.
• Specific state codes are assigned within that program and must be used in the e-file. These are subject to change with updated publications.

How to Set It Up in Dynamics 365 Finance and Operations

1. You need to turn on the Public sector license in the License configuration setup. You do not need to select any options under the Public sector if none apply to the Legal Entity for this to work.
   
2. In Organization administration > Organizations > Legal entities, in the Tax 1099 fast tab, set the Combined Federal/State filer to Yes.
   This needs to be set up in all Legal Entities using “K” Records in the 1099 e-file.
   
   
3. In Accounts Payable> Periodic Tasks> Tax 1099 > Combined federal/state filing codes you need to identify the IRS state code with the states that the Legal Entity is paying vendors to if they are part of the CF/SF Program.
   This needs to be set up in all Legal Entities using “K” Records in the 1099 e-file.
   Note: The IRS state code does not show the preceding 0 in this setup screen below, but it does populate the e-file correctly as 01, 04, etc.
   
   
4. Make sure the Tax 1099 fast tab is populated correctly for the vendor. Navigate to: Accounts Payable> Vendors > All Vendors.
   
   

Data Entry for Invoices

When entering AP invoices make sure State/providence is populated under the 1099 tab.

Once the invoice is paid, the 1099 amounts will show for federal and state in the Vendor settlement for 1the 099s screen.

To run the IRS 1099 e-file:

1. Navigate to Accounts Payable> Periodic tasks > Tax 1099 > Vendor settlement for 1099s.
2. At the top click Create Export file.
3. Populate the parameters, then click O.

Results of the IRS 1099 e-file:

1. Total amount paid to the vendor for that state
2. Total number of vendors paid for that state
3. Total amount paid to that state

This post outlines the steps to configure the 1099 e-file functionality within Dynamics 365 Finance and Operations for exporting K record information. While the process is manageable, it is not entirely straightforward, therefore we hope you will find this post helpful to facilitate setup in your system.

Learn More About How to Manage Tax Forms in Dynamics 365 Finance and Operations

If you need assistance with this process, our team can help you do that and find other ways to get the most out of Dynamics 365 Finance and Operations. Get in touch with the Stoneridge experts to learn more.

Co-Author: Emily Stockton

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