Create 1099 File

Creating the 1099 file is the first step in creating 1099s. This will total all information for the year and store what it calculates in three places. This ensures that if you were to make any changes to the core data after 1099s have been filed, it won't mess up the audit trail for what numbers were filed on the 1099s.

1) 1099 File: This is the raw numbers that are printed on the 1099 forms. You can view/edit these numbers on the Update 1099 window. The information stored here directly affects the actual 1099.
2) 1099 Detail File: The information stored here is the same as the 1099 file, but is broken down by well. You can view/edit these numbers on the Update 1099 Detail window. The information stored here directly affects the Owner 1099 Reconciliation report.
3) State Detail File: The information stored here is the same as the 1099 file, but is broken down by state. You can view/edit these numbers on the Update State 1099 window. The information stored here directly affects the State 1099 records.

You can edit the totals calculated by the software afterwards if needed. Use the "Update" windows to edit what was calculated.

You can create the 1099s multiple times if needed. When created a 2nd time you will be warned that they have already been created. If you choose to continue, it will completely remove the previously created records and replace them with what is calculated this time. This is important, because if you have edited any of the 1099 totals, you will lose those changes and will need to make them again.

Create 1099 File for year
The year that you want to create the 1099s for.

Show Advanced Options
Several options are available that can affect the 1099 processing. These options will only be visible if you mark this option to show
By default, the only option marked is to Create 1099s Based on Gross Revenue Instead of Net. Be sure to fully evaluate and understand any other options that you choose to mark. The video tutorials are a good place to review these options.

Create 1099s Based on Gross Revenue Instead of Net
When marked, the 1099s will be based on gross revenue received.
When unmarked, the 1099s will deduct taxes, withholding, and expenses from gross revenue to determine the amount to report.
By default, this option will be marked and the system will create 1099s for owners based on gross revenue received. We suggest leaving this marked.

There was always debate between our clients about whether the net amount (check amount) or the gross income earned should be reported to the IRS on the 1099. The wording of the IRS instructions used to be fairly vague, so we were forced to offer an option about whether the file should be built using net revenue or gross revenue. The current wording of the IRS instructions (since 2009) is much clearer: "Enter gross royalty payments of $10 or more before reduction for severance and other taxes that may have been withheld and paid." And "Gross oil and gas payments for a working interest." We continue to offer the option for how to report the revenue, but it has become clearer in recent years that the intent of the IRS is to have the gross revenue reported to them for all oil and gas 1099s created.

Only Include Revenue Earned this Year
When marked, the 1099s will be based off of the date of the run the amounts were initially allocated to the owner regardless of if it was paid out or remains in suspense.
When unmarked, the 1099s will be based off of the date that the amounts are actually paid to the owner. If an amount is placed in suspense, it won't be reported on the 1099 until the year it is released from suspense.
By default this option will not be marked. SherWare suggests leaving it unmarked.

Create 1099s by Tax ID Instead of Owner ID
This option allows you to consolidate the 1099 records based on the tax ID. This is helpful if you have multiple records setup for the same recipient and don't want to send them multiple 1099 records.
Different recipients with the same Tax ID will be merged and will receive one consolidated 1099 if this option is marked.

Exclude Transportation Revenue
Transportation revenue will be excluded from the 1099 totals when this option marked. This is usefule if you have had any marketing costs allocated to owners using the "TRANS" revenue type and you feel these amounts should not be reported on the 1099.

Build 1099s by Well
If each well has its own tax ID number this allows you to create the 1099s using each well as the payer instead of your company. If an investor has an interest in multiple wells then he will receive a 1099 for each of them. If you are using this option each well must have a tax ID specified for it on the options tab of the well information window. When viewing any 1099 reports you will need to remember to mark the "by well" option.
Generally this option will not be marked. If you are unsure if each well is defined as its own tax identity you can consult your tax advisor.

Minimum Royalty Int 1099 Amount:
Enter the minimum amount that must be earned before a 1099 will be created for a Royalty/override owner. When the 1099s are created they will only be created for royalty/override owners if they earned more than the amount specified here. The minimum is specified each year by the IRS within the instructions for the Form 1099-Misc.

Minimum Working Int 1099 Amount:
Enter the minimum amount of non-employee compensation that must be earned before a 1099 will be created for a working interest owner. When the 1099s are created they will only be created for working interest owners and vendors if they earned more than the amount specified here. The minimum is specified each year by the IRS within the instructions for the Form 1099-Misc.

Create
Click on the "Create" button to create the 1099 file for the selected year.

"Selected Year Has Not Been Approved"
If you get a message saying Selected Year Has Not Been Approved... when you create the 1099 file then you just need to be aware that the IRS has not yet released the 1099 standards for the year that you are creating the 1099 records for. If the IRS decides to change the standards then your 1099s may not be correct. You can still create the 1099s but it will be based off of the prior year's standards. You can recreate the 1099s again at a later time and it will replace them with the correct information if any changes are made. Once the IRS releases the standards then we will put out a patch with any necessary changes and remove this warning. If you feel the IRS should have already released the standards by now then you can check our website to see if you are at the latest version of the software. If you are not at the latest version of the software then you will need to update to the latest version of the software and this message will likely be removed.

Adjusting 1099 Totals
Adjustments that are needed for 1099 totals can be made in two general ways.

1) Adjust Owner History
The "Owner History" window can be used to add are adjust the totals for an owner. Changes made on this window directly affect the history of the software so they will affect other reports as well. Since the 1099s are created from this same history, adjustments made on this window need to be made prior to creating the 1099s. This is typically the best option if you only used the software for a portion of the year and want to plug in the missing amounts. The nice thing about making changes this way is that you only have to enter it once, and you don't lose your work if you have to re-create the 1099s because you are editing the numbers that the 1099s pull from.

2) Update 1099 totals.
You can use the "Update 1099 File", "Update 1099 Detail File", and "Update State 1099 File" windows to adjust the 1099 totals. These changes only affect the 1099 and will be made after the 1099s are created. These changes will likely need to be entered three times, once for each window, and will be lost of the 1099s are re-created.