Understanding Contract and Pension Employee Setup

To generate the appropriate year-end 1099 forms, you must set up tax method information for pension and contract employees before you process the pay information for that year. When you assign the correct tax method to an employee, history records that are created as a result of the payroll process are assigned the appropriate tax history type. Based on the tax history type, the Payroll system generates 1099-R forms for pension employees and 1099-MISC forms for contract employees.From year 2021, the system also generates 1099-NEC form for contract employees.