As businesses develop and expand, they often depend on the proficiency of contractors to finish certain tasks and projects. Managing such contractors with ease is important to uphold seamless operations and generate precise financial records.
With QuickBooks, you can set up and handle contractors in the system. In today’s guide, we will take you through the step-by-step guide to set up and pay independent contractors or 1099 employees in QuickBooks Online.
This article will include everything, whether you are new to QuickBooks accounting software or just wish to streamline your business processes.
Let us begin by understanding what a 1099 employee is in the first place.
What is a 1099 Employee?
A 1099 employee, also called an Independent Contractor, is a certain kind of individual who offers services to a business as per a specific contract. However, he/ she is not considered an official employee of the particular organization.
In contrast to regular employees, Independent Contractors are usually responsible for handling their own taxes and benefits. Furthermore, such employees have the autonomy to set their own working hours and can work with several clients.
Not to mention, the role of such employees is often project-based, and are paid for the deliverables they create instead of the time worked.
How to Set up Contractors in QuickBooks Desktop & Online?
To set up your 1099 contractors choose your payroll service.
1. Set up Contractors in QuickBooks Online
Step 1: Add a Contractor as a Vendor
In case you haven’t already; enter the contractors as a vendor in QuickBooks:
- Click Payroll and then choose Contractors.
- Then you have to select Add a contractor.
- Enter the information for your contractor or choose the Email this contractor button to have them complete it.
- When finished, choose Add contractor.
Step 2: Track Contractor Payments for 1099s
You must begin keeping track of the contractor’s payments now that you have added them as a vendor.
- Go to Sales or get paid & pay, then Vendors.
- Open the profile of the vendor you want to track
- Then you have to select Edit.
- The Track Payments for 1099 checkbox must be chosen and checked.
Behind the scenes, QuickBooks will start keeping track of all of their payments. The tracked payments can be added to the form easily when you are prepared to file your 1099s.
2. Set up Contractors in QuickBooks Desktop for Windows
Enable the feature to begin tracking contractors for 1099 payments:
Step 1: Turn on the 1099-MISC Feature
- First, You have to select the Edit menu and then you have to select Preferences.
- Then you have to choose the tax: 1099 menu and then select the tab of Company Preferences tab.
- Do you file 1099-Misc forms? In the section, you have to select yes.
- When you are finished you have to select OK to save your settings.
Step 2: Add a Contractor as a Vendor
- Select Vendor Center from the Vendors menu.
- Choose New Vendor from the dropdown menu, then select New Vendor.
- Each tab’s fields should be filled up. A W-9 contains this information. Later, you can edit and change this info later.
- Select OK when you’re finished.
Step 3: Track Contractor Payments for 1099s
- Select Vendor Center from the Vendors menu.
- Then you have to choose Edit after choosing a vendor’s name.
- Review the information by selecting the Address Info tab:
- Verify that your ZIP code and two-letter state abbreviation are both right.
- If the vendor is a person, the First Name, M.I., and Last Name fields should all contain the vendor’s legal name.
- Leave the Company Name field empty if you only know the name of the company and not the person’s name. They won’t appear twice when you create your 1099-MISCs because of this.
- After that, you have to select the Tax Settings tab and then you have to select and check the Vendor eligible for 1099.
- In the Vendor Tax ID field, you have to enter the vendor’s tax identification number.
- After finishing you have to select OK.
Behind the scenes, QuickBooks will start keeping track of all of their payments. The tracked payments can be added to the form easily when you’re prepared to file your 1099s.
3. Set up Contractors in QuickBooks Desktop for Mac
Enable the feature to start tracking the contractors for 1099 payments:
Step 1: Turn on the 1099-MISC Feature
- Select Preferences from the QuickBooks menu.
- Then you have to select the 1099s section.
- After that, you have to select and check the 1099-MISC forms are filed box.
- For the purpose of reporting and taxation, choose the accounts for each 1099 type that applies to your business:
- Choose an account from the dropdown list in the Account column.
- In order to link multiple accounts: Select Selected Accounts from the drop-down list, then click the desired accounts in the Select Accounts window. Once all appropriate accounts have been chosen, click OK.
- Not all 1099 categories may be required for reporting by your company. Most companies simply disclose amounts for Box 7: Nonemployee Compensation. Please contact the IRS or an accountant for more details on reporting requirements.
- Enter the new amount in the Threshold column to modify a threshold amount. This is optional.
Step 2: Track Contractor Payments for 1099s
- Select Vendors from the Lists menu to start.
- Then you have to choose a vendor in the Vendor List window, then click Edit Vendor.
- After that, you have to select the Address Info tab.
- Verify the ZIP code and two-letter state abbreviation are both in the Address field.
- If the vendor is a person, the First Name, M.I., and Last Name fields should all contain the vendor’s legal name.
- To avoid double names on the 1099-MISC form, leave the Company Name field empty if you only know the name of the company and not the person.
- Now you have to select the Additional Info tab.
- In the Tax ID field, enter the vendor’s tax identification number after checking the Vendor eligible for 1099 box.
- At last, you have to select OK.
How to Set Up a 1099 Employee in QuickBooks Online?
Setting up a 1099 employee in QuickBooks Online includes preparing a vendor profile for the contractor and creating them as a 1099 contractor in the system.
- Add the vendor details like names, tax identification numbers, contact details, etc.
- After the information is added, make sure that the vendor is marked as a 1099 vendor.
- Now add vendor payment details like routing number and account number, in case payments are done through direct deposit.
- Classify the vendors properly. Mention whether they offer services, goods, and other kinds of payments to make sure of precise reporting and monitoring.
- Once the vendor information is added, go to the vendor profile and choose the Edit option.
- Now update the tax status to 1099 in the particular vendor information section.
- Make sure that the tax identification number is added accurately.
- Ensure the Track Payments for 1099 is checked.
By performing such adjustments, QuickBooks Online will monitor and report payments done to the vendor automatically, making the process of meeting 1099 reporting requirements simple and trouble-free.
How to Pay a 1099 Employee in QuickBooks Online?
Paying a 1099 employee in QuickBooks Online includes preparing an expense transaction or a bill, adding the contractor details, choosing the expense account, and then saving the payment information.
Step 1: Prepare a Bill
- To initiate the payment process for a 1099 employee, go to the Expense tab.
- Now choose New Transaction tab and then select Bill.
- After the bill is created, you must add the contractor’s name, tax identification number, address, etc. It is important to add the payment amount since it is the platform for precise 1099 reporting.
Step 2: Add the Contractor’s Detail
- To add the information of the contractor, go to the Vendors tab.
- Now choose the name of the contractor.
- Now add the details in the Tax Information section.
Note: This data is important to generate the Form 1099 year-end and for obeying the tax regulations.
Step 3: Choose the Expense Account
After adding the information of the contractor, the next step is to choose the right expense account for the payment to ensure proper financial recording.
Step 4: Add the Amount and Save
The payment procedure for a 1099 employee in QuickBooks Online includes adding the payment amount and then saving the transaction to finish the financial disbursement.
How to Pay Several 1099 Employees in QuickBooks Online?
Paying several 1099 employees in QuickBooks Online includes preparing an expense or bill transaction, including several contractors, adding the payment amount for every contractor, and saving the payment information.
1. Prepare a Bill
Starting the payment procedure for several 1099 employees in QuickBooks Online begins with creating a bill that includes the collective payment information for the related contractors.
2. Include Several Contractors
After the creation of a bill, the next step is to include several contractors in the transaction, mentioning the individual payment allotments for every 1099 employee.
3. Add the Amount for Every Customer
The payment distribution procedure includes adding the related payment amount for every 1099 employee, making sure of precise financial disbursement in the same bill transaction.
4. Save and Close
The last step is paying several 1099 employees in QuickBooks Online is to Save and Close the expense or bill transaction, making sure of precise recording and ending of the payment process.
How to Record Contractor Payments in QuickBooks Online?
Recording contractor payments in QuickBooks Online includes preparing an expense or check transaction, choosing the name of the contractor’s name, adding the payment amount, and saving the details of the transactions.
1. Prepare an Expense Transaction or Check
Starting the recording of contractor payments in QuickBooks Online includes preparing a check or expense transaction to precisely capture the financial payout for the particular services offered.
2. Choose the Name of the Contractor
Once the transaction has been created, the next move is to choose the particular contractor’s name for whom the particular payment is getting recorded, making sure of accurate financial acknowledgment.
3. Add the Payment Amount
You need to add the particular payment disbursed to a contractor, making sure of precise financial documents in the expense transaction or check.
4. Save and Close
Finishing the recording procedure includes completing the contractor payment record in QuickBooks Online, guaranteeing correct documentation, and saving and closing the check or expense transaction.
Note: Implementing such important steps into the recording procedure in QuickBooks Online ensures the clarity and precision of the contractor payments, offering an overall overview of financial activities for strategic decision-making.
How to Pay Contractors in QuickBooks Online with Direct Deposit?
Simplifying payments to contractors in QuickBooks Online with direct deposit includes creating the direct deposit feature, preparing a bill or check transaction, choosing the direct deposit option, adding the payment amount, and then saving the details of the transaction.
Step 1: Create Direct Deposit for Contractors
The first step in paying the contractors with direct deposit in QuickBooks Online is to create the direct deposit feature. It ensures the smooth electronic transfer of funds for the service promised.
Step 2: Prepare a Bill or Check Transaction
- In QuickBooks Online, you need to go to the Create menu and choose Bill or check to issue the transaction.
- Add the details of the contractor like name, payment account, and amount, and select the direct deposit option. Adding more information enables the system to integrate electronic transfer capabilities with ease, promising secure payments.
Step 3: Choose the Direct Deposit option
The payment procedure includes choosing the direct deposit option in the check transaction or the bill. It allows electronic transfer for the contractor payments in the QuickBooks Online.
Step 4: Add the Payment Amount and click Save
To ensure a smooth electronic fund transfer for the contractor payments in QuickBooks Online, the payment procedure ends with inputting the payment amount and saving the bill or check transaction.
Conclusion
We hope that by the end of this article, all your doubts concerning how to pay contractors in QuickBooks Online will be resolved. We have shared all the important information related to the topic.
Still, it is quite likely that you may have certain doubts regarding the steps. In such a scenario, we suggest you get in touch with our Dancing Numbers team of QuickBooks. They will be able to resolve your queries with ease and answer all your questions.
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Frequently Asked Questions
How to MAP 1099 Vendors in QuickBooks?
● First, You have to go to the Vendors tab and then you have to click on Vendor Center.
● Then you have to tap on the vendor’s name.
● Then you have to go to the Tax Settings section and then mark the box beside the Vendor eligible for 1099 section.
● Click on Ok and repeat the steps for other vendors that are eligible for 1099.
How to Keep Track of My 1099 Employees?
Spreadsheets are perhaps the best tool for independent contractors to use while keeping track of their earnings and business expenses. Additionally, it helps while completing 1099-misc forms to start tracking your expenses, use Excel or Google Sheets.
How to Pay a 1099 Contractor in QuickBooks?
● Select Contractors by going to the Payroll menu.
● Next, you have to go to the contractor’s name, then you have to select the dropdown menu, and then you have to pay with direct deposit.
● For the direct deposit enter the amount.
● Then you have to select the expense account that you use to track paychecks in QuickBooks.
● Lastly, you have to select Save and Send or click on Save and New.