How to Add Independent Contractors And Track them for 1099s in QuickBooks Online

many humble businesses hire short-run workers or bring on autonomous contractors to complete projects. Hiring vendors is a capital way to get an technical to help out your business but by rights account for expenses and their labor is critical .
QuickBooks gives you the tools to track these expenses and file 1099-MISCs for your autonomous contractors. This article ’ mho goal is to set you up for success, both for account and legal reasons .
You may be asking yourself, “Why do I need to track 1099 independent contractor payments separately?” well, let me tell you ! Separating regular employee payments from contractors is all-important because of the type of ferment they do and their relationship to your clientele. Contractors are on-demand or freelance and do work for you but are not your official employees. Because of this, you need to report independent contractor compensation on a 1099 MISC. From fiscal and legal standpoints, the division needs to be clear .
additionally, knowing whether person should or should not be classified as an freelancer contractor can be complicated. Intuit has a tool that can help explain the remainder between a 1099 and a W-2 worker. If you are diffident, reach out to a tax professional or what we call the source of truth : the IRS web site.

The Expenses pill is one position where you can create seller profiles. If you want to enter your 1099s information yourself, this is the place for you ! Go to Expenses>>Vendors and then click on New Vendor .
Contractor 2 giph.gif
You can besides create and manage records for your independent contractors in the Payroll Tab. In QuickBooks Online, you can find your contractors here since they, like your employees, are individuals you pay. here you have the option to email your vendors and have them fill out the information themselves .
Contractor 1.png
Let ’ s take a spirit at the Vendor Information window more closely. You fill out a bunch of the same information for vendors as you do for employees. One difference is the EIN ( employee ’ second Identification Number ) which is entered on the Business ID line. If you have this number, you ’ ll want to fill it in. If not, you can add it late but remember to do thus before it ’ mho time to file .
There ’ sulfur besides a checkbox to Track payments for 1099s. once checked, QuickBooks will add the mugwump contractor to the tax filing module .
Contractor 4.png
Before going any far, click on your newfangled contractile organ ’ sulfur name and make sure all the information is right. Pay close care to their EIN and email address if you plan to send their 1099-MISC electronically .
As always if you need to make any changes, snap on the seller ’ mho name and then Edit .
Contractor 5.png
Note: You can use this demand like procedure to track an existing seller for a 1099-MISC. Remember, you will have to separate the expenses associated with products and services you buy from the seller versus expenses related to their narrow labor. Be very consider about which account you map expenses to on Expense forms .
You can see within the seller profile where you can add a default expense account .
Contractor 7.png Speaking of Expense Accounts … Let ’ s create one !
We ’ ll use this for payments made to freelancer contractors. This step is particularly important for vendors you besides buy products and services from. As mentioned above, expenses for products and services need to be differentiated from the study they do .
Go to the Accounting tab and chatter on your Chart of Accounts. Create a new account like the one pictured below :
Contractor 6.png

  • name the accountIndependent Contractor Labor or something else that makes common sense and is easy to remember
  • chooseExpenses as the Account Type andCost of Labor as the Detail type
  • From nowadays on, every time you enter an expense or pay a check to your independent contractors, map those transactions to this new Expense report .

Contractor 8.png
Since you ’ ve been tracking their payments entirely with that special contractor Expense Account, filing the 1099-MISCs will be a slice of patty .
In Step 2 of the Prepare 1099s module, select Box 7 : Nonemployee Compensation. Choose the account you used to pay your contractors. This tells the IRS what money was used for non-employee compensation .
In Step 3, the Vendors you started tracking will automatically appear on the number. If you don ’ deoxythymidine monophosphate see one of your contractors, simply edit their profile using the steps above and choose the Track payments for 1099s checkbox. Complete the module and you ’ re ready to send out 1099-MISCs to your independent contractors .

Tips and Reminders:

  • always be mindful of which Expense bill you ’ re using when you enter expenses related to mugwump contractors .
  • Use the memo and description fields to further document what these types of expenses are for so you won ’ thyroxine have to guess during the induce of tax temper .
  • What ’ s most important is knowing which expenses apply to the 1099-MISC. This is no easy job, but the IRS web site provides a comprehensive examination list

    you can use as a character .

  • If you already entered department of labor expenses for a Vendor into a different expense score before going through this process, go back and recategorize those transactions into the new “ Independent Contractor Labor ” report .

There you have it ! We went from setting up contractors to expense forms to filing for 1099s. I hope this was helpful and gave you an in-depth overview of how QuickBooks Online handles vendors. As constantly, reach out to the Community if you have questions. We ’ re here to help !

source : https://www.peterswar.net
Category : Finance

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