Do you know, why it’s important to set up a 1099 contractor? The 1099 form is a crucial federal form filed to report certain non-employment incomes earned by a particular taxpayer. It has to be filed with the IRS generally before 31st January of every year. It includes dividends from owning a stock, income as an independent contractor, local tax refund, retirement account payouts, etc. Businesses need to report the payments they made to individuals or contractors through this form.
QuickBooks users should know how to set up a 1099 contractor to track and file these forms. It means configuring your application so that every time you make a payment to the contractor, QuickBooks notes it down to file this form. Users need to only file this form for any non-employee they paid more than $600. The recipient needs to file a W-9 Form with the IRS.
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Setting up a 1099 contractor in QuickBooks.
The method of setting up a 1099 contractor in QuickBooks depends on the version you are using. The steps are also different in QBD for Mac and Windows. Check the payroll service you are using and follow the steps accordingly. Let’s look at how you can set up a 1099 contractor in QuickBooks.
Top Ways To Set Up a Contractor in QuickBooks Online
There are two parts to set up a contractor in QuickBooks Online, which includes adding your contractor as vendor and then tracking the payments for 1099s.:-
Step 1- Adding your contractor as a Vendor.
- Go on the Contractors menu.
- Tap on Add a contractor.
- Enter in all the required information or tick mark Email this contractor checkbox. Contractor can fill it out themselves with this option.
- Tap on Add contractor once you are done.
Step 2- Tracking Your Contractor payments for 1099s
- Go on the Vendors menu.
- Choose the vendor you wish to track and open their profile.
- Tap on Edit.
- Tickmark Track payments for 1099 box.
Ways to Set Up a Contractor in Quickbooks Desktop for Windows
There are three steps to set up a contractor in Quickbooks Desktop for Windows. Users need to activate the 1099-MISC feature, add a contractor as vendor and then start tracking. Let’s look at these steps in detail:-
Step 1- Activate the 1099-MISC feature
- Go to the Edit menu and choose Preferences.
- Tap on Tax:1099 menu and click on the Company Preferences tab.
- Go to Do you file 1099-MISC forms? And click on Yes.
- Tap on OK to save your settings.
Step 2- Adding your contractor as vendor
- Go on the Vendors menu and choose Vendor Center.
- Click on the New Vendor list and tap on New Vendor.
- Enter all the required information. You can find it on a W-9 form.
Note:- You can change the information if required in the future.
- Tap on Ok after you are done.
Step 3- Tracking Your Contractor Payments for 1099
- Go on the Vendors menu and choose Vendor Center.
- Choose the Vendor name and tap on Edit.
- Go to the Address Info menu and cross-check the information:-
- Check that you have entered the correct state abbreviation and ZIP code.
- The vendor’s legal name should be entered in the First Name, M.I., and Last Name boxes if the vendor is a person.
- Leave the Company Name section blank if you only know the company name and not the person’s name. When you create your 1099-MISCs, this prevents two blank boxes.
- Go to the Tax Settings menu.
- Tickmark Vendor eligible for 1099.
- Type in vendor’s tax identification number in Vendor Tax ID section.
- Click on OK once you are done.
Method to Set up a Contractor in Quickbooks Desktop for Mac
It’s a two-step process where you need to activate the 1099-MISC feature and then set QB to track the payments. These are detailed steps:-
Step 1: Activate the 1099-MISC feature
- Go to the QuickBooks menu and choose Preferences.
- Tap on the 1099s section.
- Tickmark 1099-MISC forms filled box.
- Choose the account for every 1099 category that is associated with your business for reporting and taxation:-
- Go to the Accounts menu and choose an account from the list.
- You can also select multiple accounts by clicking on the Selected Accounts option and clicking on desired accounts in the Select Accounts section.
Note:- some companies don’t need to report on all 1099 categories. Many organisations just submit figures for Box 7: Nonemployee compensation. Please consult an accounting expert or the IRS for more information on reporting requirements.
- You can change the threshold amount in the Threshold column if you wish to.
Step 2:- Tracking Contractor Payments for 1099s
- Go to the Lists menu and select Vendors.
- Choose the vendor and tap on Edit Vendor in the Vendor List window.
- Click on the Address Info tab and check the following information:-
- Ensure the address field contains the correct two-letter state abbreviation and the ZIP code.
- The vendor’s legal name should be entered in the First Name, M.I., and Last Name boxes if the vendor is a person.
- Leave the Company Name field blank if you know the company name but don’t know the person’s name.
- Go to the Additional Info tab.
- Click on vendor eligible for 1099 checkbox and enter the vendor’s tax identification number in the Tax ID field.
- Tap on OK.
QuickBooks will now start keeping a record of all the payments made to these accounts. It will give out the required information when you need to file Form 1099. The same thing will happen for QuickBooks Online and QuickBooks Desktop for Windows too after you complete the mentioned steps for them.
Read Also: If Can’t Activate Direct Deposit due to QuickBooks error code 40001, Follow the instruction for updating QuickBooks & running it as an administrator.
Method to Set up a Contractor in Intuit Full Service Payroll
It’s a two-step process where users need to set up a contractor as a vendor and then make it ready for direct deposit. You need to do the following things set up a 1099 contractor in QB:
Step 1: Adding contractor as a vendor
- Go on the Employees menu and scroll down to contractors.
- Tap on Add new contractor and select the type of contractor.
- Choose whether your contractor is an individual or a business. It will decide the type of information QuickBooks will ask you.
- Enter contractor information.
Step 2- Setting up contractor’s direct deposit and noting any prior payments
- In the Pay method field, choose Edit.
- Click on Direct Deposit in the Pay Method list.
- Enter in the contractor’s bank account information.
- Tap on OK.
- You need to check mark the appropriate option if you have already paid the contractor outside the service in the particular calendar year.
- Ensure that the Form 1099-MISC Intuit send to the contractor at year’s end has the correct dollar amount when you add the lump sum total that you paid to the contractor:-
- Compensation- In Box 7 of Form 1099-MISC, enter the total previous payments to be reported.
- Reimbursement- Enter any business-related expenses that the contractor was prepaid for and you reimbursed them for. Form 1099-MISC does not report any of the amounts put here.
- Tap on Save.
Method to Set up a contractor in Intuit Online Payroll
It’s a two-step process where firstly user needs to save contractor as vendors and then enter all the prior payments made to them.
Step 1- Adding contractor as a Vendor
- Go on the Employees menu and scroll down to Contractors.
- Now click on Add a Contractor and select the type of contractor.
- You can set your contractor as an individual or a business. The option you choose defines the type of information QUickBooks asks.
- Fill in the contractor’s information.
Step 2- Setting up contractor’s direct deposit and enter any payment made earlier
- Go to the Payment method and select Direct deposit.
- Tick Mark the appropriate checkbox and enter in any required information. Mention any amount you paid to a contractor outside the service in that particular calendar year.
- Make sure that the Form 1099-MISC Intuit sends to the contractor at yearend has the correct dollar amount when you add the lump sum total r.
- Compensation- In Box 7 of Form 1099-MISC, enter the total previous payments to be reported.
- Reimbursement- Enter any business-related expenses that the contractor prepaid and that you reimbursed them for. Form 1099-MISC does not report any of the amounts put here.
- Tap on OK and enter in contractor’s bank account information and then tap on OK.
- Tap on Agree to verify bank details.
So these are the methods for how to set up a 1099 contractor in QuickBooks. Make sure that your employee fill in W-9s form to make the process faster. If you are stuck at any step and don’t know what to do, we will advise you to reach out to an expert and then they can guide you the best possible way. Contact Asquare Cloud Hosting’s expert team now.