In order to legally employ an independent contractor for a project-based business, the whole process has to pass through a few major steps generally referred to as setting up a 1099 contractor. Unlike hiring a regular W-2 employee, this procedure focuses on confirming that the contractor is truly independent for tax and legal purposes.
The IRS Form 1099 is utilized to disclose payments made to non-employees. The most important forms are the 1099-MISC and 1099-NEC. If a contractor receives a total of $600 or more during the year, he/she must be sent a 1099 form by you.
In QBO, the contractor payment segment lets you set up your contractor for 1099 tracking. As they are added, QB tracks all the transactions made to them, making it easier as it’s time to file their 1099.
Process to Set Up a Contractor on Your Device
Here are the procedures to set up your 1099 contractors, which vary based on the QB payroll service you use:
QuickBooks Online & QuickBooks Contractor payment
First, you have to sign in to your account to get started
Select Add a contractor
Mention your contractor's name and their email address
If you want the contractor to fill in their own details, choose Email this contractor
Now, if you prefer, you need to enter the information by yourself; just leave this option unchecked
You can also pick Waiting for information if you want to complete their details later. This lets you continue with the setup without any delay
At last, you have to click Add contractor
QuickBooks Contractor Payment without QuickBooks Online
Navigate to Contractor > choose the Contractors
Pick Add a contractor
Now, you have to enter your contractor’s name and email address > and hit the Email this contractor box if you want the contractor to enter their own informations
Leave the box unchecked if you manage to enter their details
Then, choose Add contractor
Note:- QuickBooks Error 103 occurs when banking updates fail, blocking online account synchronization and preventing accurate financial transaction downloads.
QuickBooks Desktop for Windows
Turn on 1099-MISC
Choose the Edit menu and then Preferences
Pick the Tax: 1099 menu. Then choose the Company Preferences tab
Tap Yes in the Do you file 1099-MISC forms? segment
As you're done, you need to select OK to save your settings
Add a contractor as a vendor
Choose the Vendors menu and then Vendor Center
Pick the New Vendor dropdown > then select New Vendor
Fill out the fields on each tab. You can get this information from a W-9. You can also edit and change this information later
Now, after completing the process, you need to select OK
Track contractor payments for 1099s
Choose the Vendors menu > then Vendor Center
Select a vendor’s name > pick Edit
Pick the Address info tab > check the informations:
Ensure the state abbreviation and ZIP code are correct.
If the vendor is an individual, you have to mention their legal name in the First Name, Middle Initial, and Last Name fields
If you only have the company name and not the person’s name, leave the Company Name field empty. This helps prevent duplicates when preparing your 1099-MISC forms
Choose the Tax Settings tab
Select and verify the Vendor eligible for 1099
Mention the vendor’s tax identification number in the Vendor Tax ID field
As you are done with the procedure, you can click the Ok option
QuickBooks Desktop for Mac
Enable 1099-MISC:
Under the QB menu, choose Settings
Choose the 1099s segment
Pick and verify that the 1099-MISC forms are filed in the box
Choose the accounts for each 1099 category that applies to your business for reporting and taxation purposes:
Under the Account section, you have to pick an account from the dropdown list
To link more than one account, choose Selected accounts from the dropdown menu
Then pick the accounts you want in the Select Accounts window. Once you are done, click OK
If you want to change a threshold amount, simply type the new amount in the Threshold column, but this step is optional
Track contractor transactions for 1099s:
Under the List menu, pick Vendors
From the Vendor list window, choose a vendor, then choose Edit Vendor
Ensure the Address field contains the correct two-letter state abbreviation and ZIP code
If the vendor is an individual, enter their legal name in the First Name, Middle Initial, and Last Name fields
If you only know the company name and not the person’s name, leave the Company Name field blank. This helps prevent duplicate entries on the 1099-MISC form
Choose the Additional Info tab
Pick the Vendor eligible for 1099 checkbox, and in the Tax ID field, mention the vendor’s tax identification number
Hit OK
Explore more:- QuickBooks Error 6000 83 appears when company files are damaged or inaccessible, causing disruptions in multi-user access and file operations.
Conclusion
In this blog, we have outlined the most effective steps to set up a 1099 contractor smoothly. However, if you are unable to follow these steps or encounter issues, you should dial +1(855)-510-6487 and consult QB tech experts.
Set Up a 1099 Contractor – Frequently Asked Questions
What does it mean to set up a 1099 contractor in QuickBooks
Why is it important to set up a 1099 contractor
How do I add a 1099 contractor in QuickBooks
You can add a 1099 contractor by entering their name, address, Tax Identification Number, and payment method in the vendor section. QuickBooks then tracks all payments for accurate year-end reporting.
Can I set up multiple 1099 contractors at once
Does setting up a 1099 contractor affect payroll employees
What information is required for a 1099 contractor
Essential information includes the contractor’s legal name, mailing address, Tax Identification Number (TIN or EIN), and the type of payments they receive. Accurate information ensures proper IRS reporting.
Can I edit a 1099 contractor’s information later
How does QuickBooks track payments for 1099 contractors
Is it possible to generate 1099 forms directly from QuickBooks
Can I use QuickBooks to check if a contractor needs a 1099
What happens if a 1099 contractor is not set up correctly
How often should I review 1099 contractor information
