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How to set up contractors and track them for 1099s in QuickBooks

Learn how to add contractors and track payments you make to them.

In QuickBooks, you can set up your contractors as vendors. QuickBooks tracks all their related payments so when you need to file their 1099s, you already have all their info. Here's how to set up contractors in each product.

Any non-employee who you might pay $600 or more in a given year (although electronic payments, such as with a credit card, don't count). Before you start, check the IRS guidelines so you know who you need to file 1099s for.

Note: 1099 E-File Service only supports contractors with addresses in the United States.

Get your contractors to fill out a W-9

Before you start, we recommend having your contractors fill out a W-9. This gets info you need to make the set up quicker. You can download W-9 forms directly from the IRS.

Step 1: Add a contractor as a vendor

Enter the contractor as a vendor QuickBooks Online. Note: If you already added a contractor/vendor to Quickbooks, you can skip this section.

  1. Go to the Workers menu and select Contractors.
  2. Select Add a contractor
  3. Enter their info. You can find all of this on their W-9.
  4. When you're done, select Add contractor.

Step 2: Track contractor payments for 1099s

Now that you entered them as a vendor, you need to start tracking their payments.

  1. Go to the Expenses menu and select Vendors.
  2. Select the vendor you want to track and open their profile.
  3. Select Edit.
  4. Select and check the Track payments for 1099 checkbox.

QuickBooks will start tracking all of their payments behind the scenes. When you're ready to file your 1099s, you can easily add the tracked payments to the form.

Here's how to prepare and file your 1099s during tax season.

To start tracking contractors for 1099 payments, enable the feature:

Step 1: Turn on the 1099-MISC feature

  1. Select the Edit menu and then Preferences.
  2. Select the Tax: 1099 menu. Then select the Company Preferences tab.
  3. Select Yes in the Do you file 1099-MISC forms? section.
  4. When you're done, select OK to save your settings.

Step 2: Add a contractor as a vendor

  1. Select the Vendors menu and then Vendor Center.
  2. Select the New Vendor dropdown and then New Vendor.
  3. Fill out the fields on each tab. You can get this info from a W-9. You can also edit and change this info later.
  4. When you're done, select OK.

Step 3: Track contractor payments for 1099s

Once the feature to start tracking payments for 1099, follow the steps to set up each vendor.

  1. Select the Vendors menu and then Vendor Center.
  2. Select a vendor's name and then select Edit✎.
  3. Select the Address Info tab and review the info:
    1. Make sure you have the correct two-letter state abbreviation and ZIP code.
    2. If the vendor is a person, the vendor's legal name should appear in the First Name, M.I., and Last Name fields.
    3. If you have the company name but not the person's name, leave the Company Name field blank. This prevents them from showing up twice when you prepare your 1099-MISCs.
  4. Select the Tax Settings tab.
  5. Select and check the Vendor eligible for 1099.
  6. Enter the vendor's tax identification number in the Vendor Tax ID field.
  7. When you're done, select OK.

QuickBooks will start tracking all of their payments behind the scenes. When you're ready to file your 1099s, you can easily add the tracked payments to the form.

Here's how to prepare and file your 1099s during tax season.

To start tracking contractors for 1099 payments, enable the feature:

Step 1: Turn on the 1099-MISC feature

  1. From the QuickBooks menu, select Preferences.
  2. Select the 1099s section.
  3. Select and check the 1099-MISC forms are filed box.
  4. Select the accounts for each 1099 category that applies to your business for reporting and taxation purposes:
    1. From the Account column, and select an account from the dropdown list.
    2. To associate more than one account: From the drop-down list, choose Selected Accounts then click the desired accounts in the Select Accounts window. Select OK when all appropriate accounts have been selected.Note: Your business may not need to report on all 1099 categories. Many businesses report amounts only for Box 7: Nonemployee Compensation. For more information on reporting requirements, please consult an accounting professional or the IRS.
    3. To change a threshold amount, enter the new amount in the Threshold column. This is optional.

Step 3: Track contractor payments for 1099s

  1. From the Lists menu, choose Vendors.
  2. In the Vendor List window, select a vendor then select Edit Vendor ✎.
  3. Select the Address Info tab.
  4. Make sure the Address field contains the correct two-letter state abbreviation and ZIP code.
    1. If the vendor is a person, the vendor's legal name should appear in the First Name, M.I., and Last Name fields.
    2. If you know the company name but not the person's name, leave the Company Name field blank to avoid double names on the 1099-MISC form.
  5. Select the Additional Info tab.
  6. Select the Vendor eligible for 1099 checkbox and in the Tax ID field, enter the vendor's tax identification number.
  7. Select  OK.

Here's how to prepare and file your 1099s come tax time.

Step 1: Add a contractor as a vendor

  1. Select the Employees tab.
  2. Scroll down to Contractors, then select Add new contractor.
  3. Select the contractor type.
  4. You set up the contractor as an individual or a business contractor. This decides what type of info QuickBooks Collects. For example, enter a Social Security number for an individual and an Employer Identification Number (EIN) for a business contractor.
  5. Fill out the contractor's info.

Step 2: Set up your contractor's direct deposit

If you selected direct deposit as a payment method, here's how you set it up.

  1. Select Edit in the Pay method field.
  2. Select Direct Deposit in the Pay method dropdown.
  3. Enter the contractor's bank account info.
  4. Select OK.
  5. If you've already paid the contractor outside the service this calendar year, select the checkbox and enter the appropriate info.
  6. When you add the lump sum total you've already paid the contractor, ensure that the Form 1099-MISC we send to the contractor at year-end has the correct dollar amount.Compensation — enter the total previous payments to be reported in Box 7 of Form 1099-MISC.Reimbursement — enter business-related expenses prepaid by the contractor that you paid back to them. Any amounts entered here are not reported on Form 1099-MISC.
  7. Select Continue.

Set up the contractor with Workforce

  1. Select View pay stubs online.
  2. Enter the contractor's email address, then select Save.
  3. Select Send email if you want to send the contractor a temporary user ID and password now.
  4. Select Done.

Set up a contractor in Intuit Online Payroll

Learn how to set up contractors in Intuit Online Payroll.

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