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Level 1

Can I change an employee with a W-2 to one that receives a 1099?

 
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QuickBooks Team

Can I change an employee with a W-2 to one that receives a 1099?

Yes, we can change an employee to a contractor, wvedwards3. 

 

We'll have to setup the employee as how we record a contractor. For the employee's payroll, let's make sure that we delete all paychecks to clear out any transactions that will cause expense duplicates it will not record a W-2. We'll inactivate the employee once we've done setting it all up. 

 

Here's how to enter a vendor:

  1. Go to the Vendor menu and select Vendor Center.  
  2. Click New Vendor
  3. For the Vendor Name let's enter a number or addition letter since QuickBooks is unable to save duplicate information. 
  4. Enter the rest of the employee's information.
  5. Under the Tax Settings tab, ensure that we check the Vendor eligible for 1099 box. 
  6. For the Account Settings tab, let's select the correct expense 1099 accounts so it'll show on the Form 1099. 
  7. Once done, click OK

We'll have to open each employees paycheck to delete them. Just go to the Employees menu and click on the employee to view all the Transactions. Double-click on each paycheck and click the Delete X button at the menu. 

 

I'll show you how to inactivate the employee once we're done with the steps above: 

  1. Still from the Employees page.
  2. Double-click on the employees name.
  3. Check the Employee is inactive box at the lower-left of the employees information. 
  4. Click OK

You can now pay your contractors and track their 1099s

 

Reach out to me if you need anything else. Thanks!

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Community Champion

Can I change an employee with a W-2 to one that receives a 1099?

Employees receive W2. Contractors receive 1099. An individual can be both but you need their name twice and duplicate names are not allowed. The simplest way around this is to spend a period at the end of one of the instances of the name.

 

The steps outlined by @Catherine_B are a little out of order due to the duplicate name restriction. Set up the new name first. Then you can delete the employee history IF that is appropriate.

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Level 1

Can I change an employee with a W-2 to one that receives a 1099?

Thank you! This is very helpful.

 

To be clear, I have issued checks Jan-Apr 2020 for this person as an employee. She wants (per her accountant) to receive a 1099 for the monthly cleaning services she has provided...since she left our office 10 years ago when she was our full time secretary.

 

So, following the directions given, will not interrupt her payments on March 31 or April 30, that I’ve already processed and want her to receive, right? I would like her payments from May 2020 on to be as a vendor. Therefore, should I follow these instructions now or do I need to wait until May (or any time after the April 30th payment is in her direct deposit account?

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Moderator

Can I change an employee with a W-2 to one that receives a 1099?

Hi, wvedwards3.

 

I'd be glad to share some insights and help you get this straightened out.

 

To answer your questions, yes your right, following the steps will not interrupt the employee's payments. You can process her payment as a vendor on May for accurate posting.

 

The bottom line is if the employee, performs work that would be paid with 1099 if done by a vendor, you will be paid with a W-2 for your regular work and 1099 for your freelance work.

 

To know more about 1099, check these out:

 

You can always get back to me if you have any other questions. Have a good one.

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