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Correct from Employee to Contractor?

 How do I change someone from an employee (mistake) to a self-employed contractor and make the YTD corrections?  Our pastor was miss-classified and I am trying to make appropriate corrections.  Paid as an employee for 23 pay periods, made corrections in last paycheck.  Need to make appropriate journal entry corrections to move SS & Medicare withholding to proper accounts and generate accurate Form 941 and W-2.  Can someone help direct me?  Thanks!

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QuickBooks Team

Correct from Employee to Contractor?

Hello there, @StPaulsMC.

I’m glad to see you in the Community.  I can help you change your employee to a contractor in QuickBooks Desktop.

You cannot currently change the type but you have the option to add the employee as a vendor. Make sure to give the contractor a slightly different name to avoid error prompt about duplicate names. 

Here’s how:
1.    Go to Vendors at the top menu and select Vendor Center.
2.    Click the New Vendor drop-down and select New Vendor.
3.    Enter Vendor Name and other necessary information.
4.    Hit OK.




After which, you may now inactivate the employee from the Employee Center:
1.    Go to Employees at the top and select Employee Center.
2.    Double-click the name of the employee.
3.    Select the Employee is inactive box.
4.    Click OK to save the changes.

Once done, run the Payroll Summary Report to get your employees’ payroll data. Then, delete the paychecks you’ve made and re-enter them using  Journal Entry. 

To get the Payroll Summary Report, follow the steps below:
1.    Click the Reports menu.
2.    Select Employees & Payroll, then Payroll Summary.
3.    Set the date range.
4.    Customize the report to only show one employee payroll data by clicking the Customize button.
5.    Choose the Filters tab, then enter Name.
6.    From the Name drop-down, select the employee.
7.    Hit OK.

Here’s how to delete paychecks in QuickBooks: 
1.    Locate and open the paycheck.
2.    Click Delete or the X icon at the top or go to Edit menu, then select Delete Paycheck (or Ctrl + D on your keyboard).
3.    When prompted, select YES to permanently delete the transaction.


Please check out this article for more information: Edit, delete, void paychecks and liability checks in QuickBooks Desktop.

You can now enter the contractor’s payroll information through a journal entry. Though the steps in creating a JE will help you record the transaction, I’d still suggest consulting an accountant to ensure your books are correct.

This should get you pointed in the right direction. Please let me know if you need anything else. I want to ensure your success. Have a good one!

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