Can you make an existing employee a contractor?

Thanks for the quick response!

Rick

Hello,

    I do not have the employee/contractor option in my QBDT?  Would i just add new vendor?

Thanks

That's correct, @Nancy0503. 

When adding a new contractor in QuickBooks Desktop, you'll need to add them as a vendor. I've included some steps to add the contractor below. 

First, you'll want to make sure that the 1099-MISC feature is turned on: 

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

Once you've turned the feature on, you're ready to add the contractor: 

1. Click on 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, hit OK.

For additional information about tracking contractor payments for 1099s, check out Set up contractors and track them for 1099. 

Let me know if you have any questions or concerns. Take care! 

I also was wondering how to do this. I am using QB online and when I click on employees I don't see any options to change their status from active to terminated? I've created them as vendors which was easy enough but don't see how to edit to make all the payments that were paid to them as employees and change those to I guess vendors or contractors? Where is the best place to find this information? Many thanks!

Thanks for joining in on this thread, @gmtourism. Let me share the detailed guide on how we can change an employee's status to terminated and change their payments as vendors in QuickBooks Online (QBO).

To make an existing employee a vendor or contractor, we'll have to change their status to terminated so they'll no longer appear on your active payroll list. 

Here's how:

1. In the Accountant view, go to Payroll and select Employees.
2. Click the employee's name. If the employee isn't on the list, select All employees from the Active Employees dropdown.
3. Look for Employment details and select Start or Edit.
4. Click the Status dropdown and select Terminated.
5. Once done, please select Save.

Since you've already set up your employee as a vendor, we can enter their transactions as checks to classify them as vendor payments. Afterward, let's inactivate the employee.

Moreover, we'll have to file 1099s with the IRS if you pay your contractors in cash, check, or direct deposit. QBO helps you prepare your 1099 forms seamlessly using the information you have in your account.

Feel free to reach out to us if you have further concerns about managing your vendors. We're always ready to answer your questions. Take care!

Are you able to have the same person listed as a contractor and employee?  

Hello there,

Yes, you can have the same person listed as a contractor and employee. Here's how:

To set up a contractor:

1. Go to Payroll and click Contractors (Take me there).
2. Choose to Add a contractor
3. Enter your info, or select the Email this contractor checkbox so they can fill it out.
4. When done, click Add Contractor.

If you opted in for the email, wait for the contractor to fill out their info. 

If you didn’t choose to send an email:

1. Select Add next to Personal details or Bank account and enter the contractor info. 
2. When finished, click Save.

Then, to add an employee:

1. Go to Payroll, then Employees.
2. Select Add an employee.
3. Add your employee’s name and email address. If you want them to enter their own personal, tax, and banking info, ensure Employee self-setup is on. QuickBooks will automatically email them an invite to QuickBooks Workforce. Your employee can enter their address, Social Security number, W-4, and banking info.
4. Click Add Employee.
5. Choose any section to add the remaining employee info. 
6. When finished adding info to a tab, click Save.

You can also visit this article for future reference: Create and run your payroll.

Feel free to post here again if you have further QuickBooks-related concerns. We are available 24/7 to lend a hand with each of your queries. Stay safe!

I have mis-categorized a contractor as an employee. Is there a way to fix this so that all the prior transactions are recorded correctly as payment to a contractor?

I can guide you through accurately recording your contractor's transactions, @Dfitness.

First, you can correct the transactions associated with the employee's profile. To do so, you can delete or void the paychecks. If needed, you can take note of the dates and amounts. Here's how:

1. Go to Payroll, then select Employees.
2. Choose the Paycheck list.
3. Pick the paycheck(s) you'd like to delete or void, then click Delete or Void.
4. Hit Yes.

If you can't make the change, you'll see an error message with an explanation. You can contact us for further help.

After removing the transactions, you can edit the employee's profile and update the name. Then, you can create and set up the contractor profile. Follow these steps:

1. Go to Payroll, then select Contractors.
2. Choose Add a contractor.
3. Input your contractor’s info, or click the Email this contractor checkbox so they can fill it out.
4. When you're done, hit Add contractor.

After setting up the profile, ensure accurate details when recording transactions with contractors, including accounts, dates, amounts, and payment methods.

In case you want to prepare and file your Federal 1099s, you can visit this article for more guidance: Create and file 1099s with QuickBooks Online.

Please let me know if you have any follow-up concerns regarding your contractor's transactions. I'm always available to assist you.

My quickbooks online won't allow me to have a contractor and employee of the same name. It suggests I add a middle initial to vary the name but he doesn't have one. Is there a way to have the same name and multiple roles?

It's nice to see you joining this thread, @novabuild.

I take it that you're trying to add an employee and a contractor. However, the system won't let you create profiles with the same names.

What we can do, is add something on the contractor's name that would differentiate the employee's name. Thus, we're unable to add same names and multiple roles.

We're still looking for improvements on setting up profiles in QBO. We'd appreciate if you'd send this suggestion to our Product Development Team for them to review it and might in the future:

I'll show you how:

1. Go to the Gear icon and choose Feedback.
2. Enter your feedback Suggestion.
3. Click Next.

For youre future refeence, this article can help youfiling your W-2 forms: Print your W-2 and W-3 forms. 

I'm still all ears if you need further assistance with your employees and contractors. Just add your reply below, and I'll circle back to help you.

If I am using the time portion of qbo if I delete the employee and add as a subcontractor will

I lose any time information.

When transitioning an employee in QuickBooks Online (QBO) to a subcontractor, it's essential to understand the implications of time tracking data, Lynn. If you delete the employee and add them as a subcontractor, you may wonder whether you'll lose any historical time information associated with that employee. Rest assured, deleting the employee will not erase their time entries. Let me share some information about this matter.

Generally, deleting an employee with a pay history in QuickBooks isn't attainable. This approach is taken to maintain or keep employee records for compliance purposes. If you haven't processed payments for this employee, you can delete them. Otherwise, you can modify their status from Active to Terminated instead. I'll guide you through the process:  

1. Go to the Payroll menu and choose Employees.
   
2. Select the employee's name and click Edit from the Employment details tab.
   
3. Choose Terminated under Status dropdown menu.
4. Hit Done.
   

Once you have deleted or updated the employee's status, you can add them as contractors. Please also note that adding subcontractors isn't available. However, you can still list them as regular contractors in QuickBooks and distinguish them by including special characters or terms like "(sub-contractor)" in their display name. For additional details, refer to this article: Set up contractors and track them for 1099s.

Additionally, if you delete or permanently remove an employee from the system, their time entries will remain stored. These time entries will continue to appear in your reports, ensuring that all recorded data remains intact and accessible for your reporting and auditing purposes. This means historical time tracking information will not be lost, providing you with a complete record of all activities associated with the employee.

If you have questions or need more information about managing employees or contractors in QBO, hit the Reply button. I’ll be here to help clarify any concerns you have and provide guidance on best practices for using the platform effectively. Your understanding is important, and I'm committed to ensuring you have all the support you need. Take care.