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Pay a contractor with direct deposit

SOLVEDby QuickBooksQuickBooks Online Payroll418Updated 2 weeks ago

Learn how to pay your contractors using direct deposit in QuickBooks or Intuit Payroll.

With QuickBooks and Intuit Payroll, you can use direct deposit to pay your contractors. This lets you put their money straight into their bank accounts so they don't have to cash a check.

To pay contractors by direct deposit, you'll need a payroll subscription with Intuit, even if you don’t run payroll for W-2 employees. Here's how to set up and create direct deposits for your payroll product.

Your steps depend on which product you have.

Note: Not sure which payroll service you have? Here's how to find your payroll service.
Note: If you don't want to use direct deposit, here's how to pay your contractors with paper checks.

Tip: You can also use direct deposit to pay open bills with your contractors in QuickBooks Online. This is outside your payroll system. QuickBooks tracks contractor payments for 1099- MISC reporting.

Step 1: Add your contractor

Before you can pay your contractor, you need to set up their profile. Check out Set up contractors and track them for 1099s in QuickBooks to learn more.

Step 2: Set up direct deposit

Once your contractors have profiles, make sure your company’s payroll is set up for direct deposit payments.

Also make sure that you’ve entered your contractor’s bank account info so you can pay them through direct deposit.

Once your contractors have profiles, make sure your company’s payroll is set up for direct deposit payments.

Also make sure that you’ve entered your contractor’s bank account. Here’s how you check the contractor’s pay method:

  1. Go to Employees.
  2. Scroll down to the Contractors section.
  3. Check if the pay method of your contractor is set to DD or direct deposit. 
  4. If the pay method is Check, select Check then select Direct deposit
  5. Select OK.
  6. Enter the contractor’s bank info.
  7. When finished, select OK.

Step 3: Create contractor direct deposit payments

Now you're ready to send a direct deposit to your contractor. Follow the steps for the payroll product you use.

To pay an independent contractor using direct deposit:

  1. Go to the Payroll menu, then select Contractors.
  2. Next to the contractor’s name, select the ▼ dropdown and then Pay with direct deposit.
  3. Enter the amount for the direct deposit.
  4. Select the expense account you use to track paychecks in QuickBooks. Note: This is the expense account on your chart of accounts where QuickBooks records the expense. It's not the bank account.
  5. Select Save & Send or Save & New.

You’ll get a message that your direct deposits were sent.

Before paying your contractor, make sure you update to the latest version of QuickBooks Desktop.

When you're ready to pay an independent contractor using direct deposit:

  1. Select Banking, then select Write Checks to start the direct deposit.
  2. Select the Bank Account ▼ dropdown and select the checking account you use to pay contractors.
  3. Select the Pay to the Order of ▼ dropdown and select the contractor.
  4. Select the Date field and enter the date you want to pay the contractor. Important: To pay by direct deposit, the pay date must be at least two business days in the future. If a date is less than two business days in the future, QuickBooks automatically chooses the soonest available date to pay via direct deposit.
  5. Enter the direct deposit amount in the $ field.
  6. Select the Expenses tab and select the related expense account.
  7. Make sure the Pay Online checkbox is checked. Note: If you’ve entered bank account information for your contractor, QuickBooks selects the Online Payment checkbox box.
  8. Select Save & Close. This opens the Confirmation and Next Steps window.
  9. Select Send to Intuit to open the Send/Receive window. Note: If you close the window on accident, go to the Employees menu and select Send Payroll Data.
  10. Select Send and enter your direct deposit PIN.

With Intuit Online Payroll Enhanced, you can send multiple direct deposits at once:

  1. Select Payday and then Contractors.
  2. Select the payment date. This is the check date and the day the contractors receive their funds. Note: The direct deposit may take up to 2 banking days to process. Learn more about lead times for direct deposit.
  3. Select the contractors you want to pay.
  4. Enter the payment or reimbursement amount. In the Payment field, enter payments made for contractor's services. In the Reimbursement field, enter any additional business-related expenses the contractor paid that you need to pay them back for.
  5. Select Preview Payment and review the details.
  6. Select Submit to Intuit.

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