1099 "employee" Set Aside Fund for Taxes

Thank you for contacting us about setting aside a vendor fund for taxes, kycagir.

QuickBooks Desktop lets you set aside Federal withholding for contractors. 

Simply add a line or expense when writing a check to account for the federal backup withholding. The amount must be entered as a negative amount to reduce the total payment to the vendor.

You can browse this link to learn more about the process: Withhold taxes from contractor payments. It explains and provides things you need to do about Federal backup withholding.

If you need further actions about the process, I recommend consulting your tax adviser. They can provide additional information so your 1099 payments have accurate records.

Let me know if you have follow-up questions about setting aside funds for taxes by commenting below. I'm always right here to help you.

We have recently upgraded to Gold Enterprise subscription to utilize the Enhanced Payroll for independent contractor payments. 2 issues of concern

1. We need to use Direct Deposit for our traveling healthcare Temp workforce. Can we manage that with our suite of services?

2. Many contractors require or request "Backup witholding". Can we track that withholding to be calculated and reported on the year end 945, and 1099 ?

Can enhanced desktop payroll handle these transactions with enterprise data ?

Is Qbooks online payroll necessary ?

Thank You.

I'm glad you've upgraded to the Gold Enterprise version with Enhanced payroll for your contractors. I'll provide you few things so you'll be more familiar with your subscription, ddineno.

Intuit QuickBooks Desktop Enterprise Gold includes everything in Silver plus. It also provides extra functionality to pay and file taxes, pay employees, and streamline your payroll. You can set up direct deposit for your payroll. But before that, you'll have to gather some information like business, bank, and principal officer information.

Once done, you can now be able to connect your bank account through Instant Bank Verification. Here's how:

1. Open the Vendor Center.
2. Double-click the vendor if you wish to add the direct deposit to.
3. Select the Additional Info tab and select the Direct Deposit button.
4. Select the Use Direct Deposit for: [Vendor Name] box, and enter the bank info. Be sure to double-check the bank account with your contractor. Note: Split direct deposit payment isn't available for independent contractors.
5. Select Send confirmation direct deposits to [email address] if you'd like a payment confirmation. Intuit will send an email to the email address entered two days before payment will arrive in the independent contractor's bank account. Included in the email:
   • Your company name
   • The amount of payment
   • The date the payment will arrive in the independent contractor's bank account (the date shown on the independent contractor's check in the check register)
   • The last four digits of the independent contractor bank account number. Note: If you don’t see an email address or the email address is incorrect, you can add or update the email address by selecting the Address Info tab.
6. Enter your direct deposit pin when prompted.

For more information on how you can set up your direct deposit, check out this article for more details: Set Up And Manage Direct Deposit For Your Contractors.

However, Enhanced Payroll features don't support the 945 and 1099 forms. You'll want to check out with IRS on how to set this up. Ideally, once you pay a contractor, you can add a line/expense to the check to account for the federal backup withholding. I've added this article so you'll know how to back up withholding: Withhold Taxes From Contractor Payments.

Also, both QuickBooks Desktop and QuickBooks Online is a standalone software to which you can add payroll to each subscription. You can use only one QuickBooks product depending on your business needs. 

Also, learn from this article how you can customize payroll reports in QuickBooks to keep track of your contractors: Customize Payroll And Employee Reports.

Please get back to us if you have any questions about taxes or contractors. We're here to help you.