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Reclassify Labor as COGS?

I never really looked into this but just now did, and realized it doesn't make sense, how my QB is set up.  I run a computer support business, and from time to time I have people who work for me as contractors.  When I pay them, I file it as "Labor" expense.  But that expense does not show up as a COGS as it should, since it is certainly a direct cost against revenue generated by them.  Any advice on how to fix this?  Certainly for going forward, but also ideally for past transactions?  Changing Labor to a COGS expense, or re-labeling paychecks to the contractor as some other COGS expense.  Thanks!


By the way when I go to edit account, for Labor, the Tax Line Mapping seems to be important.  Right now it is 1099-MISC, which is how I pay him.  It does seem that if it was up in Schedule C-COGS, it would be classified correctly.  But, I do pay him with a 1099, so which is correct?

1 Comment 1

Reclassify Labor as COGS?

Welcome to the Community, cameronjpu.


Let me share some information about COGS in QuickBooks Desktop. COGS tracks all of the costs associated with the items you sell. This includes direct material and direct labor expenses that go into the production of each good or service that is sold. You may want to create a new expense account through the Chart of Accounts so you can accurately track how much you've spent.


  1. Go to the Settings ⚙ icon and select Chart of Accounts.
  2. Click the New button.
  3. From the Account Type ▼ drop-down menu, select Expenses.
  4. Choose a Detail Type ▼ from the drop-down menu.
  5. Enter a name for the account or use the suggested name.
  6. Click Save and Close.

I'm adding this article for more information: Understand inventory assets and cost of goods sold tracking.


I'll be right here if you have additional questions in managing your account.

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