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Intuit

Pay a contractor with direct deposit

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

With QuickBooks 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 an active payroll subscription with Intuit. You need an active payroll subscription to pay by direct deposit, even if you don’t run payroll for active W-2 employees. Here's how to set up and create direct deposits for each version of payroll.

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. This is outside your payroll system. QuickBooks tracks contractor payments for 1099- MISC reporting.

Step 1: Create a profile for your contractor

Before you can pay your contractor, you need to set up their profile. Follow the steps for the payroll product you use.

Your steps depend on which product you have.

If your sign-in screen looks like this, you use QuickBooks Online Payroll. If your sign-in screen looks like this, you use Intuit Online Payroll.

Quickbooks Desktop Payroll Enhanced and Quickbooks Online Payroll

Follow these steps to set up contactor profiles and track them as a 1099 vendor.

Intuit Online Payroll Enhanced and Intuit Online Payroll Full Service

In Intuit Online Payroll, all payments you record for contractors are saved and reported to their 1099s. To get a contractor setup:

  1. Select the Employees tab, then scroll down to Contractors.
  2. Select + Add a Contractor.
  3. Select Individual or Business for the Contractor Type.
  4. Enter your contractor’s Federal EIN. Many self-employed individuals use their Social Security number. Check with them.
  5. Enter their business name, and address.
  6. Under Payment information, select Direct depositNote: If you’ve already paid this contractor outside of Intuit Online Payroll this calendar year, select the checkbox under Other. This helps us enter past payments so QuickBooks can track them for the current year’s 1099.
  7. Enter their direct deposit info, then select Save.

Step 2: Set up direct deposit

Quickbooks Desktop Payroll Enhanced and Quickbooks Online Payroll

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.

Intuit Online Payroll Enhanced and Intuit Online Payroll Full Service

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

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 the Payroll menu menu and select the Contractors tab.
  2. Next to the contractor’s name, select the dropdown and then Pay with direct deposit.
    Settle unpaid bills with your contractor

    If you have any unpaid bills from the contractor, you can also pay that bill.

    Select Pay Bills to pay all or part of the open bill for the contractor. Then fill out the bill. Or select Pay Expenses to create a payment not related to an open bill.

  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 the payment debits from.
  5. Select Save & Send or Save & New.

This starts the direct deposit process. After the transmission finishes, you'll get a confirmation message.

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 the Banking menu and 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 select 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.

This starts the direct deposit process. After it finishes, you’ll get a confirmation message and a report. Note: If you are also sending payroll, you'll an additional message.

Review your completed direct deposits

You’ll see a record in the related expense account on your chart of accounts for each contractor payment. You will also see a check for your QuickBooks Desktop Payroll Service fees. The check has an electronic payment symbol in the corner and Direct Deposit written in the memo.

Fix direct deposit errors

Did you get an error message? Don't worry. Here's what to do if the vendor payment transmission failed.

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

  1. On the homepage under Other Payments, select Pay your contractors.
    Or, 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.

Note: Since your contractor is set up for direct deposits, the funds will be available in the contractor's bank account on the pay date.

Need to void a contractor direct deposit

If you need to void a direct deposit, the timing is important. Depending on how long ago you sent the direct deposit, you may or may not be able to stop the debit. Learn how to void a contractor direct deposit:

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