Can someon please explain contractors to me? They are supposed to be entered under payroll but they are not employees, and then they show up under vendors. Help!

I understand that you may be confused about how to set up your contractors in QuickBooks Online (QBO). Allow me to provide some clarification, @knapiks. 

To manage payments to contractors and generate 1099 forms at the end of the year, you can set up contractors under the "Contractors" section within the Payroll feature in QBO. Even though contractors are not employees, they are included in QBO's payroll feature to streamline the process of managing payments and tax reporting for them. 

On the other hand, if you add a contractor under "Expenses/Contractors," they will be categorized as vendors. This categorization is mainly for organizational purposes. By categorizing contractors as vendors, you can track expenses related to them separately from other types of expenses. This can be useful for managing your overall expenses and understanding the specific costs associated with your contractors.

To sum up, contractors are managed in both the Payroll section for payment and tax reporting purposes, and in the Vendors section for expense tracking and categorization.

In case you need more information, I have attached some articles below as a reference:

• How to Add Independent Contractors and Track Them for 1099s in QuickBooks Online
• 1099 Setup

We got your back if you have other questions about managing your vendors and contractors. Have a great day!

Thank you for replying.  so if i want to produce 1099's I have to move all the tranactions to a contact in payroll?  When I am in the transaction screen for the bank account and I need to add a new contractor, the only option is to add a vendor so they are all under vendors.  I cannot move a year of transactions for 1099's.  Can I produce 1099's vendors?

Me again.  I just tried to write a check to a contractor under payroll and I can't.  So how do I get payments to link to contractors?

I'd help clear up your confusion about 1099s and tracking vendor transactions in QuickBooks Online (QBO), knapiks.

In QBO, you can set up (either in the Vendors or Payroll tab) your contractors as vendors. So, if you want to produce 1099s, you don't need to move all your transactions to a contact in payroll. As long as you've checked the Track payments for 1099s option, QuickBooks will add them to the tax filing module. Please see the screenshot below for your reference.

Moreover, vendors added through payroll are automatically eligible for 1099s. QuickBooks will track all of their payments behind the scenes. When you're ready to file your 1099s, you can easily add the tracked payments to the form.

On the other hand, once your contractor has a vendor profile, you can create or write paper checks to pay them in QuickBooks Payroll. Given that you've already set up your printing preferences, here's how:

1. Go to Payroll and select Contractors.
2. Select the dropdown next to the contractor's name and then Write check.
3. From the Bank account dropdown, select the account the check withdraws money from.
4. Complete the check fields you need.
5. Select the Print check option if you want to open the check queue to print now. Or select the Print later checkbox if you want to print the check later.
6. Click Save and close to close the check window. Save and new if you need to create another check. Note: If you choose a save option, this adds the check to your bank register. But only sends it to the print queue if you select Print later.

You can check out this article for more details about the process above: Pay a contractor with a paper check.

Whenever you're ready to prepare your 1099s with QBO, you may want to check out this article as your guide: Create and file 1099s with QuickBooks Online.

For any other 1099 concerns or questions about managing contractor or vendor payments in QBO, you can tag me in the comments below. I'm always ready to help you out.

O thank heavens!  Thank you.  

You're always welcome, @knapiks! 

I'm thrilled to learn that my colleague's assistance has been valuable in resolving your concerns. Your positive feedback is greatly appreciated, and we are committed to providing ongoing support for any future QuickBooks challenges you may encounter.

You may visit our Help Articles page to read different information that will guide you in future tasks.

If you require additional assistance or wish to engage with the Community, never hesitate to contact us. Click the Reply button below or submit a new query. We are eagerly waiting to assist you.

Thanks.

So I enter them all twice - in payroll and in vendors?  And then I have to move all the transactions too?    I'm really not getting this.  I already have them as vendors with all the transactions.   How do I get them into Payroll with all the transactions?

Hi again,

I don't write checks.  I just code transactions that come in the bank transactions screen.  The coding screen only shows the vendors/customers.  Is there a setting so that I can code to payroll contractors?

Thanks for coming back, @knapiks. Let me chime in and add some clarifying information about this matter.

In QuickBooks Online, once you create a profile for your contractor on the Contractors tab, you don't have to create a new profile on the Vendors tab, and vice versa, as the program will automatically categorize them as a vendor. Thus, the profile will show on both tabs. However, if you add the contractors to the vendor's tab and not in the contractor's tab, you need to tick the box for Track payments for 1099, so all the transactions made are linked to the contractor's profile and will be included when preparing 1099s. You may refer to the images below for the side-by-side reference: 

Next, since the contractors are labeled as vendors, you don't have to move all the transactions from the vendor profile to the contractor payroll as they are the same account. It's to avoid duplications and mistakes while managing your books in the program. Also, the payroll tab for contractors can only be used when you run a payroll to pay them for their work or prepare the 1099 forms. This explains why you can only see all the transactions in the vendor's tab. Here's a screenshot for the payroll page: 

On the other hand, when selecting codes on the Bank transaction page, you can only see vendors, customers, and employees in the options. Thus, there's no option to change or edit these codes. However, you don't have to worry about this because the contractors are included on the vendor's list option.

Moreover, you can categorize your bank transactions or match them with existing transactions in the program to make your account accurate.

Also, once everything is settled, you can create and file the 1099 using QuickBooks. 

You can comment back if you have other questions about managing your contractors in the program or other QuickBooks-related inquiries. We've got you covered and ready to provide you with assistance. 

Sorry. I was referring to Payroll contractors.  The expenses are not showing up in the payroll contractors.  Nor all the vendors.

Also, I have nothing to match the expenses to.  I don't make payments to Contractors.  I just coded what came into QBO from the bank.  They are all under expenses.

Hi there, knapiks.

You can set up a rule in QuickBooks Online (QBO) to automatically assign payroll expenses to a contractor, or manually select the contractor's name to assign the expenses.

Here’s how:

1. Click on the Gear Icon ⚙, then choose Rules.
2. Select New rule.
3. Type in a name in the What do you want to call this rule? field.
4. Choose Money in or Money out from the Apply this to transactions that are ▼dropdowns.
5. From the  ▼ dropdown, select a bank or credit card account, or select All bank accounts.
6. Set the conditions of the rule. With a maximum of 5 conditions, you can set a single rule. Set and include the following, then select + Add a condition.
7. Specify whether this rule applies to the Description, Bank text, or Amount fields in the Conditions field. To decide how QuickBooks will apply the rules, select Contains, Doesn't Contain, or Is exactly.
8. Select the settings for the rule. Select the Transaction Type, Category, Tags, and the Payee to apply.
9. Tap Save.

You can check this article for further details on creating a bank rule in your QBO account: Set up bank rules to categorize online banking transactions in QuickBooks Online.

Comment below if you have more questions about your payroll contractors in your QBO. I’ll be here to assist you at any time. 

I have a number of vendors set up already and have been paying them but now need to set them up at contractors I guess in order to automatically ask them to sent me a W-9 and to generate a 1099. Correct? I get how to set up a new contractor in QBO but it doesn't look like it links to the vendor of the same name. And once I did for one vendor it was showing zero payments to that contractor for all time - which I know is incorrect. 

How do I fix this issue? 

Hello there, plower. I wish you didn't have to go through this. No worries. I've got the steps to link your vendors and contractors in QuickBooks Online (QBO).

There's no need to set up a new contractor, you just need to tick the Track payments for 1099 box on your vendor's profile to link the two.

Here's how to do it:

1. Go to Expenses, then choose Vendors.
2. Navigate to the vendor you want to make as a contractor and click the name to open their profile.
3. Click Edit.
4. Scroll down to the Additional info section, then tick the Track payments for 1099 box.
5. Select Save.

Then, go to the Contractors tab and open the contractor profile. You can click the Send email button and follow the on-screen instructions to invite your contractors to fill up their tax details. 

Additionally, you can run a 1099 report to see who needs 1099s, payment totals, and more.

Let me know if you need further assistance with your contractors. I'll be here to help you in any way I can. Have a great day!

Thanks!!! That looks like that did the trick. 

Many thanks!

That's great to hear, plower-patientlo.

I'm glad to know the steps provided by my colleague helped you and that you were able to manage and track contractors in your account. It's always our aim to ensure that you receive the support you need.

I'll keep this thread available if there's anything else you need further assistance with when running reports in your account. Just let me know, so I can provide additional help. Keep safe!