How to change an employee to a contractor?

Changing an employee to a contractor is quick and easy and I'd be glad to show you how, lindaleigh33-out.

Before you transition your employee to a contractor, you'll need to change their status from Active to Terminated first. Here's how:

1. Click Payroll in the left panel and choose Employees.
2. Select the employee's name and click the pencil icon beside Employment.
3. Choose Terminated under Status.
   
4. Hit Done.

Once done, you can proceed by adding a contractor with a slightly different name (maybe add the middle initial). You can either use Intuit Smith as the employee and then Intuit L. Smith as the contractor.

I'll be sharing with you this article: How to Add Independent Contractors and Track Them for 1099s in QuickBooks Online. This will provide you more details on how to contractor works in QuickBooks as well as steps to track your expenses.

Keep in touch if you need any more assistance with this or there's something else I can do for you. I've got your back. Have a good day!

Hi, lindaleigh33-out.

Hope you're doing great. I wanted to see how everything is going about changing an employee to a contractor you had yesterday. Was it resolved? Do you need any additional help or clarification? If you do, just let me know. I'd be happy to help you at anytime.

Looking forward to your reply. Have a pleasant day ahead!

So you can't change their status you have to terminate then add them as a contractor? 

Correct, @ashart.

To change an employee to a contractor, you'll need to change the employee's status to Terminated. and vice versa, to change a contractor to an employee, you'll first need to deactivate the contractor then add as an employee.

Let me know if you need anything else, I'm here to help.

if I terminate them, will I have to go back thru all "employee" checks Ive written and reconnect them to the new contractor profile?

Thank you for joining the thread, @AMurph.

 
I’ll make sure to give you the right information about your concern.

After the termination, you’ll need to re-enter the payroll check as a regular check. Thus, paychecks are different from contractors’ checks.

Before you can pay your contractors, you need to set their profiles. 

Add the contractor to QuickBooks as a vendor if you haven't done so:

1. Navigate to the Payroll menu, then click Contractors.
2. Select Add a contractor
3. Enter your contractor’s info, or select the Email this contractor checkbox so they can fill it out.
4. When you're done, select Add contractor.

However, if you want to delete payroll checks, I suggest contacting your accountant for more assistance needed.
 
You can also pay a contractor with a direct deposit. Check this article for your reference.
 

You’ll need to prepare your 1099s during tax season, see the links below:

• Set up contractors and track them for 1099s in QuickBooks.
• Create and file 1099s using QuickBooks Online.

If you require any additional support or if there is anything else I can do for you, please contact me. You can rest assured that I'll be there for you. Wishing you a pleasant day!

I am getting an error that the email is already in use when I try to add the contractor. 

I did not have an option to terminate the employee, I have to mark them inactive. 

Welcome to QuickBooks Community, BHaynes2. 

I'll make sure to walk you through on how to add your contractors seamlessly. I'll also show you how you can have the option to terminate an employee.

The error appears when we try to enter duplicate information from other contractors or employees. If we have set up contractors as employees by accident and they don't have paychecks created or pay history added to their profile, we can delete or make them inactive. I'll show you how:

1. Go to the Payroll menu.
2. Within the Employees tab, select the employee you want to eliminate.
3. Click the Action drop-down arrow and select Delete Employee.
   

To terminate an employee, we can follow the steps below. Please note that terminated employees will no longer be listed on your active payroll list. However, your accounts still have their profile and pay history, which continues to show up on reports.
 

1. Go to the Payroll menu. Then, select Employees.
2. Select your employee. 
3. Click the Action drop-down arrow. Select Change Status.
4. From the Employment details window,  select Terminated in the Status field.

On the other hand, if you've seen the same page below, we can only make your employee inactive since we still need to complete the setup for our payroll and our employee profile and have payroll taxes done within your QBO. Afterward, we'll be able to terminate or delete an employee.

Then, we can refer to this article to learn about adding contractors: Set up contractors and track them for 1099s.

For additional information, feel free to visit these articles. They contain details about handling employee status and payroll.

• Get started with QuickBooks Online Payroll
• Terminate or change your employee's status on the payroll.

Also, we can run some payroll reports to get the information accordingly and set up your contractors correctly:

• Run payroll reports in QuickBooks Online Payroll
• Get answers to your 1099 questions.

There you go. I'm always here if you have additional concerns about managing contractors and employees in QBO. I'll ensure to provide the details and solution you need. Take care and stay safe!

thank you for your instruction for how to change yo9ur employee to a contractor . but in doing so , now no-one can clock their hours of the day through time sheets or workforce.. help . !!

I then need them all to be in a nice little row before payday... eeks!!  signed, Weary workers leader 

I know a way for your contractors to clock in their hours through a timesheet, Getngear.

We can add the contractors as Team Members in QuickBooks Time, allowing them to log in and clock their hours. The steps to complete the process are as follows: 

1. Go to My Team.
2. Select + Add.
3. Enter their information, and select a role.
4. If you'd like an invitation to be sent to the team member(s), enter their email address (es) and/or mobile number(s), and select Email or Text.
5. Select Add Team Member(s).

If you need to add members in bulk, the following article will walk us through the process: Add and manage team members in QuickBooks Time. More information about granting a member permission and allowing them to edit their profile can be found at the same link. 
 

If there's anything else I can do for you, please let me know. I'm always willing to help. Have a wonderful day!

How do i do this on Quickbooks Online? This is after a year of paying multiple contractors while they were miss-categorized as employees. I need to re-categorize them so I can send them their 1099’s. I don’t not want to create issues when I delete employees and add contractors with little tricks like slightly changing their name spelling. They are LLC’s so they need to be the right spelling. Thanks.

I get that to reclassify a contractor to an employee; I have to make the contractor inactive and then create a "new" person with a slight variation of the name. But, in the next step, I have to enter the SSN, but I am blocked from entering that with the message "This Social Security number is already in use by another employee. Check your number and try again."Obviously, I can't proceed unless the contractor relationship ends and the employee relationship begins. How do I solve this one? [email address removed]

I have a solution for adding the Social Security Number (SSN) to your employee information, Mark. Rest assured, you can continue adding all the necessary information in the field.

We can replace or change the SSN of the inactive contractor and input the correct one in the new employee you created. Here’s a step-by-step guide on how to do this:

1. Go to the Payroll and click Contractors. 
2. From the selection drop-down, select Inactive. 
3. Click the contractor's name. Then, click the pencil icon under the Pay section. 
4. Under the contractor's withholding, click the pencil icon to edit the Social Security Number section into a different one.
5. Click Done and then Done.

Once you’ve completed these steps, you’ll be able to input the SSN for the new employee you created.

Moreover, you may refer to this article to view steps on how you can run several payroll reports that you can use to view useful information about your business and employees: Run payroll reports in QuickBooks Online Payroll.

We'll always be at your side and offer guidance about adding employees' personal information or addressing any other QuickBooks inquiries you may have.

I tried the directions and attempted to change the SSN for the contractor by 1 digit ending in a 6 instead of the current 5. The SAVE button will not work for me and allow the contractor number change. There have been 11 payments made to the contractor in 2024. If I wait until 1/1/2025, will that make a difference?

Hi there, @markatgoefi. I appreciate you for making an effort to resolve the issue by following the steps provided by my colleague. Since you're still unable to proceed, let's troubleshoot this matter further. 

One factor you need to consider when you encounter this situation is your browser. When our browser gets overloaded, it causes lagging and formatting issues while working on your QuickBooks company. As a result, you'll encounter difficulties when saving your newly converted employee. 

To address this, we can consider opening your account using a private browser as they won't save your browsing activity, cache and cookies, or site data. To use one, here are the keyboard shortcuts you can follow:

• Google Chrome: Ctrl + Shift + N
• Mozilla Firefox: Ctrl + Shift + P
• Safari: Command + Option + P
• Edge: Ctrl + Shift + N

Once there, open your account and try to create your employee's profile from scratch. If you're able to process this using your private browser, please clear your browser's cache for a fresh start. Also, I suggest using an updated browser so you can utilize QBO to its full potential.

Moreover, please make sure to verify that your employee's name and Social Security number (SSN) matches with Social Security's record. This way, we can ensure that the entered SSN is valid, to check if please visit this website: Social Security Number Verification Service. 

In addition, I'll include this article you can check if you have need help in managing an employee residing in a new state: Set up employees and payroll taxes in a new state
 

Comment back in this thread if you need further help in entering your employee's SSN in QuickBooks, @markatgoefi. We'll make sure to help you as soon as possible.