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QuickBooks Helps You Work with Contractors

March 23, 2019

QuickBooks Online Helps You Work with Contractors

These days we work in a so-called “gig” economy. Many people lost full- time employment during the financial crisis a decade ago.They had to “moonlight” but do it full time in order to make ends meet. Many found skill sets that they didn’t know they had and found that their skills were in demand. Thus many opened their own businesses and became full-time independent contractors.

When you need to hire a “freelancer” to do work for you,QuickBooks Online has the tools to handle your accounting requirements in this regard. These folks are not W-2 workers so there is not any excessive paperwork. You will simply ask them to fill out IRS Form W-9. You will pay them for services rendered and send 1099-MISC after the first of every year for their records for paying their taxes. This is the way that it works in QuickBooks Online.

Create Contractor Records

NOTE: First of all make certain that the person you are paying is really an independent contractor and does not qualify as an employee! The IRS takes this seriously and spells it out pretty clearly. If you are unsure of the status of any contractor, contact us to make sure what their status should be.

You can do this yourself or let the new contractor fill out his or her own profile.

You will need to create records for your contractors in QuickBooks Online, just as you would for any employee. In the left navigation pane, first click Workers and then Contractors | Add a contractor. Enter the name of the individual and their email address in the window that opens. If you prefer that the contractor fill out his or her own profile, just click the box next to Email this contractor.

If you do this QuickBooks Online sends an email to the contractor and invites them to create their Intuit account and provide their W-9 information. This information, when given, is then sent back to your own QuickBooks Online account. Doing this makes the work of processing 1099s a lot easier when tax season comes around. The contractor will be able to also use QuickBooks Self-Employed which is an Intuit site specifically set up for freelancers. Let us know if you would like us to walk you through the steps.

If you choose to enter the details yourself for the contractor, leave the box blank. You will see a vertical panel slide out from the right side.

This contains the fields necessary to enter the contractor information.  Because contractors are treated as vendors in QuickBooks Online, the record you create for a contractor will also show up in your Vendors list in QuickBooks Online. If you prefer, click Expenses in the vertical left pane and then click Vendors.Click New Vendor on the right and upper side to fill in the appropriate fields there. Make certain to click on the checkbox by Track payments for 1099.Because the two areas are synchronized, a short version of what you entered in Vendors will now show up on the Contractors screen as well.

Be certain to check Track payments for 1099 when creating an independent contractor vendor record.

Work with Contractors

In the example in the image, “Brenda Cooper” had an Opening balance of $2,450 at the time you created the record. That is money you already owed her, and money for which she likely sent an invoice. QuickBooks Online makes that an item in Accounts Payable but you can also find it on the Expenses and Vendors screens as well. It will also be listed as a Bill in reports,after you have created one.

Now there are three options.

  • If you do not wish to pay “Brenda” immediately,create a Bill for her and make sure all details are filled in.
  • If you wish to pay “Brenda” right away, write a Check or enter an Expense.
  • Although QuickBooks Online lets do either of these in multiple locations, we believe that the easiest way is to go back to the Contractors screen since you can do anyof the three right there.
The Contractors screen has links to each of the three ways you can take care of compensation due to a contractor.

There are three ways to handle an invoice from a Contractor. It is necessary to first select a Category. Do this from the list of options for the three kinds of transactions. Within the Cart of Accounts is the Subcontractors category which will generally work just fine.That having been said, recommend that unless you are totally familiar with what QuickBooks Online has to offer in terms of dealing with Contractors that you contact us as you start the process.

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QuickBooks Online

QuickBooks Online is a cloud-based multi-functional accounting software suite aimed primarily at small and growing businesses. Its versatile framework makes it easy for users to manage and oversee a wide range of accounting tasks, including monitoring cash flow, reviewing transactions, categorizing expenses, checking invoice statuses, and staying on top of payroll and inventory.
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CEO, Profit First Professional, Fix This Next Founding Advisor
Principle of an accounting firm that’s committed to educating business owners on their financial health, providing a trans-formative strategy and helping them experience their profit!