Although independent contractors may provide services for your business similar to an employee, you must not classify or pay your contractor as an employee through Quickbooks. Independent contractors are considered vendors and you must enter bills and issue payments to contractors in the same way you would enter and pay other bills in Quickbooks. You must complete a three-part process to set up and pay your contractor accounts through the software.
Enter a New Vendor
Select “New Vendor” from the Vendor Center tab on your company home screen.
Complete the vendor contact information in the new vendor screen. You must complete the name field to save the entry, but if you don’t have an address or phone number, you can omit entries in these fields. Be aware that you’ll need an address and Social Security Number to issue a 1099 to your contractor at the end of the year.
Select an expense category for your vendor. This provides accurate expense information on your Profit and Loss sheet. Use a category that describes the services you receive from the contractor. For example, if your contractor provides contract marketing services, select the "Advertising” category.
Click “Ok” to save the new vendor, or click “Next” to save the new vendor and add another.
Select “Enter Bills” from the Vendor Center. You must enter a bill for the amount you want to pay your contractor before you can issue a payment through Quickbooks.
Select the contractor you want to pay from the vendor list in the drop-down menu.
Enter the date of your bill or the date of your payment. Select the date that you would naturally search for if you must reference the information in the future.
Enter the total amount you owe the contractor for the current job or period in the “Amount Due” field.
Enter additional information or memos if desired, and click “Save”.
Pay Your Contractor
Select “Pay Bills” from the Vendor menu, and select the vendor account you want to pay from the list of outstanding bills.
Enter the amount you want to pay the contractor. You may pay all or a portion of the bill. Select your payment method from the drop-down payment menu. While you may select check or cash, it is best to pay by check so you have a bank record of the payment.
Select “Assign Check No.” from the payment section for handwritten checks, and enter the check number you use for payment. Select “To be printed” in the payment section if you print checks through Quickbooks.
Select the bank account you want to issue the payment from. If you only have one bank account listed in Quickbooks, the software automatically selects the account; otherwise, make a selection from the drop-down list of bank accounts.
Click “Pay Selected Bills”. Write the check to your contractor if you issue a handwritten check. If you print checks from Quickbooks, click the “Print Checks” button in the summary window. Your payment automatically posts as an expense on your Profit and Loss statement.