As we wrap-up our look at the various workflows associated with payments within QuickBooks Online, we have just one area remaining. In this lesson we need to look at the features QBO provides for handling both employee payments in the form of payroll, as well as payments you might need to make to independent contractors.
A company’s success depends on the people who perform the work. As a business evolves, the owner grows from being the service provider to becoming the administrator. Making that leap requires additional capital and know-how.
A business owner must make certain that their employees and independent contractors get paid accurately, on time, and using the correct methods. It’s also critical to double-check that the funds have been money set aside for monthly and quarterly taxes associated with obligations related to these payments.
In some cases the owner chooses to retain the services of an independent bookkeeper or CPA, or even a payroll company to do this work. In other cases they choose to undertake payroll and contractor payment processing themselves. When a business owner chooses the later option QuickBooks can help them with their choice. The Workers Center (as shown below) accessible from the left navigation pane is where you’ll find both the Employees and Independent Contractor tools you need to make these task easier.
The QuickBooks Online Workers Center (accessible from the left navigation bar) contains both an Employees tab and a Contractors tab.
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Employees
The Employees tab (shown above) is where you go to run Payroll.
When it comes to ‘Payroll’, learning and using QuickBooks Online Full Service Payroll streamlines what would otherwise be a lot more work and a lot more hassle. It’s great for small businesses with straightforward Payroll needs.
QuickBooks Online has three levels of Full Service Payroll: Core, Premium, and Elite. In all the versions, Intuit takes care of everything for you. You report the hours, and Intuit will send the checks, do direct deposit, pay the taxes, and file your monthly, quarterly, and annual reports.
Where they differ is in the amount of support you receive. Core Payroll includes all the basics. Premium adds Time Tracking with TSheets, expert review of your settings, and HR Support Center, and same-day Direct Deposit. Elite adds white-glove on-boarding, a guarantee against mistakes, 24/7 support, and an HR advisor. You can look at details and compare the plans at this official Intuit payroll website1.
To enroll in a plan simply choose the plan you like by clicking the green Get Started button located on the Employees tab inside QBO.
A special note if you are a QuickBooks ProAdvisor reading this, you can get wholesale rates when signing-up your clients, you can learn more about those offerings in your ProAdvisor benefits.
Contractors (1099 Subcontractors)
If you have independent contractors who work for you but don’t qualify as Employees, QuickBooks Online considers them Contractors. They are frequently referred to as 1099 Subcontractors.
A Contractor is typically a Vendor you pay over $600 in a year for products or services2. They are self-employed or an LLC. In many cases, S-Corps are exempt, although some exemptions apply.
In January, you must send all your Contractors 1099 Forms, and submit 1096 Forms to the IRS.
Every independent contractor should fill out a W-9 form as soon as you retain them to perform any work or supply any materials. That way you will know if they are going to be subject to 1099, or if they are an LLC or an Inc. so you won’t have to chase them down for their addresses and Social Security Numbers or EINs (Employer Identification Number) in a deadline panic.
The Contractors tab (shown below) makes this easy.
The QuickBooks Online Contractors tab of the Workers Center.
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Click the green Add a Contractor button. QBO will send the Vendor an online W-9 form to fill out electronically. This also gives them a free QuickBooks Self-Employed account to manage their clients and W-9s. They can then turn this into their QBSE subscription if they choose.
Click the blue Write Check link to pay contractors for their services. If it’s a subcontractor whose labor you pass on to the Customer for repayment, be sure to use the Item Details area.
In January, click Prepare 1099s. Use the Wizard to send 1099s to your Subcontractors and submit your 1096 to the IRS.
Lesson Wrap-up
Integrating Payroll into QBO streamlines reporting, bringing your services all under one roof. For companies with straightforward payroll needs, QuickBooks Online Payroll is much simpler than importing pay runs from third-party software.
The automated workflow in the Contractors portal turns it into a hub for all subcontract labor transactions, making it easy for your clients to manage daily, and a dream for you in January.
If you’d like to see QuickBooks Online’s 1099 Subcontractor wizard in action, sign up for My free course.
We have now finished the Accounts Payable section of our QBO training series. But don’t forget, if you would like more training on A/P and payment related workflows you can join me for my Vendor Workflow in QBO webinar on August 12 at 12 Noon Eastern. Find out more about this Insightful Accountant jointly sponsored webinar HERE.
Next week I will begin a review of a variety of QBO transaction tools, starting with Transfers and Recurring Transactions.
Footnotes & Disclosures:
1 - the referenced URL is for a commercial site, it is provided for informational purposes only. No promotional fee or other consideration has been paid to the author, editor or publisher for use of this URL or in regard to the commercial site referenced.
2 - the requirements discussed here were as of the tax code/provisions as of the time of publication and may change at any time. Readers should always verify the current tax code requirements, DO NOT ASSUME that the information in this article is accurate with respect to 'any amount' or specific instruction other than on the exact date of article publication.