Independent contractors overview

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Change to CS Support service hours

Our Support department is closed on Friday, April 28th for a company event. However, limited Accounting CS phone support is available on that date from 9 AM - 5 PM ET due to the approaching deadline for quarterly payroll tax forms.

Links to our most popular payroll tax processing topics are available in the Alerts and notices section on the right side of most pages.

The application enables you to set up and process data for payees that are deemed independent contractors. You can enter and track hours and compensation for independent contractors along with standard employees, process Form 1099-MISC for independent contractors, and report on independent contractor information and transaction amounts in payroll-based reports.

To set up a client's payee as an independent contractor, follow the steps below.

Setting up a nonemployee compensation pay type payroll item

The client must use a nonemployee compensation pay type payroll item for independent contractor employees. If the client does not yet have such a payroll item set up, follow these steps.

  1. Choose Setup > Payroll Items.
  2. Click the Add button and enter information for the new nonemployee pay item. (For more details, see Creating and adding payroll items for your client.)
  3. In the Calculation section of the Main tab, select Nonemployee compensation from the Special type drop-down list.
  4. When all payroll item information is set up, click Enter to save the information.

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Setting up a nonemployee reimbursement pay type payroll item

If independent contractor employees are to receive reimbursement amounts on payroll checks and those amounts should not be included on the Form 1099-MISC, you will need to set up a nonemployee reimbursement pay type payroll item, if none are set up yet.

  1. Choose Setup > Payroll Items.
  2. Click the Add button and enter information for the new nonemployee pay item. (For more details, see Creating and adding payroll items for your client.)
  3. In the Calculation section of the Main tab, select Nonemployee reimbursement from the Special type drop-down list.
  4. When all payroll item information is set up, click Enter to save the information.

Adding an independent contractor employee

When the client has nonemployee payroll items set up, follow these steps.

  1. Choose Setup > Employees.
  2. Click the Add button and enter information for the new employee. (For more details, see Adding employee information.)
  3. In the Identification section of the Main tab, select Independent Contractor from the Type drop-down list.
  4. Click the Payroll Items tab.
  5. In the Nonemployee Compensation section, mark the checkbox for the appropriate nonemployee compensation payroll item. The pay items that are available in this grid are the pay items specified as special type Nonemployee Compensation or Nonemployee reimbursement in the Main tab of the Payroll Items screen.
  6. Mark the checkboxes for any appropriate deduction items or employer contributions for this employee.
  7. Click Enter to save the employee information.

Processing Form 945 for a client with independent contractors

Independent contractor payroll check amounts are excluded from Form 941/944 and are displayed on Form 945. To ensure that the amounts are included properly on Form 945, follow these steps.

  1. Choose Setup > Clients and click the Payroll Taxes tab.
  2. Make sure that the Do Not File checkbox for Form 945 in the Forms section is not marked.
  3. Click Enter to save your client payroll tax information.
  4. Choose Setup > Employees and click the Payroll Taxes tab.
  5. If the employee has backup withholding, mark the Backup withholding checkbox. This ensures that the amounts will display in the correct box.
  6. Click Enter to save your employee payroll tax information.
  7. Process your Form 945 as usual, when appropriate.

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Creating and printing payroll checks for independent contractors

  1. Choose either Actions > Enter Transactions or Actions > Enter Batch Payroll Checks.
  2. Enter payroll checks for the independent contractors. (For more details, see Entering individual payroll checks or Entering batch payroll checks.)
  3. Print the checks as usual.

Printing 1099-MISC forms for independent contractors

  1. Choose Actions > Process Payroll Tax Forms.
  2. In the Process Payroll Tax Forms screen, select 1099-MISC from the Form Type drop-down list and select the appropriate year from the Year drop-down list. You can also filter the forms further by making selections in the Filed by and Filter drop-down lists.
  3. Click the Refresh button to display the forms that meet the filter specifications.
  4. For details on selecting the copies to print and choosing print options for the forms, see Printing 1099 forms.

Note: If your firm uses the Employee Self-Service feature, and you want to send an electronic copy of the 1099-MISC form to the Employee Self-Service portal of independent contractor employees at form print time to avoid processing the 1099 forms a second time, you have two options.

  • Mark the Send 1099-MISC to Employee Self-Service checkbox in the Independent Contractor section of the Payroll Tax Forms Additional Information dialog. The electronic copy of the 1099-MISC form will be sent to the Employee Self-Service portal for all independent contractor employees every time you print 1099-MISC forms for the selected client, unless you have only Copy A selected during processing.
  • Mark the Send to Employee Self-Service (Independent contractors only) checkbox in the Print Options dialog for Form 1099-MISC. The electronic copy of the 1099-MISC form will be sent to the Employee Self-Service portal for all independent contractor employees. This checkbox affects only the forms currently being printed, regardless of what is selected in the 1099 Additional Information dialog of the Setup > Clients screen.

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Creating new hire independent contractor files

Use the Process New Hire California Independent Contractors screen to create new hire files for independent contractors to send to the California state agency. In the grid, You can specify the independent contractors to include in the file, their IDs, name, year-to-date earnings, contract start date, contract amount, content expiration date, and a checkbox to specify if the contract is ongoing. In this screen you have the option to preview files, manage files, and create new files.

  1. Choose Actions > Process New Hires > California Independent Contractors.
  2. The Independent contractor grid contains a list of all clients with newly hired independent contractors (or contractors that have not yet been reported as new hires). Mark the checkboxes next to either the client or individual independent contractors within a client that you want to include in the new hire file.

    Note: You can change the reported status of an independent contractor by marking or clearing the New hire reported checkbox in the Personal tab of the Employees screen.

  3. Click the Preview Selected button to preview the information that will be contained within the new hire file(s). Within the File Viewer dialog you can choose to show the field marker lines, view the previous or next file, or click the OK button, which will close the dialog.
  4. Click the Create File button to create the new hire file(s). The files are stored in the location displayed at the bottom of the screen, but you can change this location in the Setup > File Locations dialog.
  5. You can remove information from within the created file by clicking the Manage Files button to open the Manage New Hire California Independent Contractor Files dialog. Mark the checkbox for a client or individual independent contractor and click the Mark as Unreported button to move that information back to the Process New Hire California Independent Contractors screen.

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