Overview

Should I classify my new hire as an Employee or Contractor?

How do I set up my contractors in Gusto?

How are my contributions going to be recorded in QuickBooks?

What if there are contributions that were not tracked?


Overview

Are you hiring or contemplating hiring contractors for your business? Did you hire contractors early in the year? Here is some key info you should know. If you get stuck on any of the steps below, reach out to us at [email protected] 😉

Should I classify my new hire as an Employee or Contractor?

Check out these guides on hiring an employee vs. contractor

Employee vs Contactor Infographic

What’s the Difference Between an Independent Contractor vs. an Employee?

How do I set up my contractors in Gusto?

You can add the contractor’s basic info, allow them to self-onboard, send new hire docs, and pay them using Gusto. Gusto will send the W-9 (IRS form to request info from independent contractors) and file the required 1099 MISC forms to federal and state agencies at the end of the year.

There is a fee of $6/contractor/month for this service that we will pass on to you. Add independent contractors

Alternatively, you can do all these manually without Gusto but it’s a bit more involved on your part. And, you will be charged by an efile service provider when you file your 1099-Misc.

You do not have to pay contractors through Gusto but we recommend it since Gusto will make the annual 1099 process so simple. You are on the hook for issuing a 1099 to any contractor you pay more than $600 a year for services. Collective will not be able to assist you with this, so we highly recommend using Gusto. You can use any other service to create a 1099 or do it yourself. Also, services like Upwork and Fiverr are subcontracting companies, they are on the hook for issuing the 1099 not you.

How are my contributions going to be recorded in QuickBooks?

Payments to your contractors are automatically synced to Quickbooks. Once Contractors are set up in Gusto, go to Settings > Integration and map in Quickbooks.

  • When the information syncs to Quickbooks, you will simply Match the payments

Not sure how to do this? Reach out to your Collective team.

What if there are contributions that were not tracked?

First, add the domestic contractor in Gusto, then follow the steps below—if the contractor has been dismissed you'll need to rehire them first. The payment(s) will be added for reporting purposes only.

  1. Click the Payroll section and select Pay contractors.

  2. Click the pay date and select the actual date you paid your contractor–a message prompting you to further indicate this is a "historical payment" will appear.

    • If you're adding a payment for a previous year and a Form 1099 has already been filed (or the deadline for changes has passed), you'll need to generate a corrected Form 1099-NEC.

  3. Next to the contractor's name, under the "Total amount" column, click Enter Payment.

  4. Under the "Payment method" column, the default payment method for that contractor will appear—click that payment method (typically Check or Direct Deposit) until it updates to Historical Payment.

  5. Enter the number of worked hours, wages, or other additional earnings that were paid.

  6. Click Memo to leave a small message and let your contractor(s) know what the specific payment is for.

  7. Click Continue.

  8. Review the summary and click Submit payments if everything looks right.

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