Convert a contractor to an employee

I appreciate you posting your concern here in the Community, @fmarshall.

I'm here to ensure that you'll get to convert your contractor to an employee in QuickBooks Online (QBO) Payroll. 

There are two ways in converting a contractor into an employee. You can either choose to make the contractor inactive or add a period to the end of their name and then add them as new employee. It's to get around the duplicate name prohibition.

Follow these steps how:

1. On your QBO account, go to the Payroll tab, then select Contractors.
2. Locate and select the contractor you want to change.
3. Under the name of the contractor, click the dropdown beside Active and choose Mark as inactive.



Once done, you can then add them as an employee in QuickBooks Online.

Moreover, please take note that if your worker has been set as both an employee and a contractor within the same year, you'll need to provide both W-2 and 1099 to the worker at the end of the year.

I'll also share this article that can serve as your reference if you want to learn how to set up a direct deposit and pay your employees in QBO Payroll: Set up your company payroll for direct deposit.

Don't hesitate to leave a reply if you require further assistance with converting contractors into employees in QBO. The Community team always has your back. Have a good one!