Should I add a contractor or employee?

Hi there, AmyB.

Thank you for visiting the QuickBooks Community. I'll be sharing the difference between contractor and employee. Then, when you can add them in QuickBooks Online so you have better tracking for your taxes.

You can add an employee if this person works for someone else or a company in exchange for wages or some other agree-to compensation. While you can create a contractor if this person is an independent entity that agrees to supply services, goods, materials, equipment, or personnel that meets stated requirements. A contractor may work for a company, but they aren't a company employee. Instead, they work according to an agreed-upon contract for a set period of time.

Choosing someone as an employee or contractor is an important decision. This is because it impacts taxes, what you need to do for payroll, and more. The government has a lot of rules around this. That said, it's best to seek some help from an accounting or legal professional in determining a worker as a contractor or an employee.

Additionally, here are some helpful guidelines if the worker is an employee or independent contractor:

If your worker is an employee, an employer must:

• Withhold payroll taxes like income and Social Security taxes.
• Match the employee's Social Security and Medicare taxes.
• Pay federal and state unemployment taxes on employee earnings.
• Issue a Form W-2 after the end of the year.

If your worker is an independent contractor, an employer:

• Is not required to withhold any payroll taxes like income and Social Security taxes.
• Does not match the Social Security and Medicare taxes.
• Does not pay federal and state unemployment on employee earnings.
• Sends a form 1099-MISC after the end of each year.

To see additional details, you can click this article: What's the difference between employees and independent contractors?.

I'm also adding the articles below to see various information on how you can set up payroll in QuickBooks Online. Then, different reports you can use to view useful information about your business and employees.

• Get started with QuickBooks Online Payroll.
•  Run payroll reports.

It'll be always my pleasure to help if you have any other concerns about adding a contractor in QuickBooks. Just keep me posted in the comment section down below. Have a good one!

I would just add to the list below:

For employee, they must submit W-4 form with social security number so you can issue W-2 at year end.

For non-employee, be sure to get from them W-9 form so you can create 1099 form for them at year end.