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vendor expense vs. contractor expense

Forum|Forum|2 years ago
March 12, 2024
2 replies
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Hello

new to QBO 2024

I just established a sole proprietorship (DBA). I hired someone to help me build my website.

She works alone (no employees). Her "company" is just her name.

I have no idea if she is a sole proprietorship or s corp or whatever. Found her on Facebook. For all I know, she doesn't even have a company established and she's just someone who is good at websites. She just charged me hourly for the time she tutored me.

When I go to pay her and record this, is she a vendor expense or a contractor expense in QBO? I have read all the posts but its still not clear to me what the distinction is.

Also, if I understand tax law, I need to provide a 1099 to everyone I pay $600+ total during the course of 2024, correct?

Do I just need to check the box for 1099 tracking in her profile if I know I plan to spend more than $600?

Also, I imagine I need her ss # or tax ID number to issue a 1099. Is there a way for quickbooks to request documentation from her? Does this depend on whether I classify her as a vendor or a contractor?

THX--New to quickbooks online but also new to business so lots of questions

QuickBooks Online

Best answer by Rainflurry

@OGBadger

"Getting into tax law here, but could you maybe explain why is it that we don't ask VENDORS (like Office Max) for w-9 forms even when we purchase more than $600 of goods (staplers) or services (printing services) but we DO ask for W9's from "contractors" who sell us goods (a png logo) or services (help with a website)?"

You don't need to issue 1099s to corporations. Office Max, Target, Amazon, etc. are public companies and, therefore, are corporations. Even at the bottom of this webpage, Intuit is listed as Intuit, Inc. so you can quickly identify that they are a corporation (Intuit is a public company as well). When in doubt, you should request a W-9 from your vendors/contractors. Don't get too hung up on the vendor vs. contractor classification. You can issue a 1099 to either.

D

DebSheenD

Hello there, @OGBadger.

I'm glad to help you with your questions about QuickBooks Online (QBO) and your business setup.

Regarding your first question, if the person you hired is an independent contractor, classify her as a contractor expense in QBO. If she is a vendor providing goods or services, classify her as a vendor expense. As she is an individual providing a service, classify her as a contractor expense.

For your second question, yes, you are correct that you need to provide a 1099 to anyone you pay $600 or more during 2024. To track this, you can check the box for 1099 tracking in her profile in QBO. This will help you keep track of the payments made to her and ensure that you have the necessary information for issuing a 1099 at the end of the year.

Regarding your third question, you need the contractor's SSN or tax ID for a 1099. QBO doesn't request this info directly. Obtain it from the contractor by asking for or using a W-9 form to ensure accurate tax reporting. Let me know if you have more questions.

I've attached some articles below for additional details, as well as screenshots for additional reference:

That should point you in the right direction. Please know that I'm just a post away if you have any other questions about setting up contractors or working with QuickBooks. I'll be happy to help you further. Have a great day ahead.

O

OGBadgerAuthor

Thanks Deb

I'm sorry but I am still confused when you say,

"if the person you hired is an independent contractor, classify her as a contractor expense in QBO."

I guess thats my question. What is Quickbooks definition of an "independent contractor"?

Then you say,

"If she is a vendor providing goods or services, classify her as a vendor expense."

Same question here. What is Quickbooks definition of a vendor?

Then you say,

"As she is an individual providing a service, classify her as a contractor expense."

to this statement I ask, why is she not a "vendor"? Is a vendor not an individual? Is a vendor like Home Depot or something?

Sorry but I still need clarification

Many Thanks

Bryan_M

Hi there, @OGBadger.

I'll add info about the distinction between Vendors and independent Contractors.

A Vendor is a person or company who sells things for you. Most of the time, products are comparable to one another to a variety of clients. Both large and small enterprises are customers of the vendors that provide goods and services and long-term services are often provided by vendors.

An Independent Contractor is the one you hire to carry out particular responsibilities that have a predetermined deadline. Their employment is temporary, and the agreements governing their engagement may need to be renewed at regular intervals.

Moreover, if you add a contractor it will show to both vendors and contractor's tab. Yet, the vendor lists can be viewed in the vendor's tab.

For future reference, if you want to see how much you're paying each vendor monthly, you can read this article: How to run and save a monthly expense report by the vendor.

Leave a comment below for additional questions about adding a vendor and contractor to your QuickBooks Online (QBO) account. I'll be willing to lend a hand. Have a good day.

Rainflurry

@OGBadger

"I have no idea if she is a sole proprietorship or s corp or whatever."

You need to have her fill out a Form W-9 so that you know.

"When I go to pay her and record this, is she a vendor expense or a contractor expense in QBO?"

Technically, she is a contractor because you're paying her based on an agreed-upon hourly rate. In QBO, when you set up a contractor, they are also listed as a vendor. You're most likely going to issue her a 1099 either way.

"Also, I imagine I need her ss # or tax ID number to issue a 1099. Is there a way for quickbooks to request documentation from her? Does this depend on whether I classify her as a vendor or a contractor?"

That will be on Form W-9. Just email it to her directly and then save the completed form under her vendor profile.

O

OGBadgerAuthor

Thanks

Your post makes the most sense to me for some reason. Appreciate your reply.

Getting into tax law here, but could you maybe explain why is it that we don't ask VENDORS (like Office Max) for w-9 forms even when we purchase more than $600 of goods (staplers) or services (printing services) but we DO ask for W9's from "contractors" who sell us goods (a png logo) or services (help with a website)?

This is still a bit fuzzy to me.

THX in advance for your reply.

RainflurryAnswer

@OGBadger

"Getting into tax law here, but could you maybe explain why is it that we don't ask VENDORS (like Office Max) for w-9 forms even when we purchase more than $600 of goods (staplers) or services (printing services) but we DO ask for W9's from "contractors" who sell us goods (a png logo) or services (help with a website)?"

You don't need to issue 1099s to corporations. Office Max, Target, Amazon, etc. are public companies and, therefore, are corporations. Even at the bottom of this webpage, Intuit is listed as Intuit, Inc. so you can quickly identify that they are a corporation (Intuit is a public company as well). When in doubt, you should request a W-9 from your vendors/contractors. Don't get too hung up on the vendor vs. contractor classification. You can issue a 1099 to either.

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