QBO - Pay Contractors with Direct Deposit

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New things are always rolling out for QuickBooks Online to make work easier.  If you have been wondering about 'paying your 1099 Contractors with Direct Deposit' now you can if you are a QBO Payroll or QBO Full-service Payroll user.

Withing QBO you will find the 'Workers' tab, where you can find company vendors that have been set-up as 1099 vendors. You can add to this list by searching applicable vendors and then editing the Vendor Details as 1099 eligible.

To use the new Contractor Direct Deposit feature you must have either QBO Payroll or QBO Full-service Payroll.  Each Direct Deposit Contractor will cost you $2.00 for any month in which you actually process a Direct Deposit payment to the contractor.  If you don't process a Direct Deposit payment to a contractor you will not be charged for that month. 

To Use Direct Deposit for Contractors:

1. Select Workers on the Navigation Bar

2. Choose the Contractors tab

3. Select "Check it out"

4.  After selecting 'Check it out', you will be asked to "Turn on direct deposit"

5. Select Pay with direct deposit

6. Send the Contractor the Direct Deposit Authorization form detailing bank account and routing details.

You will then enter the information the contractor provides.

7. Once the Direct Deposit Contractor bank information has been added to QBO you can create one of the following: a Check, an Expense or a Bill.

The appropriate transaction is entered and will be processed via direct deposit.

A helpful tip for the end of your 1099 creation process is to make sure the account or item you use to pay the contractor is mapped properly. I recommend if you create a new account or item for paying contractors that you then automatically switch over to the 1099 setup and add the new account/item to the 1099 mapped accounts.

To map 1099 accounts, select:

1. Select Workers from the Navigation Bar

2. Choose the Contractors tab

3. Select Prepare 1099s

4. Click the green Continue your 1099s button

5. Select Step 2 'Accounts', and then check-mark Box 7 which is the correct 1099 reporting box for non-employee compensation. Choose the applicable accounts.

I think many service-based businesses are going to be thrilled with this new update.

The biggest perk to using Direct Deposit is being mobile, because contractors often work independently so they do not check-in or come by an office to get paid.

Now, businesses can pay these vendors in a timely manner with ease.