Not sure if you have an employee who should receive a Form W-2 or an independent contractor who should receive Form 1099-MISC? Read our Town Square Blog post on 1099 vs. W-2 to learn more.
Create a New Contractor
- Visit the Payroll section of your online Square Dashboard > click Contractors.
- Click New Contractor.
- Enter in your contractor’s name and, if they’re paid by the hour, an hourly rate.
- Select a Payment Method.
- If you choose to provide your contractor with an online account, your contractor will be able to fill in their W-9 information and, if paid by direct deposit, add their bank account details. If you prefer to fill in this information yourself, you have the option to do so after saving the contractor.
- If you do not provide your contractor with an online account, you will need to input the contractor’s personal information from Form W-9. This information will be used to generate the contractor’s Form 1099-MISC at the end of the year.
- After you click Save, your contractor will appear as an option when sending a contractor payment.
- Contractors given an online account will receive an email instructing them to create an account. After creating their account, they will be prompted to enter their personal and bank account information.
Note: You cannot pay your contractor until their personal information has been entered. To enter this information yourself, click on the contractor’s name in the Contractors tab of your Payroll dashboard > Activate Manually.
Square Payroll does not currently support filing Form 1099-MISC for contractors that are businesses and use their EIN (not their SSN) for their taxpayer identification number.
Add a Previously Created Employee as a Contractor
You can also choose to activate a contractor that you have already paid previously as an employee via Square Payroll.
- Visit the Payroll section of your online Square Dashboard > click Employees.
- Click on the employee you want to switch to a contractor and click Remove from payroll.
- Visit the Contractors section within Payroll.
- Click Add Contractor and select their name from the list below the Create New Contractor button.
See instructions above for inputting the required contractor information.
Note: An individual cannot be a 1099 contractor and a W-2 employee at the same time. If you change a W-2 employee to be a 1099 contractor or vice versa, they will receive both a W-2 and a 1099-MISC at the end of the year.
Transferring Historical Contractor Payment Information
In order for your total contractor compensation to be correct at the end of the year in Form 1099, you are responsible for transferring any historical payments for the current year to Square Payroll.
- To transfer historical payments for the current year, go to the Payroll section of your online Square Dashboard and click Pay contractors.
- Select the payment method Pay all Contractors by check.
- Select the pay period and the appropriate contractor(s).
- Enter the total amount you have paid the contractor outside of Square Payroll in the Amount column, or enter the total number of hours and hourly rate they have been paid.
- Click Continue.
- Review and click Confirm.
Note: The payment will be reported on the current year’s Form 1099-MISC. You cannot add payments for previous years.