Add Independent Contractors to Square Payroll
Create a New Contractor
- Visit the Payroll Team tab of your online Payroll dashboard or Square Payroll app.
- Click Add Team Member.
- Click Create New or select an existing team member.
- Enter your contractor’s First and Last name.
- If you choose to provide your contractor with an online account, enter their email address.
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. If you prefer to enter this information yourself, you have the option enable the feature after saving the contractor. If you do not provide your contractor with an online account, you will need to enter their information.
- Select the Contractor employment type. Note: If the team member is also classified as a W-2 employee, additionally select the Employee type. Click here for instructions on how to Add Employees to Square Payroll.
- Select the Pay Type and Payment Method.
- If applicable, enter the contractor’s personal information and bank account information.
- Click Generate Point of Sale Passcode if you would like to use Timecards through Square Payroll.
- After you click Save, your contractor will appear as an option when sending a contractor payment.
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 Team 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
Square Payroll allows your team members to be classified as both a W-2 employee and a 1099 contractor. If you would like to switch the team member’s employment type, click the applicable box on the Team Member’s payroll profile in the Team tab in your online Payroll dashboard or Square Payroll app.
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.
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 Overview section of your online Payroll dashboard or Square Payroll app 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.