Paying contractors
Onboarding contractors, paying them through payroll, and how their 1099s relate to the ones generated from bills.
How-toFor Business owners, Bookkeepers, Firm staff
Two ways to pay a contractor
A contractor can be paid through payroll as a contractor, or through accounts payable as a vendor. Both are legitimate; what matters is that you pick one per person and stay with it.
| Through payroll | Through accounts payable | |
|---|---|---|
| Best for | Regular, recurring engagements paid on the payroll calendar. | Project work billed by invoice. |
| Payment timing | On the pay calendar. | On your payment runs and their terms. |
| 1099 generated by | The payroll system. | The 1099 compliance screen, from bills paid. |
| Risk | Paying the same person both ways in one year. | The same. |
Onboarding a contractor
- 1
Confirm the classification is genuinely contractor, not employee.
This is a legal test about the working relationship, not a preference.
- 2
Collect the W-9 before the first payment.
Legal name, entity type, and tax ID. Send the onboarding link rather than emailing a form.
- 3
Record payment details.
- 4
Agree the rate and the basis in writing.
- 5
Pay on the chosen path, consistently.
Common questions
They receive both a 1099 for the contractor period and a W-2 for the employment period. Set the transition date clearly and make sure neither system reports the other's earnings.
See also1099 and W-9 compliance
Generally no — contractors handle their own taxes. Backup withholding applies in specific circumstances, most commonly where a valid tax ID has not been provided.
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