Most home service and construction companies pay subcontractors: an electrician on a remodel, a crew for a big roof, a helper for a busy season. Paying them in QuickBooks keeps the cost on the right job and puts the 1099 paperwork in one place at year end. This guide covers how to pay contractors in QuickBooks Online, how to collect W-9s, and how to file 1099s, including the higher 1099-NEC threshold that applies to payments made in 2026.
QuickBooks steps and prices below are from Intuit's product and help pages, and the tax rules from IRS.gov, as of October 22, 2026. This is a general guide, not tax advice. Talk to your accountant about your situation.
First: is the worker really a contractor?
Paying someone as a contractor only works if they actually are one. The IRS looks at three kinds of evidence:
- Behavioral: does your company control, or have the right to control, what the worker does and how they do it?
- Financial: do you control the business side of the job, such as how they're paid, whether expenses are reimbursed and who provides tools?
- Type of relationship: are there written contracts or employee-type benefits, and is the work a key part of your business?
There's no set number of factors that decides it. A sub who runs their own business, brings their own tools and crew and works for other contractors is usually a contractor. A helper who works only for you, on your schedule, with your tools, may be an employee. Generally you don't withhold or pay taxes on payments to independent contractors, which is why the IRS cares about the difference.
Step 1: Collect a W-9 before the first payment
Form W-9 is how a contractor gives you their correct taxpayer identification number (TIN) for your 1099. Get it before you pay them. If a contractor doesn't provide a correct TIN, you may have to withhold 24% of their payments as backup withholding and send it to the IRS.
QuickBooks Online can collect it for you. When you add a contractor (under Expenses & Bills > Contractors, or Payroll or Team > Contractors depending on your subscription), enter their name and email and let QuickBooks email them an invite. The contractor enters their own W-9 information and signs it digitally. QuickBooks stores the details on their profile and a PDF of the signed W-9 in their documents. Contractors added this way are tracked for 1099s automatically. Intuit notes that this invite feature is limited on QuickBooks Online Free and Lite, and isn't available in QuickBooks Desktop.
Step 2: Choose how to pay
Pay by check
With QuickBooks Payroll (now called QuickBooks Workforce) or Contractor Payments, go to Payroll > Contractors, open the dropdown next to the contractor's name and select Write check. Choose the bank account, then print the check now or later. The contractor must be set up as a vendor tracked for 1099s first.
Without a payroll or Contractor Payments subscription, you can record a check or expense to the contractor's vendor profile. Use the same expense account each time (for example, "Subcontractors") and assign the job or customer, so the cost shows up in job costing.
Pay by direct deposit
Direct deposit to contractors needs QuickBooks Contractor Payments or a QuickBooks Workforce payroll plan. Once your company is set up for direct deposit and the contractor has added their bank details (they can enter them through the same invite):
- Go to Expenses & Bills > Contractors and select Pay contractors.
- Choose the pay date and the contractors.
- Choose Direct deposit as the pay method and the expense account you use for contractor payments.
- Select Preview contractor pay, then Submit contractor pay.
What Contractor Payments costs
| Plan | Price (list) | Contractors |
|---|---|---|
| Contractor Payments | $25/mo | 20 included, then $2/mo per contractor |
| Contractor Payments + QuickBooks Online Simple Start | $50/mo | 20 included, then $2/mo per contractor |
| Workforce Payroll | $50/mo | $7/mo per employee or contractor |
| Workforce Payroll + Simple Start | $88/mo | $7/mo per employee |
Contractor Payments includes contractor payments, direct deposit (next-day deposit is subject to eligibility and, Intuit says, costs extra for contractors), unlimited 1099 e-filing and contractor self-setup. Intuit was advertising 50% off for the first three months when we checked; the discount doesn't apply to per-contractor fees. If you pay just a handful of subs by check, you may not need it. If you pay many subs every week, direct deposit and included 1099 filing can save hours.
For which QuickBooks Online plan fits a contracting business overall, see our QuickBooks for contractors guide.
Step 3: Know the 1099-NEC rules for 2026
The rules changed for 2026:
- Threshold: $2,000. For payments made in 2026, you file Form 1099-NEC for each person you paid $2,000 or more in the course of your business for services by a non-employee, including parts and materials. For payments made before 2026, it was $600. The IRS says the amount may be adjusted for inflation starting in 2027.
- Backup withholding. If you withheld federal income tax under backup withholding, you file a 1099-NEC regardless of the amount.
- Card and PayPal payments don't count. Payments by credit card, debit card, gift card or PayPal aren't reported by you on a 1099-NEC; the card company or payment app reports them on Form 1099-K when its own thresholds are met.
- Corporations are generally exempt, including LLCs taxed as C or S corporations. Attorneys' fees are the exception: report payments to attorneys and law firms even if they're incorporated.
- Due date: January 31, to both the IRS and the contractor, or the next business day if it falls on a weekend or legal holiday. For 2026 payments, that's February 1, 2027.
- E-filing is required if you file 10 or more information returns in total (1099s, W-2s and others combined).
Step 4: File 1099s from QuickBooks Online
QuickBooks Online prepares and e-files 1099-NEC and 1099-MISC forms from the payments already in your books, for contractors paid by cash, check or direct deposit:
- Go to Expenses & Bills > 1099s and select E-file.
- Let QuickBooks autofill your forms, or prepare them yourself: review your company info, then map the expense accounts you use for contractors to the right box. Most contractor payments go to nonemployee compensation on Form 1099-NEC.
- Check the box next to each contractor who should get a 1099, review the amounts and e-file.
- Track the status under the Completed forms tab.
Unlimited standard 1099 e-filing is included with Contractor Payments, QuickBooks Workforce plans and some Bill Pay plans. With QuickBooks Online alone, Intuit says fees may apply, and printing and mailing copies to contractors can cost extra. QuickBooks also files state copies for states in the IRS Combined Federal/State Filing program.
QuickBooks Desktop uses a 1099 wizard under Vendors > 1099 Forms > Print/E-file 1099 Forms. You select vendors, verify their details and map accounts, then e-file through Tax1099. Changes you make in Tax1099 don't flow back to your company file.
Filing without QuickBooks. The IRS's free IRIS Taxpayer Portal lets you e-file up to 100 information returns at a time, by hand or CSV upload, and download copies for recipients. You need an IRIS Transmitter Control Code (TCC) first, so apply well before January.
Year-end checklist for contractor payments
- Every contractor has a signed W-9 on file
- Contractors are marked as tracked for 1099 in QuickBooks
- Contractor payments use the same expense account(s), mapped to 1099-NEC
- Card and PayPal payments are excluded (QuickBooks does this automatically)
- Corporations are excluded, except attorneys
- Totals checked against the $2,000 threshold for 2026 payments
- 1099-NECs filed with the IRS and sent to contractors by February 1, 2027
Paying subs is the last step of the job. To keep the earlier steps tidy, see our contractor invoicing software comparison and our free contractor invoice template.
