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5 Great Payroll Solutions for Contractors

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If you work with contractors, you get a bonus bit of paperwork at the end of the year: 1099-MISC forms. You’ll send 1099s to your contractors for the work they’ve done throughout the year.

Payroll Solutions for Contractors

That means you need to keep detailed records of all the payments you’re making and pull those payments together at year-end to fill the 1099s out. If you use a lot of contracting work, you can easily spend hours searching down payments and figuring out who needs a form.

If you already use payroll software to manage your employees, wouldn’t it be nice to be able to manage contractors in the same place?

Payroll software for contractors

Today, we’re looking at payroll software to help you pay contractors and manage 1099s at the end of the year, saving you administrative time, clearing up you headaches, and freeing you from the wrath of the IRS.

These five software options are:

  1. Listed in the Capterra payroll directory
  2. Allow you to manage contractors and 1099s
  3. Are the most-reviewed options in the directory as of May 2017

These options are listed in order of reviews, from most reviewed to least.

Before we get started: reminder on the 1099-MISC

The 1099-MISC is a catchall for miscellaneous income generated throughout the year. While contractors are often the main focus of these filings, you may also need one if you, as a business, make payments for rent, prize winnings, fishing-related activities (no, I have no idea why), or legal services.

For contractors, the 1099 is effectively a W-2. You’re saying, “I paid this person $X for the work they did.” As a small business, it’s your responsibility to issue 1099s to your contractors.

As a quick reference point, someone is an employee if you:

  1. Dictate how they do their job
  2. Are in control of how they get paid and what they get paid for
  3. Have a contract in place for benefits and continued employment

Now that we’re reacquainted with the 1099, let’s jump into the software options.

1. QuickBooks Payroll

Reviews: 2,239

Rating: 4.5/5

QuickBooks has a payroll option that can either be paired with its accounting software or purchased on its own. QuickBooks offers two varieties of payroll, allowing you to do the heavy lifting yourself or let QuickBooks do everything.

In either version, the data from payments made to vendors/contractors will flow into the tax prep area of the software, allowing you to simply make payments throughout the year and then wrap everything up simply at the year-end.

You can then use Intuit’s e-file services to file the 1099s. Pricing for filing varies based on the product you’re using, the number of 1099s you need to file, and when you sign up—earlier filers get a discount. If you don’t e-file, you’ll be able to print out or save PDFs of the 1099s, letting you manage them in any manner you see fit.

There are all sorts of pricing variations depending on the suite of tools and level of assistance you opt for, but the basic, standalone payroll goes for $25 per month while the full-service payroll with QuickBooks Plus plan runs $130 per month.

2. Paycor Perform

Reviews: 1,034

Rating: 4.5/5

Paycor Perform is a cloud-based payroll system that manages your entire payroll process. Paycor looks to take payroll completely off your plate by managing the payments, tax preparation and filing, and payroll admin.

The system can be accessed by any device, allowing you to manage the bits you need to manage easily. You can easily update your payroll numbers and view reports on your business’s expenses.

Speaking of reports, Paycor can automate reporting and distribute the results to decision-makers in your company. You can see how much you’re spending on contracting each month, for instance, and send it along to department heads so they can actively manage costs.

1099s are just another part of the system for Paycor. You’ll pay your contractors, generate the 1099 data you need, and file those forms at the end of the year.

Paycor doesn’t publish prices, so you’ll need to reach out for a quote.

3. Patriot Payroll

Reviews: 619

Rating: 5/5

Patriot’s contractor management system is a standalone product, outside of its Online Payroll offering. With it, you can manage contractors and their associated forms all in one place, keeping everything separate from your regular employees.

The software lets you keep track of payments, report on payments, and print the actual payments in check form. Patriot’s 1099 offering goes all-in on the 1099 theme, allowing you to process payments for rents, royalties, and attorneys in addition to the contractor payments you might normally make.

Patriot is a super straightforward 1099 solution, without any features excess to requirements. Patriot prints 1099s on preprinted 1099 forms, which you can order directly from the IRS.

Because it’s a standalone product, Patriot’s 1099 offering can be had for $7.50 per month. You don’t need to use any other Patriot software or service to process 1099s, so $7.50 is all you’ll pay.

4. Xero

Reviews: 555

Rating: 4.5/5

Xero’s 1099/contractor option is built right into its core package. Once you set the contractor up in the system, you’ll be able to set up rules for them to make sure every payment you make to them is correctly categorized.

Xero will automatically transfer payment data, but will skip over things that the IRS doesn’t include in calculating the $600 limit. For instance, a payment for services will be incorporated into the 1099, but a reimbursement for travel or expenses won’t.

Because the system relies on rules you set yourself, you can cover other 1099 situations just by making the proper rule. You could mark all payments to your attorney as part of a 1099, for instance, or all rent payment to your landlord.

At the end of the year, you can either e-file the 1099s or export them to manually manage the rest of the process. Xero treats 1099s as reports, which are available in all its editions. Prices start at $9 per month and run to $70+ per month, depending on the features you need.

5. BambooHR

Reviews: 269

Rating: 4.5/5

Bamboo Payroll is part of the BambooHR framework. BambooHR is a broad system, covering everything from onboarding to time off. The Payroll add-on is a full-featured payroll option that manages payments, taxes, and benefits. This includes managing 1099s and contractors.

Using BambooHR, contractors can log in to a self-service portal to view payments and 1099s, an excellent feature for companies that manage lots of contractors. Instead of responding to every request for a new version of a lost 1099, you can just send the contractor to the portal.

BambooHR doesn’t publish its prices, so you’ll have to reach out for a quote.

Finding the right payroll software for contractors

Managing contractors effectively can unlock a new chapter of growth for your business. Flexible workers give you tools to ramp up production when you’re busy, without taking on too much administrative burden.

Finding the payroll software that works best for your business is going to be about more than just price. You need to think about your existing technology, the features you need beyond contractor management, and how your employees want to interact with you.

For a full list of payroll options, check out Capterra’s payroll software directory, sporting over 200 options with reviews and features to make buying your next bit of kit easier.

Looking for Payroll software? Check out Capterra's list of the best Payroll software solutions.

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About the Author

Andrew Marder

Andrew Marder is a writer for Capterra. His background is in retail management, banking, and financial writing. When he’s not working, Andrew enjoys spending time with his son and playing board games of all stripes.

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