Toast Payroll: Manage 1099 Contractors

In this Article:

• 1099 Independent Contractor Summary
• Hire a 1099 Contractor in Toast Payroll
• Tax Reporting for 1099 Employees
• Additional Resources

1099 Independent Contractor Summary

1099 contractors are defined as independent contractors (not employees) that provide services for your company, but are not employed by you. Neither employer nor employee taxes are withheld from amounts paid to 1099 contractors. The contractors themselves are required to pay these when they file their personal tax returns.

 
A unique situation can occur when a customer switches from another payroll provider to Toast Payroll. When an individual is paid as a W-2 employee while using the previous payroll provider (whether or not they have an SSN) in previous quarters of the same calendar year, Toast Payroll cannot onboard them and then switch that individual to a 1099 independent contractor for the remainder of the year. This poses significant worker miscalculation risks.

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Hire a 1099 Contractor in Toast Payroll

To hire an individual as a 1099 independent contractor in Toast Payroll:

1. On the Basic info step (step 1) of the employer new hire workflow, select Contractor (1099) for the What type of team member are you adding? setting.
2. On the Jobs & pay step (step 2) of the new hire workflow, select Salary or Hourly. 
   1. If you select hourly, once you've complete your new hire steps, select the View employee profile button on the pop-up after the last step.
      1. On the employee’s profile, navigate to Employment > Position > Edit.
      2. Select a Reason at the top (Administrative Update works well for this) and scroll down until you see the Salary Type field. Select Hourly from the drop-down menu. Select Submit to finish the employer steps.
   2. If you select salary, once you've completed the new hire steps, select the View employee profile button on the pop-up after the last step.
      1. On the employee’s profile, navigate to Employment > Position > Edit.
      2. Select a Reason at the top (Administrative Update works well for this) and scroll down until you see the Salary Type field. Select 1099 from the drop-down menu.
      3. The Pay Type should be defaulted to 1099-MISC and Default Earning Type fields should already be set appropriately to 1099 Amount, but you may wish to review these as well. Select Submit to finish the employer steps.
3. When submitting payroll for the first time, the Default Earning Code should be an earning code that has a 1099 taxation status. The two 1099 earning codes that are pre-loaded into your Toast Payroll database are 1099 Hourly and 1099 Amount (used for salaried employees).
   1. If you need a new earning code with 1099 taxation status, please fill out this form and send it to us via the blue chat button in the lower-right corner of any Toast Payroll page.
   2. If you have earnings that need to be transferred to or from a 1099 earning code due to mis-recording, chat with us by selecting the blue chat dot in the lower-right corner of any Toast Payroll page

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Tax Reporting for 1099 Contractor

As long as they are appropriately marked on their profile (see above), Toast Payroll does not require an SSN to be entered since contractors are responsible for their own tax filing. It is up to the employer to determine the appropriate classification of a 1099 independent contractor. Learn more about the difference between independent contractors and W-2 employees in this Internal Revenue Service (IRS) article.

Although Toast Payroll does not file taxes for 1099 contractors and does not generate or produce year-end tax forms for these individuals, those individuals can still be paid through Toast Payroll. Here are the steps to gather the information they need to file:

1. An HR+ user should navigate to Reports > Standard.
2. Search for the Quarterly Employee Payroll Audit Report and select the eye icon, then Queue on the following page.
3. Next, select the appropriate FEIN and Year.
4. Now toggle the following first four fields to Yes: Include demographics, Include earnings, Include deductions, and Include taxes.
5. After selecting Queue once more, select My reports in the pop-up.
6. The My reports tab of the Document Courier refreshes every 30 seconds while processing the report. Once the Quarterly Employee Payroll Audit is ready, select the Download hyperlink.
7. Lastly, open this file in a spreadsheet viewer. Before you send this report to a contractor, make sure to remove all other employee rows. Columns E and F list the names of each individual in the report, so we suggest removing every row besides row 1 (column headers) and the row containing the contractor.

Note: If a company code only contains 1099 contractors and zero Form W-2 employees for a calendar year, Toast Payroll will not file or submit any team member tax filings. If this occurs for a second straight year, we will shut off tax filing and will not submit any more zero returns. If you employ and pay at least one Form W-2 employee in that second year, we will continue filings.

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Additional Resources

• Toast Payroll: Get Started With the Year-End Checklist
• Toast Payroll: Hire New Employees (Employer Guide)
• Toast Payroll: Onboard Employees (Employee Guide)

This content is for informational purposes only and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.