Hire and pay US-based (domestic) contractors

• Valid SSN or ITIN (for an individual), or FEIN (for a business)
• Work address in the US if Gusto is generating a 1099-NEC at year end
• Bank account in the US if being paid through direct deposit
• No tax withholding or back-up withholding, if required for the contractor

You'll only be charged for contractors in the month(s) you pay them–the per contractor price will either be $6 per contractor or $12 per contractor depending on your Gusto plan type.

• Heads up: Gusto users can have more than one profile designated to a single email address. If you're hiring a contractor that already has a Gusto account, they can reference this article to learn how to toggle between the two accounts.  

For information about international contractor payments that Gusto supports, check out this article. 

Add a U.S.-based independent contractors

1. Go to the People section and select Team members.
2. ​Click Add a team member.
3. In  the Contractor tile, click Add.
4. Select if this is an Individual or Business contractor type.
5. Enter the contractor's details such as name and start date.
   • If you elected Individual as the contractor type, you may be asked to answer additional questions about new hire reporting and their primary work state.
6. Select their wage type–hourly rate or fixed dollar amount.
7. Enter your contractor's personal email. Use an existing address that’s not associated with your company. 
   • This allows them to view their payments and download their annual 1099 tax form.
8. At the bottom, select the checkbox to invite this contractor to enter their own details in Gusto.
   • If you wish to enter all of their information yourself, uncheck that box. Proceed with entering their SSN/EIN, address, and payment info directly as it was provided to you on the W-9.
9. Click Select documents.
10. Select the onboarding documents you need the contractor to sign or acknowledge. Choose from:
    • Individual documents (Plus and Premium only): something for a single recipient, like a contract agreement. 
    • Team documents (Plus and Premium only): something applicable to many recipients, like required training.
    • Gusto will also automatically send a W9 to your contractor to complete electronically. 
      • If they have trouble completing this form, you can direct them to this article.
11. Click Add contractor.
12. If you did not choose to have the contractor self-onboard, enter their payment details.
13. Click Save and continue.

Your contractor will receive an email requesting them to add their SSN/TIN (for an individual) or EIN (for a business), home address, and payment information for a direct deposit or check. Once completed, you'll be notified and can start paying them through Gusto.

To view the contractor's checklist later, follow these steps. If you're on the Plus or Premium plan you can add custom tasks to your onboarding checklists.

Form W-9 (Taxpayer Identification) info

If your contractor does not sign the electronic W-9 provided by Gusto after onboarding, you're required to keep a copy of the W-9 that the contractor provided to you before they were hired. 

Once Gusto's version of the W-9 has been signed by the contractor, it cannot be edited in Gusto. You can have the contractor fill out a new Form W-9 outside of Gusto, and then upload the new version to their Gusto profile.

To view the Form W-9 that was created when the contractor was originally onboarded:

1. Go to the People section and select Team members.
2. Click the contractor's name,
3. Toggle to the Documents tab.
4. Click Taxpayer Identification (Form W-9) to review the form.

    

Contractor end of year forms

Gusto will provide electronic copies of 1099-NEC to your domestic contractors, and will file your 1099-NEC forms to federal and state agencies (if applicable) at the end of the year. 

If you'd like to make contractor payments using Gusto, but don't want Gusto to produce a 1099-NEC for one or more contractors at the end of the year, contact our team from the Help section of your account to let us know—customers on a Priority support plan should contact us from the Priority support section. 

Reminders

• 1099-NECs are not required to be filed on behalf of most corporations, including LLCs that are treated as C or S Corps.
• If the annual total payments to a contractor were less than $600 for the year, you may not be required to file a 1099-NEC.

More information about 1099 reporting requirements can be found here. 

We do not currently support: 

• 1099-MISC or other 1099 types, for any agency
• Back-up withholding, if required for your contractor 
• Contractor withholding, if required by the state 
• International contractor withholding or reporting.

If you're using Gusto Time Tracking for contractors, learn how to sync their hours here. If you're looking to pay international contractors, follow these steps.

Pay your domestic contractor

1. Click the Payroll section and select Pay contractors.
2. From the "Pay domestic contractors" tile, click Create Payment.
3. Select the pay date—you can select the present date or one in the future.
   • The default date shows the earliest pay day for direct deposits.
     • Payrolls and contractor payments paid via direct deposit have the same processing timeline. If you need to pay your team sooner, you can pay with a physical check and distribute externally.
     • Paying on autopilot is not available for contractor payments. 
   • A note on pay dates:
     • If you choose the default date or any time after that, you can pay by direct deposit or check. 
     • If you select a date before the default date, you can pay by check only.
     • If the payment has already been made and you’re entering it for tax reporting purposes, you’ll want to record it as a “Historical Payment”, which you can do in the next step. 
4. If you have multiple bank accounts set up, select which bank account you would like to process payroll from.
   • If you don't see this option, head to this article to learn more.
5. Click +Enter payment to submit wages and/or reimbursements (if applicable), and invoice number—minutes worked should be entered as a decimal percentage of hour (ex. 1 hr 15 minutes is entered as 1.25 hrs).
   
   • The invoice number can be any alphanumeric combination, up to 25 characters.
     • If you do not use invoice numbers, enter ‘none’ or ‘N/A’ into the invoice number field.
   • If you need to change the payment method: Click the current payment method under the column “Payment type” and it will toggle between check, direct deposit, and historical (to be used for reporting purposes).
   • Optional: Click Add Memo to leave a small message on the payment.
6. Click Continue to review the payment.
   • Reminder: once a contractor has been paid, if you need to cancel/reverse the payment, we'll be able to correct the reporting, but you’ll need to recoup all funds (direct deposited or issued by check)–banking regulations prevent Gusto from recovering the funds on your behalf.
7. Verify the total amount and click Submit payments, or Go back if you need to make changes.
   • If your payments need to be made by check, you’ll be taken to a page that confirms the amount you need to pay the contractor. Once you’ve written the check, click Finish Payment.

Click here to edit or cancel the payment after you've run it.

If you've already paid a domestic contractor outside of Gusto, you can still add the payment to Gusto for reporting purposes—this helps ensure the total amount on the contractor's Form 1099 is accurate.

To adjust or cancel a previously processed-in-Gusto contractor payment, click the Cancel or adjust a contractor payment processed by Gusto dropdown below. To process a new payment, check out the information in the Pay a domestic contractor dropdown. 

For each month a historical payment is entered in, you'll be charged your standard monthly contractor fee.  

Adding historical payments for a previous year

The deadline to enter historical contractor payments for the previous year is in early January—we'll send notifications to admins as the end of the calendar year approaches letting you know what the final deadline is to run any and all previous payrolls (this includes historical contractor payments). 

• If you're entering multiple historical payments at the end of the year, you can enter all payments in the same month–this way you'll only pay one month's fee per contractor for all of their historical payments.
• If you're adding a payment for a previous year and a Form 1099 has already been filed, you'll need to generate a corrected Form 1099-NEC.
• If Gusto did not handle your tax filings for the previous year, you'll need to generate and file a new Form 1099 outside of Gusto.

Add a historical contractor payment

First, add the domestic contractor in Gusto, then follow the steps below—if the contractor has been dismissed you'll need to rehire them first. The payment(s) will be added for reporting purposes only.

1. Click the Payroll section and select Pay contractors.
2. From the "Pay domestic contractors" tile, click Create Payment.
3. Click the pay date and select the actual date you paid your contractor–a message prompting you to further indicate this is a “historical payment” will appear. 
   • If you're adding a payment for a previous year and a Form 1099 has already been filed (or the deadline for changes has passed), you'll need to generate a corrected Form 1099-NEC. 
4. Next to the contractor's name, under the "Total amount" column, click Enter Payment. 
5. Under the "Payment method" column, the default payment method for that contractor will appear—click that payment method (typically Check or Direct Deposit) until it updates to Historical Payment.
6. Enter the number of worked hours, wages, or other additional earnings that were paid.
7. Click Memo to leave a small message and let your contractor(s) know what the specific payment is for.
8. Click Continue.
9. Review the summary and click Submit payments if everything looks right.

View or adjust a historical contractor payment

1. Click the Payroll section and select Payroll history.
2. Click the Contractor payment history tab.

If you need to cancel or adjust a payment, click View details.

Certain contractor payments can be canceled or adjusted in Gusto without having to contact us for help. If you only see the option to cancel a contractor payment, this means the payment has not fully processed and you will need to cancel and rerun the payment to make any changes.

If you’re looking to adjust an employee payroll instead, click here.

Cancel or adjust a contractor payment

1. Click the Payroll section and select Payroll history.
2. Click the Contractor payment history tab.
   • Under the payday, if a payment can still be canceled or adjusted, they'll be a tag letting you know. If the tag doesn't appear, contact us so we can assist with the next steps. 
3. Click View details under the "Actions" column.
4. Choose the option available–the cancel option is not available once the payment has processed.
   • Cancel the payment:
     • Scroll down to the contractor name, click X cancel payment, and then click Cancel Payment to confirm.
   • Adjust the payment:
     • Under the “Adjustments” section, click Make an adjustment. Then, tell us what you need to adjust. Based on your selection, we’ll let you know the next steps required to adjust the payment.

Contractor payment reversals–general info

• Reversing before the check date
  • We’ll return the funds to your bank account within a few business days. 
• Reversing on or after the check date
  • We’ll correct the reporting, but you’ll need to recoup all funds (direct deposited or issued by check)–banking regulations prevent Gusto from recovering the funds on your behalf.

Troubleshooting a wrong bank account

Bank error received

Have your contractor update their bank account information– you can also do this on their behalf in their contractor profile found in the People section. Once updated, they should receive their funds within 1-3 business days.

No bank error

If the transaction went through and you did not receive a bank error, the funds may have landed in the wrong bank account. Because Gusto is unable to retrieve the funds from the incorrect bank account, you’ll need to call the bank with the funds directly to address the issue.

Gusto has a default limit of ten payments per contractor per month—click below to learn how to increase this.

Contractors

The maximum amount you can increase this to is 20 payments per contractor per month. Please contact us to request a contractor payment limit increase.

Employees

You can pay employees as many times as you want.

Head to this article for more information on dismissing and rehiring contractors.

After submitting payroll, we’ll electronically send your employees’ direct deposits. After the banks receive our electronic payments, they have until 5pm local to make funds available to your employees in their bank account. Employee paystubs become available in their Gusto account on the check date, but not before—you can print employee paystubs early if needed. 

If you believe there is a delay with one or more employee’s direct deposits, follow the steps below to troubleshoot.  

1. Check to see if the payroll was successfully submitted on time. To do so click the Payroll section > Payroll History > View details and review the pay date and processed date. You can also check your email for any check date change notifications.
   • If the payroll was submitted after the payroll deadline, your employee's direct deposit will be delayed by one or more business days.
     • If delayed, you can view the new expected check date by clicking the Payroll section > Payroll History.
   • If the payroll was not submitted as expected, check your dashboard and email to see if any additional information was requested.
     • If so, respond to the request and once the information has been reviewed and approved, the payroll will be processed and funds credited within a few business days.
   • If Gusto was unable to successfully debit funds from your company account for your payroll, we’ll need to resubmit the debit before the payroll can be processed.
     • Information about the resubmission of the debit can be found on the Home page of your account and in your email.
2. Check to see if the employee(s) is/are set up to receive direct deposit.
   • The employee’s payment method should be set to direct deposit.
     • If the payment method is set to check, you’ll need to issue your employee a check for their net pay.
3. Verify your employee’s bank account information.
   • If the routing or account number is incorrect, you can update it on your employee’s behalf or your employee can update their bank information on their own.
     • If we're able to retrieve funds from the original payment, we'll automatically resend it to the updated bank account; this can take a few business days to complete.
       • If you decide to delete the bank account (rather than update the existing one), you’ll need to add a new bank account and then contact us in order to resend the payment.
   • If your employee’s bank account was recently changed, payments may have been routed to the previous account. 
     • Your employee should review their previous bank’s transaction history to see if funds were deposited there. 
       • If your employee no longer has access to the old account, you or the employee can contact us to obtain the ACH trace ID for the payment, then your employee will need to contact their bank to have them track down the payment.
4. Have the employee sign in to their bank account or contact the bank directly to check if there are any pending payments (credits) incoming.

If you’re still unable to determine the payment status and believe there’s an issue, please contact us.