Normally you pay contractors for services provided by creating a bill when the work is complete or when you receive an invoice from the contractor, but if you need to pay a contractor on a regular schedule like your W-2 employees it is easy to do with Monchilla.
Note: If the IRS decides you should have paid payroll taxes for this contractor they can hit you with serious penalties (this is not the slap on the wrist stuff). For more information see 1099 Contractors vs Employees.
Create an empty tax rule group
1. Click on Settings and then Rules.
2. Click the green Create Rule Group button.
3. Type 1099 Contractor in the Rule Name box.
4. Click the Add/Remove rule button, select the Payment to Employee rule and click Save and then click OK.
Create an Employee Profile for a Contractor
1. Complete the employee profile as you normally would with an employee, but don't click Save.
2. Change the employee first and last name to the business name.
3. Check 1099 in the top right corner.
4. Under compensation and employment select the compensation amount and click Edit Item.
5. Change the Worked Hours Rule Group to 1099 Contractor.
6. If the compensation is "hourly" assign them to a project.
You're done! Paychecks will be created for this contractor just like an other employee except no payroll taxes will be applied. Now you can even use employee time tracking or setup time tracking to bill customers for hours logged by your contractor.