After you sign up with QuickBooks Online Payroll, we need to know if you’re new to payroll or switching from a previous payroll solution.
Why does QuickBooks Online Payroll ask if I have paid any W-2 employees in the current year?
This is important because if you are switching from a previous payroll solution or have paid employees in the current year, we’ll need to collect that information from you. When we calculate your payroll taxes, we’re required by the government to factor in all the payroll that you ran earlier in the year.
It's also important for employers to know if your worker is a W-2 employee or a 1099 contractor to find out if you need to withhold income taxes and pay Social Security, Medicare taxes, and unemployment tax on wages paid to an employee. According to the IRS, the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done. Review IRS: Understanding Employee vs. Contractor Designation for more details.
Note: For New Jersey employers, we also need to know the number of weeks (Sunday through Saturday) in the quarter during which the employee worked.
For more information about entering prior payroll in QuickBooks Online Payroll, see Set up a prior payroll.