Subcontractors are typically responsible for paying their own payroll taxes. This means that an employer does not have to deduct taxes from payments made to a subcontractor for services rendered. However, in some instances, an employer may be required to withhold federal income taxes from the payment. This may occur when the IRS notifies the employer that the subcontractor is subject to backup withholding. If you use QuickBooks to manage and track payments for your subcontractors, you can enter backup withholding via the application's Preferences utility.