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You hired a freelancer to build your website or handle three months of content, and now you’re staring at a W-9 form wondering what to do with it. Do you need to withhold taxes? Do you need a payroll account for one person? What happens in January when they ask about a 1099? If you’ve been paying contractors through Venmo or a bank transfer and keeping notes in a spreadsheet, you’re not doing anything illegal, but you’re one missed filing deadline away from a headache.
The paperwork problem gets worse the moment you consider bringing on your first W-2 employee. Now you’re dealing with tax withholding, state registration, workers’ comp in some states, and quarterly filings you’ve never had to think about. Most solopreneurs don’t need a full HR department for this. They need something that collects the right forms, calculates what’s owed, files it automatically, and tells them when they’ve crossed a line that requires a different type of paperwork.
That’s what the current generation of payroll tools is built for. The “AI” part isn’t marketing fluff here so much as practical automation: software that flags worker misclassification risk before it becomes an IRS problem, generates 1099-NEC and W-2 forms without you touching a spreadsheet, and in at least one case, lets you run payroll by typing a message like you’re texting a person. Below are the five tools worth knowing about if you’re paying contractors, hiring your first employee, or both.
The best AI payroll tools for solopreneurs
Gusto
Gusto is the most widely used payroll platform for small businesses, and it scales cleanly from a single contractor to a small team of W-2 employees. Its standout feature for solopreneurs is the dedicated Contractor Only plan, which handles 1099 payments, automatic 1099-NEC preparation and IRS filing, and even international contractor payouts without forcing you into a full payroll subscription. Pricing starts at $35/month plus $6 per contractor; once you hire a W-2 employee, you move up to the Simple plan at $49/month plus $6 per person, with Plus ($80/month + $12/person) and Premium ($180/month + $22/person) available as you add multi-state payroll or deeper HR support.
Deel
Deel is built for paying people outside the U.S., which makes it the right pick if your contractors are freelancers in other countries rather than down the street. It generates locally compliant contracts, handles payments in 120+ currencies, and automates invoicing and tax form collection so you’re not manually chasing documentation across time zones. The contractor management plan runs around $49 per contractor per month; a Contractor of Record option (roughly $325/contractor/month) exists if you want Deel to take on misclassification risk directly, which is worth considering if a contractor relationship starts to look more like employment.
OnPay
OnPay is a no-frills, single-tier payroll platform that skips the multi-plan pricing games entirely. It runs full-service payroll for both contractors and W-2 employees, automatically files federal and state payroll taxes, and includes basic HR tools without upselling you into a bundle. Pricing is straightforward at around $49/month plus $6 per person, with no long-term contract and a free first month for new accounts. It’s a solid fit if you want predictable, all-inclusive pricing rather than a tiered plan structure.
Roll by ADP
Roll by ADP is a mobile-first payroll app built on ADP’s compliance infrastructure but stripped down to what a very small business actually needs. Its distinguishing feature is a chat-based interface: you literally text or message “Roll,” the app’s built-in assistant, to run payroll, and it walks you through the steps conversationally rather than making you navigate a dashboard. It costs around $39/month plus $5 per person, with unlimited payroll runs and automatic tax filing included, and new accounts typically get a multi-month free trial.
Justworks
Justworks is a professional employer organization (PEO), meaning it co-employs your workers and takes on a chunk of the compliance and benefits administration for you, including health insurance access that’s normally out of reach for a business of one. It’s the right consideration once you’re hiring your first real W-2 employee and want someone else handling multi-state compliance, benefits enrollment, and HR questions. PEO plans run around $59/employee/month (Basic) or $109/employee/month (Plus, with benefits), though note that Justworks’ PEO service generally requires at least two people on payroll, including one W-2 employee; solo owners with no employees yet should look at Justworks’ standalone payroll product (around $50/month base plus $8/employee) or one of the other tools above instead.
Which one should you choose?
Paying your first 1099 contractor, U.S.-based: Start with Gusto’s Contractor Only plan or Roll by ADP. Both keep the cost low and handle the 1099-NEC filing automatically, so you’re not manually generating tax forms in January.
Paying contractors outside the U.S.: Use Deel. It’s built specifically for cross-border payments and compliant contracts, which Gusto and OnPay handle less thoroughly outside the U.S.
Hiring your first W-2 employee, keeping it simple: Gusto Simple or OnPay both give you full payroll tax filing and direct deposit without a lot of extra HR overhead, at similar price points.
Hiring your first W-2 employee and wanting benefits handled for you: Justworks is worth the higher per-employee cost if you want health insurance, 401(k) administration, and compliance questions offloaded to someone else, provided you meet its minimum headcount requirement.
Mixing a few contractors and unpredictable pay schedules: Roll by ADP’s chat-based, run-it-when-you-need-it style suits solopreneurs who don’t want to log into a dashboard every pay period.
Payroll is only one piece of the admin stack. If you’re also trying to keep your books straight without hiring a bookkeeper, our roundup of AI bookkeeping tools for solopreneurs covers the platforms that categorize expenses and reconcile accounts automatically, and if quarterly estimated taxes are still a guessing game, we’ve also broken down the best AI personal finance and tax tools for tracking what you owe. And once you’re paying people, you’re probably also chasing payments yourself — our guide to AI invoicing and billing tools covers the other side of that admin load.
If you want tool comparisons like this one before we publish them, our newsletter The Solo Stack sends a short breakdown of what’s actually worth paying for as a one-person business.
Frequently asked questions
Do I need payroll software if I only pay one contractor?
Not strictly. If you’re paying a single 1099 contractor a modest amount, you can track payments manually and file a 1099-NEC yourself through the IRS’s free filing system or your tax software. Payroll software starts paying for itself once you have multiple contractors, pay on a recurring schedule, or want the 1099 generated and filed automatically instead of doing it by hand every January.
What’s the real difference between paying a 1099 contractor and running W-2 payroll?
With a 1099 contractor, you pay the full amount agreed on and they handle their own tax withholding and self-employment tax. With a W-2 employee, you’re legally required to withhold income and payroll taxes, pay the employer share of Social Security and Medicare, and often cover state unemployment insurance and workers’ comp. The W-2 side is why most payroll tools charge more once you add an employee — there’s genuinely more compliance work happening behind the scenes.
Can I misclassify a contractor without realizing it?
Yes, and it’s more common than people think. If you control how, when, and where someone does the work, provide their equipment, or they work exclusively for you on an ongoing basis, the IRS and many state agencies may consider that person an employee regardless of what you call them on paper. Tools like Deel flag classification risk, and Gusto and OnPay both offer guidance, but the underlying legal test is about the working relationship, not the paperwork.
Do I need different handling for contractors in other states or countries?
Multi-state W-2 employees usually require you to register for payroll tax withholding in each state they work from, which most of the tools above (Gusto Plus, OnPay, Justworks) support directly. Contractors are generally simpler since you’re not withholding their taxes regardless of location, but international contractor payments involve currency conversion and local compliance questions that a domestic-only tool like OnPay isn’t built to handle — that’s where Deel fits in.
When does a contractor legally need to become a W-2 employee?
There’s no single dollar threshold or hours cutoff — it comes down to the nature of the working relationship. If the arrangement starts to look like employment (set hours, ongoing exclusive work, you directing how the work gets done, them using your equipment), it’s worth a conversation with an accountant or employment attorney rather than guessing. Most of the tools above will let you convert a contractor to an employee within the same platform once you’ve made that call.