If you’re an independent contractor you may not think much about paperwork unless you’re signing a contract with a new client. As long as you receive checks and digital payments, you’ll assume that everything is alright.
Things may be okay now, but it isn’t uncommon for some people to think more about getting an official contractor pay stub once tax time rolls around.
Going to your accountant with a lot of bank statements and PayPal receipts may not be the best way to keep track of your earnings. Creating a paystub can make your accounting needs easier, and can help you keep track of your earnings in a better way.
Do you want to know the best way to handle paystubs as an independent contractor? Keep reading this guide for everything you need to know about pay stubs for contractors.
Employee vs. Independent Contractor
Before you start thinking about the best way for you to create a paystub for your contract work, it’s important to make sure that you’re an actual contractor.
It isn’t uncommon for some people to classify themselves as contractors when they should be viewed as a regular employee. They may not have realized that they meet the requirements to be considered an employee or their client may be purposely misclassifying their status.
Employees typically work a set schedule of hours that their employers assign to them. They have taxes deducted from each paycheck, receive typical employee benefits like sick leave, holiday pay and insurance, and are more or less overseen by a manager and have little say in the work they complete.
Contractors abide by a different set of work rules. One of the biggest differences between an employee and a contractor is the number of benefits they have. A contractor’s only benefit is their paycheck, they don’t receive anything else from the company.
Contractors make their own schedules, typically supply their own equipment and require little training, and have the ability to refuse work or turn down projects. Contractors are also responsible for paying their own taxes since they don’t come out of their regular pay.
Do you still feel like you’re a contractor after reading those key differences? If you feel like you should be seen as a fulltime employee, consider reaching out to someone about your current status.
The Differences Between a W-2 and 1099-MISC
Are you still confused about your filing status? Take a look at the tax-related paperwork you’ve gotten from your client in the past. At the end of the last year, what kind of tax form did you receive from them?
A W-2 is a tax form that’s given to employees by the company they do work for. It’ll include all of their pay for a year, and will have important details about withholding allowances, holiday pay, and health insurance.
A 1099-MISC is the tax form you’d receive if you were an independent contractor. It would only list the amount of income you’ve received during the year, and wouldn’t have any information around withholdings.
Is My 1099-MISC a Pay Stub?
Your 1099-MISC may give you in-depth information on your earnings over the course of a year, but it isn’t considered an official pay stub.
Luckily for you, the 1099-MISC forms you do have can help you create a pay stub of your own. As long as you have accurate information around what you’ve earned, you can create a paystub that you can use for your official records.
What Do I Need to Include in My Contractor Pay Stub?
Whether you’re looking for real check stubs or a way to create a pay stub for all of your work, it easy to create an accurate record of your pay.
You can always go to an accountant that can draw up something you can use. If you’re short on funds or time, you can always use an online service to generate a paystub from the records you already have.
If you’re interested in creating a pay tub, there is some essential information you’ll need:
- Your state of residence
- Personal information (name, social security number, etc.)
- Details about your company (address, phone number, etc.)
- Any deductions or withholdings
- Rate of pay
- Hours worked
- Hourly rate
Why Do I Need a Contractor Pay Stub?
Creating your own pay stub is simple and will only take a few minutes, but some people may still not see why they need one.
You may keep very accurate records of your earnings, but you should still consider creating a pay stub of your own. It’ll not only improve the records you already keep, but they can also come in handy for other important matters.
Provide Proof of Income
Are you planning on getting a mortgage or refinancing soon? Does your family need a new vehicle? Are you considering going into business on your own and need a bank loan?
If you’re taking out a loan it’ll be important for you to provide proof of income to your bank. Having a pay stub will look much more professional than sending them bank statements, and it’ll be easy to see how much money you’re bringing in.
Provide Solid Documentation
You may be doing everything right on your end, but it’s possible that the client you’re working for could make some mistakes.
Maybe the client misclassified your contractor status, or maybe they didn’t keep good records. Regardless of if things go wrong on their end, you’ll be able to prove to the IRS, lawyers, or others that you received income from a client.
Get More Business Tips
Making a contractor pay stub of your own can help you in a variety of ways. You’ll be able to keep better records, easily provide proof of income, and can have official documentation of your professional relationship whenever you need it.
Are you looking for other tips that can help your career? We have a lot of content geared towards ambitious professionals on our site. Be sure to browse all of our business posts so you can find the advice you need to excel professionally.