There's no saying when you will need pay stubs. But it pays to have them handy or know the tools to generate them when the time comes. Technology has introduced many ways of doing business, like generating pay stubs online.
This way, you do not have to wait for your employer to generate your check stub to create yours. But how does that relate to self-employed individuals or contractors? It's easy. Many pay stub sites generate 1099 pay stubs for contractors without any hassle.
It is a standard practice in the United States for employers to issue a 1099 form to self-employed individuals or contractors before the end of the tax year. That leaves the contractor to generate their pay stub. This article will cover understanding 1099 tax forms and how to generate contractor pay stubs.
Who is a Self-employed or an Independent Contractor?
A self-employed or independent contractor works independently, rendering a service to an organization. Companies hire them to aid their workforce, get a job done quickly, or simply for their expertise in a particular area.
In contrast to employees, contractors run their businesses. Their contract is either short-term or long-term, but it still gives them leeway and a chance to pursue other work. While a company may employ a contractor, they are not technically on the company's payroll.
Sometimes, full-time employees of an organization contract their services to other companies, making them contractors of the company. However, deciphering who is self-employed or a contractor can be challenging in this situation.
But it boils down to what you are to a company, temporarily or otherwise. Also, contractors or self-employed individuals do not enjoy the perks full-time staff enjoys.
For instance, full-time staff receive salaries and benefits like dental or health care, among other things. However, the reverse is the case for most contractors, depending on the company. They will receive just their net salary for the job, sans benefits.
Self-employed workers work at their own pace from wherever they want, availing themselves for meetings in person or virtually, depending on their contract with the company. Also, they can stipulate a timeframe to get a job done and take time off without needing to explain, provided they get the job done.
Employee vs Independent Contractor - What’s the Difference
Knowing the difference between a contractor and an employee would save you a world of trouble and money. The misclassification of a worker can result in back taxes, monetary fines, and legal disputes. Here is the difference between employer and employee:
Benefits and Payments
Contractors usually strike deals with companies for jobs and get paid before or after the job is done. Also, they work on their terms, provided they finish the work at the stipulated time. However, one can't say the same for employees.
They are full-time employees of companies and have to account for their hours. They usually get paid wages and other benefits for their service. Employers pay for health insurance, taxes, health savings, health savings accounts (HSAs), commuter benefits, flexible spending accounts (FSAs), and stock options.
Employers do not pay such benefits to contractors. Contractors pay their taxes.
Employees are duty-bound to show up to work and work for a specific hour. Not doing so would result in termination, warning letters, or deductions. The company typically assigns contractors jobs without controlling when and how they work on them.
Also, contractors and employees have different training and onboarding procedures. Employees get the complete onboarding and training session to help them understand the company's goals and culture, while contractors might not go through the process.
What Is a 1099 Pay Stub?
A 1099 Pay Stub is a pay stub for self employed contractors that details how much they've earned in a given year. The form usually does not have any information regarding taxes or deductions. Companies do not generate 1099 pay stubs. The contractor has to do so themselves. However, with the 1099 pay stub, they can diligently show their proof of income.
What Information Should Be Included?
The 1099 pay stub should have all the information regarding your payment with the company, from the year-to-date values, pay schedule, pay period, and additional payday earnings. Also, include the W2 wage and tax statements for small businesses; company information (name, EIN, address, and your basic details).
How to Generate a Pay Stub for 1099 Independent Contractors
Creating your own pay stubs is to your advantage. It will help you provide proof of income whenever it's needed. There are many independent contractors' pay stub generator websites like real check stubs. Use these steps to create one.
Step 1. Choose a Template
Select a template with designs that fit your purpose. You can customize a template, but you might have to subscribe to the paid version to enjoy the service.
Step 2. Fill In Your Information
Here, you will fill in the company's information from their name to address and enter your details. The template is self-explanatory, with the correct headings to minimize the chances of any errors.
Step 3. Preview the Form
Preview the form and check for any anomalies or errors. You need to ensure all the information is correct to avoid trouble with the law for fraud.
Step 4. Download
After ensuring every detail and design are correct, download the document. It will likely save as a PDF or Docx.
Importance of 1099 Pay Stubs
Keeping your 1099 pay stubs as proof that you've paid taxes and that your income level is correct is vital. Landlords or lenders request proof of income when you seek their services, and the 1099 pay stub can work for that purpose.
Why Should You Choose Real Check Stubs to Generate Pay Stubs for 1099 Independent Contractors?
The Real Check Stubs platform is a user-friendly website where you can create a pay stub for small business owners and contractors in under two minutes. They ensure accuracy by providing clear headings to fill out your information.
The platform will keep your record, and if you need the document again, they will send you another copy if you provide the same email address you used at checkout.
Frequently Asked Questions
Does a company have to create a 1099-misc form for independent contractors?
No, companies do not have to create pay stubs for contractors. The contractor has to generate the pay stubs themselves. For payments made for services rendered for your business or trade, companies only need to file Form 099-NEC, or Compensation.
Why are 1099-misc forms important?
Business payers use the form to report specific miscellaneous compensation to contractors. Having it is necessary so you can file with the IRS and avoid any penalty.
What do independent contractors do if they don’t receive a 1099-misc form?
You must report all your freelance income if you didn't get a Form 1099. So the first action is to contact the business and notify them of the delay. If they still don't send over the document, go ahead and file the document with the IRS.
How to choose a 1099 independent contractor pay stub template?
Ensure it's editable, and the headings are clear and unmistakable. Go for practicality rather than aesthetics. This way, no information will be lost in the plethora of designs.