Pay stub requirements for contractors

"Where is my pay stub?" from someone paid on a 1099 is a reasonable question with an unsatisfying answer: there is not one, and there is not supposed to be one.

That is not an employer cutting corners. A pay stub is the by-product of a payroll relationship — wages, withholding, employer-side taxes, and in most states a statutory duty to hand the worker a statement about all three. A contractor engagement has none of those parts, so it produces none of that paperwork. Understanding what it produces instead is more useful than trying to obtain the wrong document, and for the paying business it matters twice over, because issuing the wrong document is itself evidence of a problem.

Why there is no stub

Three things are missing at once.

No withholding. Nobody deducts federal income tax, Social Security or Medicare from a contractor payment. The contractor pays Social Security and Medicare through self-employment tax on net profit and settles income tax through quarterly estimates. Pay stubs for the self-employed works through that machinery.

No employer-side taxes. There is no employer half of FICA, no federal or state unemployment tax on the payment. The line items that make up half of a stub have no counterpart.

No wage statement duty. State wage statement laws are written about employees and wages. Where a state requires an itemised statement — the state requirement pages set out which do — the duty runs to employees. A contractor is outside it, in the same way they are outside the state's overtime and minimum wage rules.

What is left is an ordinary commercial transaction: an invoice, a payment, and a tax form once a year.

What the payer issues instead

A payment against an invoice. Many businesses send a remittance advice showing invoice number, date and amount. That is a business courtesy with no statutory content — nothing prescribes its contents, and nothing requires it to exist.

Form W-9 at the start, to collect the contractor's name and taxpayer identification number. This is not bureaucracy for its own sake; the next section is what happens when it is missing.

Form 1099-NEC after year end. The threshold moved recently and the old number is the one everyone remembers, so it is worth being exact. Under P.L. 119-21 the minimum threshold for reporting on these information returns rose to $2,000 for tax years beginning after 2025, and may be adjusted for inflation beginning in calendar year 2027. The IRS instructions state the rule for the form directly: file Form 1099-NEC for each person in the course of your business to whom you paid at least $2,000 for services performed by someone who is not your employee.

The familiar $600 figure was the threshold before that change. It still appears in a great deal of published advice, and for payments made in 2026 it is simply out of date.

Two adjacent numbers, since they get mixed up with the main one: attorneys' fees of $2,000 or more paid in the course of your trade or business are reportable in box 1a, and sales totalling $5,000 or more of consumer products for resale go in box 2 of the 1099-NEC or box 7 of the 1099-MISC.

The one case where a contractor payment does carry withholding

Backup withholding is the exception that surprises everyone, and it is the only circumstance in which a contractor payment behaves like a payroll payment.

If the payee fails to furnish a TIN in the manner required, or the IRS notifies the payor that the TIN furnished is incorrect, the payor must deduct and withhold tax from the payment. The statute sets the rate by reference to the fourth lowest rate in the individual rate table; the IRS states the current rate as 24 percent.

Two practical consequences:

The contractor receives 76 cents on the dollar until the TIN problem is resolved. The withheld amount is not lost — it is credited against their tax like any other withholding — but it is gone from cash flow now.
The payer must file a Form 1099-NEC for anyone from whom federal income tax was withheld under the backup withholding rules regardless of the amount of the payment. The $2,000 threshold does not apply to that filing.

Which is the sharp answer to "why does my W-9 matter": it is the difference between being paid in full and being paid 76 percent of it.

Where a stub becomes evidence against you

Here is the reason this matters to the paying business more than to the contractor. A worker paid as a contractor who receives a document showing withheld income tax, withheld FICA and an employer contribution is being described, in writing and by the payer, as an employee. If the classification is ever tested, that document is the payer's own characterisation of the relationship.

And it can be tested under three separate frameworks, which do not have to agree with one another.

Federal wage law. The Department of Labor's regulation determines status by the economic reality of the relationship: whether the worker is economically dependent on the potential employer for work, or is in business for themself. It is a totality-of-the-circumstances analysis over six factors — opportunity for profit or loss depending on managerial skill, investments by the worker and the potential employer, degree of permanence of the relationship, nature and degree of control, the extent to which the work is an integral part of the potential employer's business, and skill and initiative — with no single factor decisive and additional factors allowed. The regulation also disposes of the labelling argument in one sentence: labelling employees as independent contractors does not make the Act's protections inapplicable.

Federal tax law. The IRS applies common-law control, sorting the evidence into three categories: behavioural control over what the worker does and how, financial control over the business aspects of the job, and the type of relationship, including written contracts and employee-type benefits. Where it remains unclear, either party may file Form SS-8 and ask the IRS to determine the status.

State law. Several states apply a stricter ABC test. California presumes a person providing labour or services for remuneration is an employee unless the hiring entity demonstrates all three of: freedom from control and direction in fact and under the contract; work performed outside the usual course of the hiring entity's business; and the worker being customarily engaged in an independently established trade or business of the same nature as the work performed.

Prong B is the one that catches otherwise careful arrangements. A design studio engaging a plumber clears it easily; a design studio engaging a designer does not, however genuinely independent that designer is.

The frameworks run independently, so a worker can be outside the FLSA's coverage and still be an employee under a state ABC test. Getting the classification right is a separate exercise from getting the paperwork right — but if the paperwork says "employee" while the payment says "contractor", the two are already inconsistent before anyone starts.

If you are the contractor and somebody demands a "pay stub"

They usually want proof of income and have only ever seen one form of it. Say how you are paid, and offer the documents that fit: invoices, the 1099-NEC forms you received, bank records showing the deposits, and your tax return with Schedule C. That is the standard package for someone in business for themself, and most requesters accept it.

Using a pay stub as proof of income sets out what each kind of requester actually requires, including the ones with a federal rule behind them, and pay stubs for the self-employed covers the income statement you can legitimately produce for your own records.

What does not help is a document with withholding lines on it. A stub describing tax that nobody withheld from a payment that was never wages describes a transaction that did not happen, and the further it travels the worse that becomes.

If you believe you are being paid as a contractor while working as an employee, that is a classification question rather than a paperwork question, and Form SS-8 and your state labour agency are where it goes.

If you hire people yourself

Once someone is an employee, the whole apparatus arrives at once: withholding, employer taxes, and in most states a wage statement with each payment. How to make pay stubs for employees covers the sequence, and what to include on a pay stub covers the contents.

The generator is built for wages — it applies the 2026 federal, FICA and state withholding tables to a W-2 pay period. That makes it the right tool for the people you employ, and the wrong one for the contractors you pay, whose payments carry no withholding to show.