Independent contractors get paid by sending each client an invoice and receiving the money directly, usually by ACH deposit, wire transfer, paper check, or a digital payment platform. Before any of that happens, you give the client a completed IRS Form W-9 and sign a contract that sets your rate and payment terms. Nothing is withheld from what the client sends you, so you handle income tax and self-employment tax yourself through quarterly estimated payments, and at year-end each client reports what they paid you on Form 1099-NEC. That is the full loop of how independent contractors get paid.
Paperwork to Have in Place First
Two documents need to exist before the first payment moves.
The first is IRS Form W-9, Request for Taxpayer Identification Number and Certification. You fill it out and send it to the client so they have your name and taxpayer identification number on file for year-end reporting.1Internal Revenue Service. Forms and Associated Taxes for Independent Contractors Your TIN is either your Social Security number or an Employer Identification Number; sole proprietors with an EIN can use either one.2Internal Revenue Service. Form W-9, Request for Taxpayer Identification Number and Certification If you skip the form or give a wrong TIN, the client may be required to hold back 24% of every payment and send it to the IRS as backup withholding.3Internal Revenue Service. Backup Withholding
The second is a written contract. It locks in the rate, the schedule, and the “net” terms — net-30, for example, means the client has 30 days after receiving your invoice to pay. A good contract also spells out what happens if payment is late, who owns the finished work, and how either side can end the arrangement. Without one, chasing money or resolving disputes gets much harder.
If the client is paying electronically, you also need to hand over your bank account number and the bank’s nine-digit routing number.4HelpWithMyBank.gov. How Do I Transfer Money From My Financial Institution to a Family Member or Friend? Check both numbers carefully; a single wrong digit can delay the deposit or route it to the wrong account. Larger clients may also ask for a Certificate of Insurance showing general liability coverage before they process any payment. Your insurer can issue one on request.
How the Money Actually Reaches You
ACH Direct Deposit
Most recurring contractor payments run through the Automated Clearing House network. Standard ACH transfers settle within one to two business days, and same-day ACH is available when speed matters.5Nacha. The ABCs of ACH It is the default for most businesses because it is cheap and paperless. Once a client sets up a recurring schedule, deposits tend to arrive on the same day each cycle.
Wire Transfer
Wires move money bank-to-bank in real time and can settle the same business day.6Federal Reserve Services. Fedwire Funds Service and National Settlement Service Operating Hours The tradeoff is cost: domestic wire fees frequently run $15 to $50 per transaction. Wires make sense for large, one-time invoices where the fee is small next to the payment.
Paper Check
Checks are still common with smaller businesses. Mail time plus bank clearing can add several days on top of your net terms, so if a client insists on paying by check, consider negotiating shorter terms to offset the wait.
Digital Payment Platforms
Services like PayPal, Venmo for Business, and Stripe work well for smaller projects and freelance work. They charge the person receiving the money a processing fee, typically around 2.9% to 3.5% of the transaction plus a small fixed amount per transaction.7PayPal. PayPal Merchant Fees Build those fees into your rate so they don’t quietly cut your effective pay.
If a single platform sends you more than $20,000 across more than 200 transactions in a calendar year, it must issue you and the IRS a Form 1099-K reporting those payments.8Internal Revenue Service. Understanding Your Form 1099-K You owe tax on all your income regardless of whether a 1099-K arrives, but a mismatch between what you report and what the platform reports can attract IRS attention.
Invoicing the Client
Payment is triggered by an invoice, and most late payments trace back to something missing on it. Every invoice should carry:
- A unique invoice number, so the client’s accounts payable team doesn’t pay it twice and your records stay clean.
- Your full name and address and the client’s, matched to how they have you set up as a vendor.
- An itemized description of the work: services provided, hours or milestones, your rate, and the total per line.
- A payment due date tied to your contract’s net terms, such as “Due: June 15, 2026 — Net-30.”
- Payment instructions: bank details for ACH, a mailing address for checks, or a link for a payment platform.
Larger clients often require a Purchase Order (PO) number on every invoice. A PO number is an internal tracking code the client generates when they approve the spending. If they use PO numbers and you leave the field blank, your invoice can sit unprocessed until someone matches it to the right project by hand. Ask about PO numbers during onboarding.
Send the invoice the way the client wants it sent. Large companies often run a vendor portal where you upload a PDF and can watch the approval status; smaller firms usually take invoices by email at a dedicated accounts payable address. Once submitted, a manager typically reviews and approves the charge, and the accounting team schedules payment according to your net terms.
What to Do When a Payment Is Late
If the due date passes, start by contacting the client’s accounts payable department. Most delays are processing hiccups rather than refusals. From there, your contract governs what comes next, including any late fees or interest. Federal government contracts are different: the Prompt Payment Act requires agencies to pay interest on overdue invoices at a rate set by the Treasury Department.9Office of the Law Revision Counsel. 31 USC Ch. 39 – Prompt Payment For private clients, only the terms you negotiated apply, which is why a late-fee clause in the original contract is worth insisting on.
Taxes You Handle Yourself
Self-Employment Tax
Employees split Social Security and Medicare taxes with their employer. Contractors pay the full amount. The self-employment tax rate is 15.3% of your net earnings: 12.4% for Social Security and 2.9% for Medicare.10Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion only applies to net earnings up to $184,500 in 2026; anything above that cap is subject only to the 2.9% Medicare tax.11Social Security Administration. Contribution and Benefit Base If your net self-employment income exceeds $200,000, or $250,000 if married filing jointly, an additional 0.9% Medicare tax applies to the amount over that threshold.12Internal Revenue Service. Topic No. 560, Additional Medicare Tax
You can deduct half of your self-employment tax when calculating adjusted gross income, which lowers the income tax on your other earnings.13Internal Revenue Service. Topic No. 554, Self-Employment Tax You report contractor income and deduct business expenses on Schedule C.14Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business Only your net profit — gross income minus deductible expenses — is subject to self-employment tax.
Quarterly Estimated Payments
Because no one is withholding tax from what your clients pay you, the IRS generally requires quarterly estimated payments if you expect to owe $1,000 or more in federal tax for the year.15Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals Those payments cover both income tax and self-employment tax. The 2026 deadlines are:
- April 15, 2026, for income earned January through March.
- June 15, 2026, for income earned April through May.
- September 15, 2026, for income earned June through August.
- January 15, 2027, for income earned September through December.
To avoid an underpayment penalty, your total payments for the year need to equal at least 90% of your current-year tax liability or 100% of what you owed last year, whichever is smaller. If your adjusted gross income was over $150,000 the previous year, the safe harbor rises to 110% of last year’s tax.16Internal Revenue Service. Estimated Tax You can pay online through IRS Direct Pay, through the Electronic Federal Tax Payment System (EFTPS), or by mailing a check with Form 1040-ES.17Internal Revenue Service. Estimated Taxes
Year-End: The 1099-NEC
Each client who paid you $2,000 or more during the calendar year must send you Form 1099-NEC, Nonemployee Compensation, by January 31 of the following year, and file a copy with the IRS by the same date.18Internal Revenue Service. General Instructions for Certain Information Returns – 2026 The form reports exactly how much non-employee compensation you received, and the IRS uses it to check the income on your return.
If you earned less than that threshold from a particular client, or if a client fails to send the form, you still owe tax on the income. Keep your own record of every payment received during the year so you can report accurately whether or not the paperwork arrives on time.
One boundary worth flagging: none of this applies if you’re actually an employee who has been labeled a contractor. The Department of Labor uses an “economic reality” test to decide the question, and misclassified workers can lose access to overtime pay, unemployment insurance, and other protections.19U.S. Department of Labor. Misclassification of Employees as Independent Contractors Under the Fair Labor Standards Act If a client sets your hours, provides your tools, and controls how you do the work, the payment mechanics in this article may not be the ones that legally apply to you.