Getting paid as a 1099 contractor works differently from a regular paycheck: you send the client a completed W-9, invoice them under the terms you agreed to, receive the funds by ACH, check, wire, or a digital platform, and then handle income and self-employment taxes yourself because nothing was withheld. The term “1099 employee” is a bit of a contradiction. If you receive a 1099, you’re a business owner rather than an employee, and the money flow reflects that.
The process starts before you do any of the work.
Agree on the Rate and Payment Terms in Writing
A written service agreement is what prevents the most common freelancer headache: vague expectations about what you’ll be paid and when. Most contractors use one of three compensation structures — a flat fee for a specific deliverable, an hourly rate with time tracking, or a monthly retainer for a set block of availability.
The payment timeline matters as much as the rate. “Net-30” means the client has thirty days after receiving your invoice to pay. Net-15 gives them fifteen. For larger projects, milestone-based payments let you collect partial amounts at defined stages instead of waiting until the entire project wraps. Put whatever you agree on in writing and have both sides sign. A handshake works fine until it doesn’t, and by that point you’ve already done the work.
Send a W-9 Before You Send an Invoice
Before a client can legally pay you, they need your completed IRS Form W-9, “Request for Taxpayer Identification Number and Certification.” The client uses the information on it to report your payments to the IRS at year-end.1Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification
The form asks for your legal name, a business name if you use one, your mailing address, and your Taxpayer Identification Number. For most solo contractors, the TIN is your Social Security Number. If you’ve set up a business entity, you’ll use your Employer Identification Number instead.2Internal Revenue Service. Form W-9 (Rev. March 2024) Request for Taxpayer Identification Number and Certification
Have it ready before you start. Many clients won’t process a first invoice without it, and some accounting departments won’t even set you up as a vendor until they have it on file.
Skipping the W-9 or providing a wrong TIN causes a real cash flow problem: backup withholding. If the client doesn’t have a valid TIN from you, they’re required to withhold 24% of every payment they make and send it directly to the IRS.3Internal Revenue Service. Topic No. 307, Backup Withholding You’ll eventually get credit for those amounts when you file, but in the meantime you’re running on 76 cents of every dollar you earned.
Send an Invoice to Get Paid
No one cuts you a check just because you finished the work. You have to ask for the money by sending a formal invoice, and how organized you are here directly affects how fast the funds arrive.
Every invoice should include:
- Your contact information: name or business name, address, email, and phone
- Client information: company name and billing contact
- A unique sequential invoice number for tracking
- A description of the services performed, the dates, and the rate applied
- The total amount due
- Payment terms and the due date (for example, “Net-30 — due by July 15, 2026”)
Send it through whatever channel the client specifies: a dedicated email address, an accounting portal, or freelancer management software. Then track it. A spreadsheet or invoicing tool that flags overdue payments will save you from chasing money you forgot about. If a payment runs past the deadline, send a polite follow-up to the accounts payable contact within a few days. Waiting weeks to notice signals that you’re not paying attention, and some accounting departments take advantage of that.
How the Money Actually Reaches You
Once the invoice is approved, the client sends the funds one of several ways. Which one you’ll see depends on the client’s size and their accounting setup.
- ACH transfer is the most common method for domestic payments. Money moves electronically between bank accounts, with same-day and next-day settlement options available. You provide your bank’s routing number and account number to set it up.4Nacha. SDA Schedules and Funds Availability
- Paper check. Some companies still mail physical checks. Between postal transit and bank clearing, expect five to seven business days after the check is supposedly in the mail.
- Wire transfer is faster than ACH but more expensive. Domestic wires typically cost $25 to $35, and international wires often run $50 or more. Clients usually reserve these for large or time-sensitive payments.
- Digital platforms like PayPal, Venmo for Business, and freelancer-specific tools such as Deel or Bill.com offer speed and convenience. Most give near-instant access to the money, but their transaction fees eat into your earnings, which is worth factoring into your rate.
For ACH and wire transfers, the client needs your banking details, which you’ll usually provide during onboarding alongside your W-9. Most electronic systems send a confirmation when a transaction initiates, so you’ll know funds are on the way before they land.
Set Aside the Taxes No One Withholds for You
A W-2 employer withholds income tax, Social Security, and Medicare from every paycheck. Your clients don’t. They send you the full invoiced amount, and everything owed on it is yours to handle.
Self-Employment Tax
On top of regular income tax, you owe self-employment tax of 15.3% on your net earnings: 12.4% for Social Security and 2.9% for Medicare.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only to earnings up to $184,500 in 2026; Medicare has no cap.6Social Security Administration. Contribution and Benefit Base You calculate this on Schedule SE with your annual return, and you can deduct half of the self-employment tax from your adjusted gross income.
Quarterly Estimated Payments
If you expect to owe $1,000 or more in taxes for the year, the IRS requires quarterly estimated payments rather than a single April settlement.7Internal Revenue Service. Estimated Taxes You use Form 1040-ES to calculate each quarter’s amount and can pay online, by phone, or by mail.
The 2026 quarterly deadlines are:
- First quarter: April 15, 2026
- Second quarter: June 15, 2026
- Third quarter: September 15, 2026
- Fourth quarter: January 15, 2027
Missing a deadline triggers an underpayment penalty, which the IRS currently charges at 7% annual interest, compounded daily.8Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 A rough rule for new contractors: set aside 25% to 30% of every payment you receive in a separate account earmarked for taxes. The exact number depends on your income level and deductions, but starting there keeps you out of trouble while you refine it.
The 1099-NEC You’ll Receive at Year-End
By January 31 following each tax year, every client who paid you $2,000 or more during the calendar year must send you a Form 1099-NEC reporting the total.9Internal Revenue Service. Form 1099 NEC and Independent Contractors The same form goes to the IRS.10Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
The $2,000 threshold is new for 2026; it was $600 for payments made before January 1, 2026.9Internal Revenue Service. Form 1099 NEC and Independent Contractors The higher threshold means some smaller clients may no longer be required to issue a 1099, but that changes nothing about your tax obligation. You owe income and self-employment tax on every dollar of net earnings whether or not a 1099 was issued.
Keep Your Records for at Least Three Years
Every invoice you send, every payment confirmation, every expense receipt — save all of it. The IRS generally requires you to retain records supporting your income and deductions for at least three years from the date you file. If you underreport income by more than 25% of your gross, the retention period stretches to six years. If you don’t file a return at all, there’s no time limit.11Internal Revenue Service. How Long Should I Keep Records
Three years is the floor, not the target. Bank statements, contracts, invoices, 1099 forms, and quarterly payment confirmations should all be in your archive. Keeping them digitally for six or seven years costs nothing and protects you if a deduction or income figure gets questioned later.
When a Client Won’t Pay
Late payments come with the territory. Most resolve with a polite reminder. When a client goes silent or disputes what they owe after you’ve delivered the work, escalate.
Start with a formal demand letter stating the amount owed, the relevant contract terms, and a deadline for payment, and saying plainly that you’ll pursue legal remedies if payment isn’t received. It creates a paper trail and often shakes loose payments that reminders didn’t.
If the demand letter fails, small claims court is the most accessible option for amounts within your jurisdiction’s limit, which ranges from a few thousand dollars to $25,000 depending on where you file. You typically don’t need a lawyer, and filing fees are modest. For amounts above the small claims threshold, or for clients in another state, you may need to consult an attorney about filing in a higher court.
One boundary worth knowing: the federal Fair Debt Collection Practices Act regulates how debts can be collected, but it applies only to consumer debts — personal, family, or household obligations. Business-to-business debts like unpaid contractor invoices fall outside its scope, so the FDCPA’s specific procedural protections aren’t part of this picture.
Your best protection against non-payment is the contract you signed before work started. Clauses covering late payment penalties, the right to stop work if payment is overdue, and which party pays legal fees in a dispute give you leverage you won’t have otherwise.