Independent contractors are typically paid per project or per invoice, with payment terms negotiated in their contract. Unlike employees who receive regular paychecks with taxes already withheld, contractors submit invoices for their work, handle their own taxes, and receive gross payments with no deductions. The specifics of how and when that money arrives depend on the payment terms, the method of transfer, and whether the work is domestic or international.
Invoicing and Payment Terms
Most contractors get paid by submitting an invoice after completing work (or reaching a project milestone). The invoice lists the services performed, the amount owed, and a due date. That due date is set by the payment terms in the contract, expressed as “net” followed by a number of days. Net 30 means the client has 30 days from receiving the invoice to pay. Net 15, Net 60, and Net 90 are also common.
Net 30 is the standard fallback across most industries, but actual timelines vary widely depending on the type of work. Cleaning and landscaping contractors often get paid immediately or within one to two weeks. Construction contractors commonly wait 90 days. Professional services firms average around 75 days, and transportation contractors can wait anywhere from 30 to 120 days.
For larger projects, contractors often negotiate milestone-based payments or require a deposit upfront. A web developer building a $10,000 site, for example, might collect 30% before starting, 30% at a midpoint review, and the remaining 40% on delivery. This protects the contractor from doing months of work before seeing any money, and it protects the client from paying in full before the work is done.
Common Payment Methods
How the money actually moves depends on the size of the payment, the tools the client uses, and whether the contractor is domestic or overseas.
- Direct deposit or ACH transfer: The most common method for U.S.-based contractors working with established companies. The client initiates a bank transfer using the contractor’s routing and account numbers. ACH transfers are free or very low cost and typically settle within one to three business days.
- Check: Still used by some businesses, especially smaller ones. Slower than electronic methods since it depends on mail delivery and bank processing.
- Payment platforms: Services like PayPal, Venmo (for business), and Zelle let clients send money quickly. PayPal charges a transaction fee of 3.49% for standard commercial payments, which adds up on larger invoices. Wise charges starting at 0.33% of the total, making it a lower-cost option for international payments.
- Payroll and contractor management platforms: Tools like Gusto, Deel, and others let businesses manage contractor payments alongside employee payroll. Gusto charges a small per-transaction fee with no additional monthly cost per contractor for existing customers. Deel’s international contractor plan starts at $49 per contractor per month.
- Freelance marketplace platforms: If you found the work through Upwork, Fiverr, or a similar site, payment runs through that platform. The platform holds the client’s payment in escrow and releases it to you after the work is approved. Upwork charges contractors outside the U.S. $0.99 per local bank transfer.
Paying International Contractors
When a contractor is based in another country, the payment process gets more complicated because of currency conversion and cross-border fees. International wire transfers through a bank typically cost $15 to $30 per transfer, and the contractor’s bank may charge an incoming fee on their end too. You’ll need the contractor’s full name, country, account number, bank name, bank address, and the bank’s SWIFT code.
Specialized platforms can reduce those costs. Wise keeps fees low by using mid-market exchange rates. Payoneer charges 1% of the transaction amount plus a minimum $4 fee when both parties have accounts, but fees climb to 3% if the contractor doesn’t have a Payoneer account. Revolut offers a free basic plan for transfers up to $1,000 per month at interbank rates, but only if the contractor also uses Revolut. Its paid plan (starting at $30 per month) includes five no-fee international transfers and up to $10,000 at low rates before surcharges kick in.
Tax Reporting for Contractor Payments
Businesses that pay contractors don’t withhold income tax, Social Security, or Medicare from those payments. That’s the contractor’s responsibility. But the business does have reporting obligations to the IRS.
Before any work begins, the hiring company should collect a completed Form W-9 from the contractor. This form provides the contractor’s taxpayer identification number (either a Social Security number or an Employer Identification Number) and is required for tax reporting purposes.
At year’s end, any business that paid a contractor at or above the reporting threshold must file Form 1099-NEC (Nonemployee Compensation). For tax years beginning after 2025, the reporting threshold increased from $600 to $2,000. Both the IRS copy and the contractor’s copy are due by January 31 of the following year. So if you did contract work in 2026, the company that hired you must send your 1099-NEC by January 31, 2027.
If a contractor fails to provide a valid taxpayer identification number (by not returning the W-9, for example), the business may be required to apply backup withholding at a rate of 24% on payments. This is withheld and sent to the IRS, similar to how employee tax withholding works, but it only applies in specific non-compliance situations.
What Contractors Owe in Taxes
Because no taxes are withheld from contractor payments, you’re responsible for paying both income tax and self-employment tax. Self-employment tax covers Social Security and Medicare, which employees split with their employer. As a contractor, you pay both halves, totaling 15.3% on net earnings (12.4% for Social Security and 2.9% for Medicare).
Most contractors need to make quarterly estimated tax payments to the IRS rather than waiting until April. If you owe more than $1,000 in taxes for the year and haven’t been paying quarterly, you’ll likely face an underpayment penalty. The quarterly deadlines fall in April, June, September, and January.
The upside is that contractors can deduct business expenses, home office costs, health insurance premiums, and other qualifying expenses directly from their income before calculating taxes. You can also deduct half of your self-employment tax from your adjusted gross income.
Legal Protections for Getting Paid
One of the biggest risks of contract work is late or missing payment. Unlike employees, contractors don’t have the same automatic protections under federal wage laws. However, a growing number of jurisdictions have passed laws specifically protecting freelancers and independent contractors. These laws typically require written contracts for engagements above a certain dollar amount, mandate timely and full payment, and establish penalties for violations including double damages and attorney’s fees.
Even without specific freelancer protection laws in your area, a signed contract is your strongest tool. A good contractor agreement spells out the scope of work, the total price or hourly rate, payment terms and due dates, late payment penalties, and what happens if either side wants to end the relationship early. If a client doesn’t pay, that contract becomes the basis for a small claims court filing or collections action. Without one, recovering unpaid fees gets significantly harder.