I know why you’ve been here. As an Independent contractor, you want to bill your client. Did I guess it wrong? Let me give another try; you want to become a freelancer and looking for an invoice template to bill your customer. Yes, you can provide any service you have landed in the right place. You can download any Independent Contractor Invoice Template for free from here and use it.
I agree with you; you have just not clicked my site to download Free Independent Contractor Invoice Template. Also, you need some inputs regarding the components of standard independent contractor invoice, hourly rates independent contractor invoice, the role of time sheet for an independent contractor, tax, travel expenses, holidays, paid time off, bonus, payment intervals, etc.
I promise you to provide all details required for raising an Independent Contractor Invoice. I will also add features including, How to invoice when 1099 employees work as independent contractors? How to handle clients who refuse to pay? Action points for unpaid invoice.
To cut the story short, I will throw light on all formations about independent contractor invoice. Check this article for knowing the difference between a proposal, contract, and invoice.
Come; let’s dive into the sea of independent contractor invoice details.
Components of Standard Independent Contractor Invoice
It’s familiar, and it usually goes like this
Understand the standard independent contractor invoice template and impress your clients 3x more than ever before.
First, mention the date, invoice number followed by your name, contact details and customers name and contact information.
Give the name of the work you have done. Eg: Plumbing work invoice.
Fill the table with all details regarding your service. Split your charges for labor, materials, transportation, and services. Make it clear to your client about your rates by breaking it down. Do not forget to include the time duration and unit price across all rows on the right side.
Sum up the cost separately and write the total. Now add the tax and mention the total including tax.
Provide your bank details or let know the mode of payment and last date for releasing payment.
At the end of the page put your signature.
In a nutshell, the core components of the invoice include Date, Invoice Number, Contact details of both parties, Work details with cost, tax details, payment terms, and signature.
It sounds simple. And it is.
How to invoice when 1099 employees work as independent contractors?
So what’s it all about Independent 1099 contractors invoice template? I know you are getting confused about a 1099 worker.
Let me give you an insight.
Take Advantage of Form 1099-MISC Special Features
1099 employees, Individual professionals working under contract. Do not think them as regular employees. US tax form 1099 introduced the term “1099 workers.” US IRS used the 1099 tax form to calculate income that does not cover under wages and salaries.
Later on, this form came into limelight for the independent contractors’ amount paid. The payments under this form called as “non-employee payment” by the IRS (Internal Revenue Service).
Per the US tax regulations, organizations must submit a Form 1099 for paying more than $600 to any independent contractor during that year.
1099 workers are not obligated to pay tax. Companies designate employees in the 1099 category and avoid paying taxes.
To invoice as a 1099 worker make sure not to include any tax deductions in your invoice. Raise a bill for a flat fee.
The invoice must contain the date of the services, the amount and billable hours or procurement of goods. Include the shipping charges wherever applicable.
Trust I made it clear to the 1099 employees.
Hourly rate independent contractor invoice
Learn about making an invoice based on the work hours. Per hour rate calculation.
Hourly rate invoice template holds good with the simple bill, but it allows you to work out the total amount by entering your hourly rate and the actual hours worked.
I can hear you asking, what is “your hourly rate”?
I will walk you through the maths.
With this calculation double your performance
As an independent contractor, how much you can charge for your work based on an hour.
Sum up your last drawn salary and overhead costs. For example: $50,000 (salary) + $10,000 (overheads) = $60,000. Note: Last drawn salary is applicable if you provide a similar service like your previous work experience.
Multiply the sum with the profit margin. Randomly select a percentage between 5 and 20. For instance: 10% of $60,000 = $6,000; $60,000 + $6,000 = $66,000.
Now divide the above-obtained figure by your yearly billable hours. Yippee, you got your hourly rate: $66,000 ÷ 1,920 = $34.38. Round it off to the closest whole number (i.e. $34 in this case)
Note 52 weeks in a year. Then how did I arrive at 1,920? Simple, consider you take holidays, and I calculated 48 weeks as working weeks. 48*5*8.
If you want to know your rates per day, then multiply the hourly rate by 8.
Yes, you got it right. Still, need more inputs, check this
Include Federal Tax ID for getting the 1099-MISC form for tax exemption. Provide details regarding 1099 in the comments section.
Role of time sheet for independent contractor
Are you frowning? Timesheet? For me? Relax.
Timesheet not only helps your employer to monitor your work. It enables you to track your work hours for the accurate billing.
Feeling better now? Move on.
Contractors must precisely record their working hours for the right payment. I have customized contractor timesheet templates for different working arrangements.
Select yours and fill it.
Either fill and share with the client via email or print paper.
Timesheets helps to increase your efficiency as an independent contractor. I don’t like my boss watching me. Do you like? No, but how do we make ourselves achieve the target unless we have our time sheets in place.
Keeping track of the time we work motivates us to complete the task successfully. Set milestones and complete one at a time to reach the goal.
Maintain the time sheet and make your employer happy
Are you worried about creating the Contractor time sheet?
Don’t need to, with the extra attention I have made a more comprehensible time sheet. The finer details I have included in the Contractor time sheets not only allow you to measure the time spent in doing work, but they also help you to calculate the work done in an appropriate format.
Avoid complicated jargons in your timesheet. Keep it simple. Use our independent contractor timesheet template and track your time quickly.
Relevant Tax information
Good news independent contractors, no tax get deducted from your paycheck. But there’s one small catch; you are not free from paying taxes.
As an independent contractor, you should pay federal and state income tax for your income fetched via freelancing work.
Independent contractor tax payment gets tracked under self-employment tax. Tax includes tax for medicare and social security.
I will help you to understand the tax component better.
When you have declared that you’re paying tax as an independent contractor, make sure to complete Form W-9. Upon filing Form W-9 Request for Taxpayer Identification Number (TIN) and Certification.
File W-9 for any reference in future from the IRS.
Prepare Schedule C along with your personal income taxes. List down all your income earned through independent contracting and subtract the expenses from the total.
Simple, isn’t it? Yes, It is.
Some more details for your clarity.
Step 1: Self-Employed Independent Contractor reports their income via 1099-MISC or receipts.
Step 2: Pay your Taxes through Quarterly Estimated Taxes. Submit tax return form in case you have an arrear.
Step 3: Include Form 1040, Schedule C or Schedule C-EZ, Schedule SE along with the tax return form.
How to charge travel?
As an Independent contractor when the job requires travel, you need to move. Do not worry about the reimbursement from the client.
Here you go in claiming your travel charges.
All reimbursements of travel related expenses get submitted to the IRS for 1099 contractors. The contractor owns the accountability for filling the IRS that all such expenses are deductible for tax purposes.
So let’s get down to business. Keep in mind to talk about the travel terms while signing the agreement.
Include the details in the Independent Contractor’s invoice.
Make sure to collect all receipts concerning your travel for the assignment. Enclose the same with your invoice.
In case the company has provided Purchase Order mentioning the expense limit then you may have to stick to it for getting the charges.
Holidays and Paid Time off (PTO)
Frankly speaking, as an Independent contractor you don’t have a PTO. You deliver your work based on the requirement.
The company legally would not pay when you do not complete the job.
If you complete your job well ahead of time, then the remaining time is a holiday for you. You may even choose to work on another assignment with a different player.
The bottom line, an independent contractor, does not come under any scheduled leave and get paid for your job.
But remember if you work for a project in their premises as an independent contractor as you need to utilize their resources then you may fall into a different category. When the remains closed for the holiday, you may not have access.
Good news, as an independent contractor company can offer you a bonus. Make it clear that a clause describes your bonus in the contract.
There’s a catch
When you get a bonus, ask your client to mention the details on your 1099 form, if the total cost exceeds $600.
Also be clear that you do not deviate from IRS guidelines.
Bonuses given to independent contractors must have valid reasons and metrics.
Let me make it simple, for example, in a scenario the client offers a bonus for an independent contractor to come to office on time to complete a project for several months. According to IRS, this clause will make the independent contractor a full-time employee.
Hence look at the reason for which you may get a bonus. Bonus offered for reaching any milestones like fetching new business etc. sounds good.
Just don’t complicate things for want of bonus. If IRS considers you as a full-time employee (FTE), then you cannot work for multiple customers. Your freedom as an Independent Contractor (IC) gets lost.
Independent Contractor Payment Frequency
You decided to work as an independent contractor for your job freedom. But now the question is. How often can you ask for payment? Is there a fixed time slot for payment similar to employees get their salary on a monthly basis.
I agree with you that you need not wait for a month to get paid.
Then, how would you get paid?
Hourly Payment or Fixed (Monthly, Biweekly, Weekly) Payment – Which one is better?
Discuss your frequency of payment during the time of agreeing to complete the work with your client.
The employer at risk when they agree to pay based on hourly rates. Without knowing the efficiency of the contractor when companies decide to make payment based on per hour calculation they may land in trouble.
But, on the contrary as an independent contractor if you agree with a fixed-payment model, then you are in trouble.
Want to know the best part?
Fix payment frequency based on the nature of the job. When the job demands more time for completion, either request for payment on stages of completing work weekly or fix milestones and charge upon achieving the milestones.
This way both you and your customer can enjoy the work.
How to manage clients who refuse to pay?
You know to calculate your rate, to raise an invoice, pay tax, and much more as an independent contractor.
So what’s the problem now?
I understand after you have done all your homework and completed your job successfully. Your client refuses to pay. How to handle such a customer?
5 Tips to deal with not paying clients
- Continuous Follow Up
Call or send an email to your client daily. I know that’s very annoying, but no other way when your client refuses to pay you for your job.
- Provide options
Tired of calling every day? Just extend an offer that you accept part payment. One good idea to deal with such client is agreeing to give support for another critical job for them.
- Consult a lawyer and reach out legally
Upon regular follow-up when nothing works just warn them that you may take legal action against them. Don’t stop there but have a word with the lawyer too.
- Devise a framework
Take a professional approach. Raise the bill and wait for 15 days. Then send a reminder. If they don’t respond within 90 days, then initiate process legally with a notice sent to them.
- Meet in person
Personal meeting solves many issues. Take time to meet them in person and explain in detail. This way you can also visit their premises and verify their status.
Tried all tips? But nothing worked out. Now it’s your turn
Action points for unpaid invoice
Here are some important points to know about unpaid invoices.
First, regulate your job model. Have a contract in place for any job irrespective of the client. Mention the payment terms.
Take action! Raise the invoice on time and escalate non-payment immediately. Keep them informed that their delay in payment may force you to approach legally.
Work with a lawyer and send notice.
Stay connected with the professional organization. You are not alone, so make use of the information obtained from experts. Your group might help you with suggestions and legal actions.
Good luck and let me know.
Proposal Vs Contract Vs Invoice
As an independent contractor, you always get to hear about proposal, contract, and invoice. So what’s it all about?
All revolves around the same area talking about the contact details of both parties, work description, the amount of work, total tax, payment terms, and mode of payment.
Then how to they differ from each other?
What it means is this,
The proposal just says the plan of action with price quotation or estimate sent to the client to be. Based on their acceptance of your work, you sign a contract with them.
Terms and Conditions described in detail makes a whole deal. Contract also known as an agreement which when signed by both parties is a legal document.
Paper sent with a list of services rendered or item sent to collect payment known as Invoice. Also called as bill or statement of charges.
It’s easier than you think. Send a proposal to bid a project, sign a contract to start the job, and raise an invoice to bill your client.
Get Going with your services. Feel free to download any template for your use.
Trust me. You’ll be glad you did it.