How to pay and manage US contractors: A practical guide

If you're paying independent contractors in the US, you need to handle three things: send them money, collect the right paperwork, and file tax forms with the IRS. The payment part is simple. The compliance part—keeping track of contractors, agreements, payments, and tax deadlines—is where most businesses stumble.

This guide walks through what you actually need to do. Then we'll show you where Kontrable helps organize the work.

The three things you need to do

1. Collect a W-9 form before the first payment. This is a one-page IRS form where the contractor provides their tax identification number (SSN or EIN). You don't file it with the IRS—you keep it on file. If you pay someone without a W-9, you're supposed to withhold 24% of their payments, which is a mess. Just get the form first.

2. Make payments however works for you. ACH transfers are cheapest for US-to-US payments ($0-$3 per transfer). Zelle or Venmo work for small amounts. Check still works. Some contractors prefer Wise if they move money internationally later. The method doesn't matter to the IRS as long as you can prove you paid them.

3. File a 1099-NEC form if you paid them $600 or more in the calendar year. This form reports the payment to the IRS and goes to the contractor by January 31. You file it with the IRS by the same deadline (or February 28 if you e-file). If you miss this, there are penalties.

That's it. Three steps, one deadline per year.

Common places this falls apart

Most businesses mess up the tracking part, not the payment part.

You pay a contractor $500 in January. Then $200 in June. You think you're under the $600 threshold until December when you realize you've paid them $850 total. Now you need a 1099-NEC, but you haven't been tracking cumulative payments by contractor. You scramble to reconstruct what you paid and when.

Or you collect W-9 forms and store them in email or a folder, then can't find them when you need them for the 1099 filing. Or you forget about a contractor you hired six months ago and accidentally miss the January 31 deadline.

Or—and this happens often—you have no written agreement with the contractor about scope, payment terms, or confidentiality. When there's a dispute, you have no paper trail.

These aren't payment problems. They're organization problems. And they're why managing contractors matters as much as paying them.

How to stay organized (without Kontrable)

If you're paying a few contractors, a spreadsheet works: one row per contractor with their name, payment dates, cumulative total, W-9 status, and agreement status. Update it after each payment. Review it in December to see who hit $600+, then file 1099s in January.

If you're paying dozens of contractors or handling them across a team, a spreadsheet becomes fragile. People forget to update it. Contractors' information changes and nobody records it. You lose track of which W-9s you have on file.

This is where Kontrable helps.

Where Kontrable fits

Kontrable is a contractor database that keeps everything in one place: contractor details, payment history, W-9 status, signed agreements, and contract terms. You log payments as you make them (through your own bank or payment method—Kontrable doesn't process payments). Kontrable tracks cumulative payments per contractor and flags when someone hits the $600 threshold.

When it's time to file 1099s, Kontrable auto-generates the forms from your payment records. You review them, send them to contractors, and file with the IRS. No reconstruction, no scrambling, no missed deadlines.

You also get a contractor portal where contractors can sign agreements and provide W-9 information themselves instead of you chasing them via email.

Kontrable works globally—you can manage contractors in any country. But the US tax and compliance features are designed specifically for US contractors.

Payment methods: What you actually need to know

For US businesses paying US-based contractors, ACH is the cheapest and most reliable option. Here's what to do:

Get their bank details. Ask the contractor for their routing number and account number. This takes 30 seconds.

Set up the transfer in your bank. Most US banks let you initiate ACH transfers online or via your banking software. Enter the contractor's details, the amount, and the date.

Wait 1-3 business days. ACH transfers are reliable but slower than credit cards. The contractor will see the money in their account within that window.

Keep a record. Save the confirmation number or screenshot. This is your proof of payment for the 1099.

That's the whole process. ACH costs $0-$3 per transfer depending on your bank. It's direct, it's clean, and it works.

What about Zelle or Venmo? They're instant and free, but they're designed for small one-time payments under $500. If you're paying a contractor regularly, ACH is better.

What about Wise, PayPal, or other platforms? They add a middleman and extra fees ($5-$15 per transfer). Use them only if the contractor specifically asks for it or lives internationally. For US-to-US payments, skip them.

Tax requirements explained

W-9 Form (Collect before first payment)

This is a one-page form where the contractor provides:

• Their legal name
• Business name (if they have one)
• Taxpayer ID (SSN or EIN)
• Address

You can download it from IRS.gov. Send it to the contractor, have them sign it, and keep it on file. You don't send it to the IRS—it's just for your records.

If a contractor refuses to provide a W-9, you're required to withhold 24% of their payments. This is rare and it's a pain, so most contractors provide the form immediately.

1099-NEC Form (File once per year)

If you paid a contractor $600 or more in the calendar year, you file a 1099-NEC form.

What it includes: Contractor's name, address, and taxpayer ID. The total amount you paid them. Your business information.

Timeline:

• Send to contractor: January 31
• File with IRS: January 31 (or February 28 if e-filing)

How to file: Use accounting software (QuickBooks, Xero, etc.), use the IRS FIRE system online, or let a CPA handle it. Kontrable will auto-generate the forms from your payment records starting in early 2026, so you can review and file them yourself or send to your accountant.

What happens if you miss the deadline? IRS penalties apply. This is not a deadline worth missing.

Backup withholding (Rare)

If the contractor doesn't provide a W-9, you withhold 24% of their payments and send it to the IRS. This is uncommon because most contractors provide the form. If it happens, ask your accountant.

State-specific rules

Contractor classification rules vary by state. Some states (California, Massachusetts, New Jersey, Illinois) make it harder to classify someone as a contractor. Other states (Texas, Florida, Georgia) are more flexible.

The key question: does your contractor meet your state's test for independent contractor status?

This is complex and depends on your state's specific rules. If you're unsure, talk to a lawyer. Kontrable doesn't make classification decisions for you—that's between you, the contractor, and your state's requirements.

What Kontrable does is help you document the relationship so you have a paper trail if you're audited.

Common mistakes and how to avoid them

Mistake 1: Paying someone without collecting a W-9 first. Solution: Make W-9 collection your first step. Kontrable can send contractors a W-9 request through their portal so they provide it directly.

Mistake 2: Losing track of cumulative payments. Problem: You paid a contractor $590, then hired them again for $50. You hit $640 total and now you owe a 1099-NEC. But you didn't know you were close to the threshold. Solution: Track cumulative payments per contractor. Kontrable does this automatically—you'll see the running total every time you log a payment.

Mistake 3: Missing the January 31 deadline. Problem: You scramble in late January to reconstruct payments from your bank account, email invoices, and spreadsheets. You miss the filing deadline and face penalties. Solution: Start tracking payments in Kontrable as you make them, not in January. When it's time to file, the data is ready. Kontrable auto-generates 1099s so you're not starting from scratch.

Mistake 4: No written agreement. Problem: You pay a contractor for work, they deliver something you didn't expect, or they share confidential information with a competitor. You have no contract to point to. Solution: Use a written contractor agreement. This protects both you and the contractor. Kontrable lets you upload or generate agreements and have contractors sign them through their portal.

Frequently asked questions

Q: Do I need an EOR platform like Deel or Remote for US contractors? A: No. EOR platforms are for hiring employees internationally. US contractors handle their own taxes. You just need to file 1099-NEC and keep records. Kontrable is simpler and cheaper than EOR for this reason.

Q: What if the contractor lives in a different state than me? A: Doesn't matter for federal taxes. They're responsible for their state income taxes. You file the federal 1099-NEC with the IRS.

Q: Can I pay contractors under $600 and skip the 1099? A: Yes, you're not required to file 1099-NEC for payments under $600. But you should still collect a W-9 and track payments in case you hire them again and hit the threshold later.

Q: What's the difference between 1099-NEC and 1099-MISC? A: 1099-NEC is for contractor services (what you use 99% of the time). 1099-MISC is for other payments like rent or royalties. Use 1099-NEC for contractors.

Q: Do I need a lawyer to create contractor agreements? A: It's smart to have a lawyer review your first template. After that, you can reuse it for similar work. Kontrable will offer agreement templates, but these are starting points—have a lawyer review before you use them.

Q: What if I'm paying contractors in multiple countries, not just the US? A: US tax requirements only apply to US contractors. For contractors in other countries, tax and compliance rules vary by country and your local laws. Kontrable tracks contractors globally, but you'll need to follow your local requirements for each country.

Getting started

If you're managing US contractors, here's the process:

1. Collect a W-9 from each contractor before their first payment
2. Make payments via ACH (or your preferred method)
3. Track cumulative payments per contractor
4. File 1099-NEC forms by January 31 for anyone paid $600+

Kontrable helps with steps 1, 3, and 4 by organizing contractor data, tracking payments, and auto-generating 1099 forms. You stay in control of your payments and keep using your existing bank or payment method.

If you're managing a handful of contractors, a spreadsheet works fine. If you're managing dozens or coordinating across a team, Kontrable saves time and prevents mistakes.

Ready to get organized?

[Join the Kontrable waitlist] – We launch in January 2026 with US contractor management built for businesses paying contractors directly.