A subcontractor invoice is a form used by contractors to pay subcontractors for their services. If a subcontractor earns over $600, the contractor must obtain an IRS Form W-9 from the subcontractor to file an IRS Form 1099-MISC.
Table of Contents
- What is a Subcontractor?
- Contractor vs. Subcontractor
- Subcontractor Agreement
- Subcontractor Salary & Hourly Pay ($/hr)
A subcontractor is an individual or company hired by another company (usually a general contractor) to complete a job or a side job. Because hiring employees can be painstaking and more expensive, it’s much easier for a general contractor to hire another individual or company to do the work as a subcontractor. This mitigates expenses and risks and allows both the contractor and subcontractor the potential to earn more on the project.
Essentially, a contractor is the main boss. The subcontractor works under the contractor but is still their own boss. There is a similar chain of command that one would see in a workplace, but when the job is finished, the parties go their separate ways. After a job is complete, the only thing a contractor needs to worry about is paying the subcontractor what they’re owed. Contractors and subcontractors tend to work well together because of the agreement they sign beforehand, called the subcontractor agreement.
Perhaps the biggest difference between subcontractors and employees is that subcontractors are responsible for paying their taxes. When a contractor pays a subcontractor, taxes are not withheld. Come tax time, the subcontractor should receive a Form 1099-MISC from the subcontractor, which should align with the income made from the job. If the subcontractor works fifteen different jobs in a calendar year and makes over $600 on each, the subcontractor should receive fifteen 1099s, which they will enter when they file taxes.
A subcontractor agreement is the backbone of the relationship between both parties, the subcontractor and the contractor. The agreement prevents any disputes from arising because it lists every detail about the job and the services each party brings to the table. Within the agreement, the subcontractor will state how much each service costs, including labor. The contractor, in return, can use the subcontractor agreement as a reference when allocating work to the project.
Subcontractors are commonly sought out for construction-related tasks but are available in a wide span of industries, such as chefs and waitstaff for an event. To follow is the average pay available for subcontractors, which can vary greatly depending upon the subcontractor’s industry: