The service invoice, or an ‘invoice for services rendered,’ is for any labor, consulting, or other work that is to be paid on a per hour ($/hour) or per job basis. Service invoices are designed for a broad range of independent contractors and are sent to the client prior to or after the service has been rendered.
Table of Contents
- Service Invoices: By Type
- What is a Service Invoice?
- How are Independent Contractors Paid?
- Employee vs. Independent Contractor
- Security Guard
A service invoice is a list of charges given to a client after an individual provides a service in the form of consulting, advising, or providing actual labor. The invoice acts as a demand for payment, which is commonly due 15, 30, or 60 days from the date of delivery. If the due date elapses and no payment is made, late charges and/or interest may be applied per the service agreement. After a payment is obtained, the invoice should be marked as paid and act as a receipt.
Due to IRS Requirements, an invoice must be kept on record for three (3) years from the tax year date or two (2) years from which the tax was paid, whichever is longer.
A service invoice can be used for any labor that is paid on an hourly or per-job basis. The most common types of services, where the laborer is acting as an independent contractor, are as follows:
- Real Estate
There are three (3) ways to pay an independent contractor: per project, per gig, and per hour ($/hr).
When a contractor is paid on a per-project basis, they may or may not request a partial up-front payment. This is often due to other factors such as equipment, employees, and other costs.
- For Example – This is common for construction projects as the contractor will need to include costs of building materials, products, and internal labor costs.
In other situations, the independent contractor is paid on a per-task basis. This is common for jobs when it’s difficult to track the laborer’s efforts and base the pay on performance.
- For Example – A writer that gets paid on a per-article basis due or a graphic designer being paid on a per-image basis.
Some circumstances call for payment on a per-hour basis. This is especially common when the employer is providing the equipment, space, and the tools necessary for the individual to complete with their own labor.
- For Example – A person that hires a bookkeeper to go over the finances of the company.
Whether an individual is an employee comes down to employer tax withholding and certain guarantees, such as unemployment, medical insurance* (*in some cases), and time off, whereas an independent contractor is “their own boss” and must withhold their own taxes from income.
- Works pre-set hours on a mandated schedule.
- May only be paid per hour ($/hr) or salary.
- Paid Benefits from the employer.
- Not responsible for withholding income taxes.
An Independent Contractor:
- Works on their own schedule.
- May be paid per hour or per project/gig.
- No Benefits from the employer.
- Responsible for withholding income taxes.