Businesses are structured differently. Not all employees are classified the same. There are full-time and part-time workers, and hourly or salaried.
In some cases, an employee is classified as a seasonal worker or contractor.
No matter the classification, your pay stubs should reflect how the employer coded your position. This becomes important when you’re completing loan applications and preparing your taxes.
Employee vs contractor makes a difference when it comes to hourly vs. salary and whether taxes are withheld. It also determines if you’re eligible for benefits.
Are you an employee trying to pull pay stubs together in order to complete paperwork? Keep reading to learn how to get the pay stubs you need.
Differences in Employee vs Contractor
The stark difference in employee vs. contractor classifications is the tax implications. Employers deduct federal and state taxes from their employee’s pay. They also are responsible for outlining wages, hours worked, and all before and after-tax deductions for benefits.
Independent contractors are paid a set rate and are responsible for all tax filings and payments. In the digital era, it’s quite possible a contractor won’t receive an actual pay stub. Companies pay them via electronic funds transfers.
Employees will receive a W-2 at the end of the year which is used to file their taxes. A contract employee may or may not receive a 1099 form. It’s based on the type of employment and whether the individual reached a financial threshold.
Documenting Your Pay as an Independent Contractor
Depending on how your work is classified and payment is sent, it’s vital for independent contractors to keep accurate and detailed financial records. You never know when someone may need to see this information.
During the COVID-19 pandemic, there were local grants and federal loans available. Not having check stubs to verify income locked many contractors out of the process. The same is true when applying for a mortgage or any income-based service.
With paystub generator apps, they could have taken their records and created hassle-free pay stubs with a payroll number.
Paystub Generators Are Valid
You may be wondering if using a pay stub generator is legal or how to find pay stubs that are valid. The answer is simple, they are valid documentation and accepted by financial institutions. You must enter the correct information for your pay stubs to avoid any problems down the line.
Choose a reputable company that has a hassle-free system. You also want to see a sample pay stub that looks professional.
Also worth noting, pay stub generators aren’t just for contractors. You can use the service to recreate faded or damaged documents from a past employer.
Always Keep Valid Records
It’s important to keep track of your paystubs. If you have multiple jobs in a year, understand the difference between employee vs contractor payroll reporting. It can mean the difference between an approval or a denial.
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