What happens when a contractor does not pay?

Home improvement jobs take time, skill, and effort. If you’re a contractor, you’ve probably spent multiple hours, days, weeks or months coordinating with the homeowner, hiring suppliers and subcontractors, and doing physical labor. It can be extremely frustrating, then, when a homeowner does not pay the bills. How can you get the money you’re owed?

Can a client force an independent contractor to pay?

However, it may still be possible to force your client to pay as agreed without a written contract. Just like employees, contract workers should send their claim to the business in writing. This letter should explain in detail the work that was performed and the payment that is expected in exchange.

How are employees paid and how are contractors paid?

Employees receive payment on an hourly or salaried basis and are under the control of the employer; contract workers work independently, often have contracts, and are paid by the job or project.

Can a contractor withhold payment from a subcontractor?

In most cases, you can’t legally withhold payment from a subcontractor when the job you’ve been contracted on fails to pay on time or, even worse, doesn’t pay at all. You’re still responsible for making sure your subcontractors are paid.

When do employees and contractors are not paid?

This may be a temporary cash flow shortage or a more permanent situation such as a bankruptcy. In these cases, employees and contractors are not paid because there are other more pressing (to the business) uses for the money. Unfortunately, when businesses don’t have money, employees are often the last to be paid,…

What happens when a contractor refuses to pay a subcontractor?

If the owner then fails to pay, the subcontractor can then file the lien. A mechanic’s lien can be used to foreclose on the property in question as a means to collect the money the subcontractor is owed when the property sells. In cases like this, it doesn’t matter whether or not the owner of the property has paid the contractor in good faith.

Do you have to report payments to independent contractors?

If you pay independent contractors, you may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business.