Pay Stub Generator for Small Business

W-2 or 1099: there are two tests, and they can disagree

Most guidance treats worker classification as one question. It is two, run by two agencies, and the same worker can come out differently under each.

For tax, the IRS applies the common-law test set out in Publication 15-A. Anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done — even where you give them freedom of action. And the label is irrelevant: the substance of the relationship, not the label, governs the worker's status. The evidence falls into three categories. Behavioural control asks whether you direct how the task is done — instructions about when and where to work, what tools to use, what sequence to follow, and training. Financial control looks at unreimbursed expenses, the worker's own investment, whether they offer services to the market, how you pay them (an employee is generally guaranteed a wage for a period of time; a contractor is often paid a flat fee or time and materials), and whether they can make a profit or a loss. Type of relationship covers written contracts, employee-type benefits, permanency, and whether the work is a key aspect of your regular business.

For minimum wage and overtime the Labor Department runs its own test, and it is currently mid-rewrite. The 2024 six-factor economic reality test is still the codified text at 29 CFR part 795. But Field Assistance Bulletin 2025-1 says the Wage and Hour Division will no longer apply that analysis in its own investigations, while stating that the 2024 rule remains in effect for private litigation. A proposed rescission would replace it with the 2021 analysis — five factors, two of them core: the nature and degree of control, and the opportunity for profit or loss. Comments closed in April 2026 and no final rule had taken effect as of September 2026.

The practical version: for tax, use the IRS common-law test. For wage and hour, the Labor Department's test is separate and is being rewritten — check the current position before relying on it. If you genuinely cannot tell, either you or the worker can file Form SS-8 and ask the IRS, though it may take at least six months to get an answer.

What getting classification wrong actually costs

The numbers here are worth knowing before you decide, because the penalty structure rewards honest mistakes and punishes convenient ones.

No reasonable basis, no relief

Publication 15-A is blunt: classify an employee as a contractor with no reasonable basis for doing so and you are liable for employment taxes for that worker, with the relief provision unavailable.

Section 530 relief has a condition people miss

If you do have a reasonable basis you may be relieved of employment taxes — but only if you filed all required federal information returns consistently with how you treated the worker, and never treated anyone in a substantially similar position as an employee for periods after 1977.

The reduced rates, and how they double

Under IRC § 3509 the liability is computed as if withholding were 1.5 percent of wages and the employee FICA share 20 percent of the amount imposed. Skip the information returns as well and those become 3 percent and 40 percent. And § 3509 does not apply at all where the liability is due to intentional disregard — so the discount exists only if it was a genuine mistake, doubles if you also skipped the 1099s, and disappears entirely if it was deliberate. You also cannot recover the tax from the worker.

The trust fund recovery penalty

Where withheld income, Social Security or Medicare tax is not deposited, the penalty is 100 percent of the unpaid trust fund tax. It reaches anyone the IRS determines was responsible for collecting or paying it over and acted wilfully — which can include an officer, a partner, an accountant, a volunteer director, or simply someone who signs cheques for the business.

There is a voluntary route

Employers currently treating workers as contractors may be eligible for the Voluntary Classification Settlement Program if requirements are met; you apply on Form 8952.

What a pay stub must show is a state question

Federal law does not require you to hand an employee a pay stub at all. It requires you to keep the underlying records. The stub obligation is state law, and states fall into three groups: no requirement, access states where the employee must be able to see the information, and states where you must furnish a statement unless the employee consents to electronic delivery.

Colorado is the one to know about right now, because it changed. COMPS Order #40 was adopted on 8 December 2025 and took effect on 1 February 2026, replacing Order #39. Rule 7.1 requires a true and accurate record for each employee covering name, address, occupation and hire date; daily hours worked; credits claimed and tips; regular rates, gross wages, withholdings and net paid each period — and, newly, all vacation pay hours accrued, used and available in the current benefit year, plus the same for sick leave hours.

Rule 7.2.1 requires an itemised earnings statement each pay period including total hours worked. Rule 7.2.2 adds an on-request duty for the vacation figures, which an employee may exercise up to once a month, and the rule names the ways to satisfy it — including listing the information on each pay stub. For a small employer that is the option that discharges the duty without building anything. Rule 7.3 requires those records kept at least three years after the wages were due, and for the duration of any pending wage claim.

California is the strictest. Labor Code § 226(a) requires nine specified items on every statement, including all applicable hourly rates and the hours worked at each, only the last four digits of the SSN, and the legal name and address of the employer — plus available paid sick leave under § 246(i), and three years of retention. New York requires the employer's address and phone, the pay basis, and for non-exempt staff the regular and overtime rates and hours, with payroll records kept six years. Hawaii, Oregon and Minnesota all run long itemised lists too, and Massachusetts uniquely requires increases as well as deductions.

Two states are worth flagging because they are commonly got wrong. Ohio is worth checking directly rather than trusting a list — it has long appeared in the no-requirement column, and there are consistent reports that a Pay Stub Protection Act changed that in 2025. We have not been able to read the statute on an official Ohio source to confirm it, so treat any inherited list as possibly stale and verify with the Ohio Department of Commerce before relying on it. Texas, by contrast, does have a statement provision, but it sits in the Texas Minimum Wage Act, which exempts anyone covered by the FLSA — so in practice it reaches almost no private employer.

Several states attach real money to getting it wrong. California can reach $50 for a first pay period and $100 per employee per period after that, capped at $4,000, plus a separate $750 for refusing an inspection request. New York runs at $250 per work day, capped at $5,000 in a private action. Minnesota reaches $10,000 per violation per employee for repeated or wilful failures. Hawaii is the sharpest: a wilful failure to comply with its wage chapter carries a fine from $100 to $10,000, or up to a year, per offence. Colorado is worth stating precisely, because it is widely reported wrong — its $250 per employee per month penalty, capped at $7,500, attaches to the duty to keep and produce pay records, not to a defective statement itself. If you employ people in more than one state, the stub has to satisfy the strictest one you touch.

Electronic delivery rules differ too, and they are not interchangeable. Hawaii, Oregon and Connecticut require the employee to opt in. New Jersey is electronic by default with an unconditional right to paper on request. California does not require consent to start but the employee may always elect paper. Minnesota requires you to provide a work computer to review and print, and paper on 24 hours' notice.

Federal recordkeeping, and the deposit calendar

Under the FLSA you must maintain and preserve payroll records for each covered employee, including total wages paid each pay period and the date of payment with the period it covers (29 CFR 516.2). The Act prescribes no particular form for those records — the duty is to have the information, not to use a template.

On the tax side the rhythm is quarterly and annual. Form 941 reports withheld income tax and the employer and employee shares of Social Security and Medicare. Deposits run on either a monthly or a semiweekly schedule, and which one applies to you is determined by your lookback period, not by choice. W-2s and Form 940 are annual.

One 2026 change that affects your paperwork rather than your payroll: the information-return reporting threshold for payments to contractors rose from $600 to $2,000 for payments made after 2025. That does not change who is an employee. It changes when a 1099 has to be issued to the people who genuinely are contractors.

What this tool does, and where it stops

PayStubGo produces an earnings statement from the figures you enter, with federal, state, Social Security and Medicare estimated for 2026 and every line editable. Enter the company once and the details carry across employees and periods.

It is not payroll software. It does not file your 941, calculate your deposit schedule, remit anything to the IRS or a state, produce W-2s, or track accruals. It does not verify that the numbers you enter are the numbers you paid. If you have employees, you have deposit obligations and filing deadlines that exist whether or not you produce a stub, and this tool does not discharge any of them.

Where it fits is the gap between running real payroll and having nothing: a clean, consistent, per-period record for a small number of employees, matching what actually left your account.