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ACH vs. PayPal to pay Independent Contractors

We are planning a project that will require a number of independent contractors. We had been planning to pay these IC's by ACH. However, several of the IC's have requested that we use PayPal instead. I know that the IRS recently made some changes to the rules governing 1099 reporting if you paid the IC's via PayPal. However, I've not been able to determine what the new rules are and if it is better to pay via PayPal vs. ACH. Can anyone shed light on this matter?


Topic Expert
Joan Varrone
Title: CFO
Company: Cloud Cruiser
LinkedIn Profile
(CFO, Cloud Cruiser) |

You should be providing 1099 to all of these contractors regardless of the way you pay them so the new IRS rules dont affect you. I dont think Paypal charges you anything to use this to make payments so you should honor their requests.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Regardless of how you pay them, the US DOL Wage and Hour Department is cracking down on 1099 usage.

Read this pamphlet and make sure they are 1099 people.

Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA)

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Before you set up both ACH and PayPal, ask why those subs want PayPal and why they dislike ACH. Also consider the costs and effort to track who gets paid how.


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