Quick answer
Move from friendly to formal, one step at a time:
- Check the invoice reached the right person and has everything they need.
- Remind politely the day after it’s due, then again a week later.
- Call and ask directly what’s holding it up.
- Pause work on anything new until you’re paid.
- Send a formal demand letter with a final deadline.
- Use the law: file a complaint under your state’s freelancer protection law, if one applies, or go to small claims court.
- Collections as a last resort.
For taxes: if you’re a cash-basis freelancer, you don’t pay tax on an invoice that was never paid, and you can’t deduct it as a loss either.
Step 1: rule out the simple problems
Most late payments aren’t malicious. Check:
- Did the invoice go to accounts payable, not just your project contact?
- Did it include the PO number, a W-9 or vendor registration the client needs?
- Is the due date clear?
Fixing these often gets you paid within days.
Step 2: send reminders
The day after the due date:
Hi [name], a quick reminder that invoice [#] for [amount] was due on [date]. I’ve attached it again for convenience. Could you let me know when payment is scheduled? Thanks!
Seven days later:
Hi [name], following up on invoice [#] for [amount], now [X] days past due. Please let me know if there’s an issue I can help resolve. As per our agreement, a late fee of [1.5]% per month applies from [date].
Invoicing apps can send these automatically.
Step 3: pick up the phone
A short call often uncovers the real issue: cash-flow trouble, a disputed deliverable, or a lost invoice. If the client is struggling, offer a payment plan in writing (for example, three monthly payments).
Step 4: stop new work
Politely pause further work until the overdue balance is paid. Don’t hand over final files or transfer ownership of work you haven’t been paid for, if your contract lets you hold them back.
Step 5: send a demand letter
After 30 days or so, send a formal letter (email and certified mail):
- Invoice numbers, amounts and dates.
- A reference to your contract and its payment terms.
- A final deadline (for example, 10 business days).
- What you’ll do next: file a complaint, go to small claims court or use a collection agency.
A letter on a lawyer’s letterhead, often at low cost, can be very effective.
Step 6: use freelancer protection laws
Several states and cities now protect freelancers’ right to be paid:
| Law | Covers work worth | Key rules |
|---|---|---|
| New York State Freelance Isn’t Free Act (since Aug 28, 2024) | $800+ (single or combined within 120 days) | Written contract; pay by the agreed date or within 30 days of completion; double damages possible |
| Illinois Freelance Worker Protection Act (contracts from July 1, 2024) | $500+ within 120 days | Written contract; pay within 30 days if no date; complaints to the Illinois DOL |
| California Freelance Worker Protection Act (since Jan 1, 2025) | $250+ | Written contract; pay within 30 days if no date; double damages possible |
| New York City Freelance Isn’t Free Act | $800+ | Complaints through the city’s consumer and worker protection office |
Check whether your state or city has something similar. Some counties and cities have added their own.
Step 7: small claims court
For modest amounts, small claims court is quick and doesn’t need a lawyer. Limits vary by state; California’s is $12,500 for individuals, for example. You’ll need your contract, invoices, emails and proof of the work delivered. Winning a judgment doesn’t always mean you’ll collect, but it adds pressure and legal tools.
Collection agencies usually keep 25% to 50% of what they recover. Use them for old debts you’ve otherwise written off.
Taxes on unpaid invoices
- Cash basis (most freelancers): income counts when received. An unpaid invoice was never income, so you don’t report it and can’t deduct it as a bad debt.
- Accrual basis: you reported the income when you invoiced, so an uncollectible invoice can be deducted as a business bad debt in the year it becomes worthless.
- If the client pays next year, report it in the year you receive it.
- Expenses you paid for the project (materials, subcontractors) are still deductible.
How to prevent it next time
- Use a written contract with payment terms, late fees and ownership transfer on payment.
- Take a deposit (30% to 50%) from new clients.
- Bill milestones on long projects.
- Offer easy payment links.
- Check new clients: a quick search for reviews or complaints.
Frequently asked questions
Can I charge interest on late invoices?
Yes, if your contract says so. Check your state’s usury limits; 1% to 1.5% per month is common.
Should I keep working while waiting?
Finish what you’re committed to only if the contract requires it. Otherwise, pause new work until you’re paid.
Can I post about a non-paying client online?
Stick to facts and be careful: false or exaggerated claims can lead to defamation claims.
Do I report an unpaid invoice on my taxes?
Not if you’re on the cash basis, which covers most freelancers.
This article is general information, not legal or tax advice. Consult an attorney or CPA for your situation.
Related guides
- Wrong Amount on Your 1099? How to Get It Corrected
- 1099-NEC Explained: New $2,000 Threshold and What It Means for Freelancers
- 1099-K Threshold 2026: Back to $20,000 and 200 Transactions
- What to Do If You Didn’t Receive a 1099
About this guide
Written by the Freelancer Tax HQ editorial team, based on our professional experience, official US government sources (IRS, SSA and other agencies) and reputable informational articles listed in the sources below. Last reviewed on . Tax rules change often, and we update this guide when they do. Read our editorial policy or report an error.
Sources
New York State: Freelance Isn’t Free Act; Illinois Freelance Worker Protection Act; Nixon Peabody: New York and California grant broad protections to freelance workers; California Courts: Small claims; IRS Topic 453, Bad debt deduction.