“ After sending him the 1099 for it he said he would dispute the pay that I wont be able to prove the cash payments. What will the IRS have to say on my behalf?”---->I guess some contractors want cash in lieu of a check; probably they think that checks will(may) bounce or maybe they don't want to report the income to the IRS or etc.As long as you issued a 1099 form to the SC(this doesn’t mean that you pay cash under the table.)and submit both 1099 and 1096 summary to the IRS, the IRS knows that you have enough evidence, 1099 and 1096 submitted to the IRS; the form 1096 summary requires a total amount reported from all forms, the 1099form sent to him by you, being submitted, and a total amount withheld or etc. It also provides check boxes for the types of forms being submitted.The ball is in his court; he(not to report the income received from you in cash on his return) needs to prove the IRS that he has NOT received any compensation from you.
This is a legal question.If th e SC thinks that he is not paid for work (or worse, claims he was never paid), he can lien your property, a Mechanic’s Lien, and its rules vary by state. In essence, this means the SC has not been paid in full, and is claiming a right in your property. Because of this, it is crucial that when you pay a contractor, they sign a lien waiver. I guess you may consult with an attorney, or you may sue the SC.