Do Non-US Residents Need to Receive 1099s? How to File 1099s For Non-US Resident Contractors (And Why It’s a Must)
Updated in 2024.
A lot of business owners are totally confused about form 1099. That is, who gets them, who doesn’t, who has to file them, and what happens if you don’t. The basics are that independent contractors (rather than employees) receive them who earn non-payroll wages on services rendered. Where it gets really tricky is knowing how to file 1099s for non-US resident contractors (or even knowing if you have to!)
What if you hire a contractor who is NOT a resident of the United States? What do you file if your contractor is a US Citizen working outside of the US? Do you have to file a 1099 for non-US resident contractors?
The answer is “yes and no” (as usual with the IRS, haha!). Let’s review each case below.
Let’s talk about how you handle the 1099 situation for non-US resident contractors, and make sure you’re handling everything in a legal fashion!
If you work with foreign contractors (that is, non-US citizens who performed work for you outside of the US), you will need to collect a form called a W8-BEN or a W8-BEN-e. Even if you don’t need to file anything on the contractor’s behalf, you will need to keep this completed form on file to stay compliant.
The W8 BEN or W8 BEN-E will determine if there are any tax withholding requirements, in which case you’d have to follow those instructions and make tax deposits on their behalf and pay them the net amount (after taxes).
If you work with a contractor that is a US Citizen working OUTSIDE of the US, the regular 1099 rules fall on them.
Why is this form kept on file for each foreign contractor? Because if you’re audited, having it available will prove why you didn’t issue them a 1099. This will clear you of any liability for NOT filing a 1099 for this contractor.
Now, suppose that you have a foreign person working as a contractor for you in the US, or partially conducted work within the US, but is not a US citizen, in this case, you’d use form 1042-S as opposed to a 1099 for that portion of the income earned.
Now, why is is important to ensure you’re filing these forms? Because if you can’t provide the proper forms, you can’t take the money you paid your contractors as a business expense AND there are late filing, or non-filing fees if you were required to and failed to file.
So what are the next steps to ensure you’re filing everything properly and in a timely manner? Let’s get to that now.
So now that you know how to file 1099s for non-US resident contractors, make sure you don’t end up paying unnecessary penalties for ALL your contractors, foreign and domestic!
Got questions about 1099s, W8-BENs, or 1042-S forms? Leave me a comment!
Until Next Time,
Love, Light, and MONEY, Honey…
Kaylee
Hello, Kaylee,
I would have loved to have had such helpful, succinctly-stated advise when I first began as a 1099er so many (yes, many1) years ago.
Thank you for today’s offering!
Hi Kaylee,
My wife and I are dual citizens of the US and Canada. We reside in Canada and do not have a US-based residence on US soil. We contract for companies that are based in the US. In the past, we have never completed a W9 but have simply reported all of our contract earnings like good citizens do. I don’t know what the companies have done on their end. I can only hope that they earmarked their expenses to designate that we were the recipient of those funds.
So, the question is left in the air: Should we complete a W9 and our company file a 1099? The W9 form itself doesn’t provide the option to use a foreign address. We do not have a US mailing address. Therefore, logically-speaking, the W9 is only required for US citizens who are working abroad yet still retain a residence in the US (e.g., people who work abroad but would consider themselves “from the US”). We have lived in Canada since the second half of 2015.
We would be incredibly grateful if you could provide us with some information to guide us in this decision. We don’t want our companies or ourselves to get into trouble. Thank you so much for posting this article! It’s very well-written and clear!
Hello Jakob,
I was updating my blog and saw your comment! When you’re a Canadian business and you hire US based citizens that are contractors, you typically need to issue 1099-NECs to comply with the U.S. law and international agreements. They would fill out a W9 and you would send a 1099 to them through an online software or you can use a paper form. If you are talking about US companies hiring YOU, (giving you money) then the US company should collect a W8-BEN or W8-BEN-E on your behalf. If you’re having trouble with specifics please contact a local agency that specializes in CAD/US business relationships. I hope this helps!
Thank you, Kaylee. I appreciate your helpful response. Have a splendid day!
Hi, Kaylee!
Thank you for the most-recent post re: 1099s. It’s always good to know how these should be handled. Living in a border State, we could very likely find it especially helpful to know how to address compliance issues regarding paying or being paid by a Canadian citizen.
Most helpful!
Thank you Merri, as we move into more of a virtual and global market I suspect there will be even more changes coming! Ill be sure to update as we make those changes. Stay tuned 🙂
Hi Kaylee,
I have a small business in the US and have independent contractors in Belize. Do I just need them to complete Form W-8 BEN and keep it on file? I want to confirm that I do not need to file anything with either the IRS or Belize. Thank you.
Yes the first step is to have them complete a W8BEN if they are individuals and W8BEN-E if they are working under a corporation. How they fill in those forms will determine if any further filing is needed.
We are an entity located in KC, MO USA and had a contract worker from Ontario Canada for 2023 – they’ve submitted a Form 8233 Exemption From Witholding on Compensation for Independent personal Services because he couldn’t get a Foreign Tax ID for the W8-Ben I’d been asking him for. MY CFO stated this form is all we’d need to get the person paid. I now need to know which form, like a 1099-NEC, I’d need to file to record what we’ve paid to him? I’ve only ever had to file 1099-NEC & 1099-MISC forms in the past.
Hello Jennifer! Your CFO might be able to assist you on the specifics, but if they filed an exemption form you would not need to supply a 1099 to them. The form 8233 is for income earned from personal services, if they provided professional services they should have filled out a W8 BEN or W8 BEN-e. Either way, a 1099 would not be sent since this is only for US citizens (regardless of location), what form you might be looking for is a 1042 filing requirement if they conducted any services within the US, if not, no additional filing is required.
Thank you for repeating this information, Kaylee! It’s so good to be reminded of business expense compliance issues. This is a “print-it-out” piece to be sure.
Thank you kindly Merri!
Hi Kaylee, I’m a resident of Singapore and recently had a broker to help sell some stock under a fast food company. Got the check proceeds a few days ago – almost a month that it reached me (check was dated Mar 1st!). Came with the tax information 1099-B that I’m not sure now what to do with it since I am not a US citizen/resident. They have withheld 24% federal income tax on the stocks sale. Is this because due to the fact that I had not earlier on updated my tax status and filed the W8-BEN ? Thanks & appreciate any help
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