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A 1099 for foreign contractors is almost never required: when the worker is a foreign person doing the work outside the United States, you collect Form W-8BEN and file nothing for them. The 1099-NEC reporting threshold is $600 for payments made in 2025 and $2,000 for payments made after December 31, 2025, per the IRS Form 1099-NEC FAQ.
US-source pay to a foreign person is the one case that triggers withholding, at a default 30% of the gross amount under IRS Publication 515. The whole answer turns on two questions: whether the worker is a US person or a foreign person, which decides the certificate you collect (a W-9 or a W-8BEN), and where the work is performed, which decides whether the payment is US-source at all. Both questions sit inside the wider compliance picture US companies take on when hiring foreign remote workers: classification, permanent establishment and payroll tax all follow the same border crossing.
Which form applies by worker
| Worker | Tax status | You collect | You file |
|---|---|---|---|
| US citizen or resident alien, anywhere | US person | Form W-9 | 1099-NEC by January 31 once payments pass the threshold |
| Foreign contractor, all work outside the US | Foreign person, foreign-source | Form W-8BEN | Nothing |
| Foreign contractor, some or all work in the US | Foreign person, US-source | Form W-8BEN, plus Form 8233 for a treaty claim | 1042-S with Form 1042 by March 15, at 30% or the treaty rate |
| Foreign entity, such as a corporation or partnership | Foreign person | Form W-8BEN-E | 1042-S if any of the work is US-source |
| No documented status | Presumed US person | None on file | 1099-NEC with backup withholding |
Read the table in two moves: the worker’s status first, US person or foreign person, because that decides the certificate you collect. Then where the work happens, because US-source pay to a foreign person is the one case where you withhold and file. Most cross-border contractor relationships land in row 2: a foreign contractor working entirely outside the United States, for whom the W-8BEN is the whole job.
Payments to a foreign person sit outside the 1099 system: the general instructions for information returns state that income reported on Form 1042-S must not be repeated on a 1099. The last row is what happens when you skip the collection step entirely.
When you do send a 1099
A foreign contractor gets a 1099 only when they are a US person: a US citizen or resident alien, wherever in the world they live. US persons certify with Form W-9, which gives you the taxpayer identification number your information return needs.
The threshold is $600 for payments made in 2025 and $2,000 for payments made after December 31, 2025, per the 1099-NEC instructions, which also set the deadline: file with the IRS and furnish the worker’s copy on or before January 31 of the following year. The $2,000 figure covers nonemployee compensation; other payment types reported on information returns keep their own thresholds.
Say a US citizen developer in Lisbon invoices your company $30,000 for the year. You keep their W-9 on file and send a 1099-NEC by January 31, exactly as you would for a US contractor in another state, which also makes it a multi-state payroll question. Where the worker lives changes nothing: US persons enter the US information-return system from anywhere.
What the W-8BEN does
The W-8BEN is the certificate a foreign individual signs to document foreign status, and it is what lets you pay a foreign contractor without US withholding when their work is foreign-source. The IRS tells a foreign person to give the form to the withholding agent or payer, which is you, whether or not they claim a reduced rate of withholding (About Form W-8BEN).
The form comes to you, not to the IRS: you keep it on file and rely on it. Entities certify on a separate form, the W-8BEN-E, so a foreign corporation or partnership never signs the individual version. One exception keeps a person on the W-9 side of the line: a resident alien who relies on a saving clause of a tax treaty completes Form W-9 instead, per the general instructions for information returns.
A form you hold generally stays valid from the date the worker signs it until the last day of the third succeeding calendar year, unless a change in circumstances makes the information on it incorrect, per the W-8BEN instructions.
If you learn that information on the form is unreliable or no longer correct, treat the documentation as invalid under the IRS reliance rules at 26 CFR 1.1441-7, and get a fresh certificate from the worker before the next payment.
Where the work is performed
Paying a contractor abroad is US-source only when the services are performed inside the United States: the work’s location, not the worker’s address, decides. Under 26 CFR 1.861-4, compensation for services performed wholly inside the United States is gross income from sources within the United States, and services performed outside the United States are foreign-source.
For work that straddles the border, the rule allocates pay by worker type: a non-employee’s pay is sourced on the basis that most correctly reflects the proper source of the income, while an employee’s defaults to a time basis, counting days worked inside the United States against days worked abroad. A foreign person whose work for you is performed entirely abroad is therefore earning foreign-source pay: no US withholding applies, no 1042-S is due, and no 1099 is filed.
Withholding on US-source payments
You withhold 30% of the gross amount from a foreign contractor’s US-source pay, at the time you make each payment. Publication 515 states the rate, the gross-amount basis and the timing: the tax comes out of the payment itself.
A lower rate can apply when the worker’s country has an income tax treaty with the United States. For personal services the worker claims treaty relief by giving you Form 8233 before you pay, and you then withhold at the treaty rate instead of 30% on the qualifying US-source services.
What you paid and withheld goes on Form 1042-S, furnished to the worker and filed with the IRS by March 15 of the following year, together with Form 1042. Copy A goes to the IRS and the remaining copies go to the worker, and a filer who needs more time can get an automatic 30-day extension on Form 8809. For the 2026 tax year, forms due March 15, 2027 must be e-filed through the IRS IRIS portal, because the FIRE system retires after December 31, 2026.
The e-file threshold applies to the whole picture: a business filing 10 or more information returns in a year, counting 1099s, 1042-S forms and W-2s together, must file them all electronically. Count every information return you file in the year, including W-2s for employees and 1099s for US contractors, before assuming paper is an option, and the IRS reporting page for contractor payments points to the free IRIS Taxpayer Portal.
How to document each payment
You document payments to a foreign contractor in five steps, from the certificate before the first invoice to the return you file at year end.
1. Collect the certificate before the first payment
Get a W-9 from a US person or a W-8BEN from a foreign individual before money moves. With nothing on file, the payee is presumed to be a US person, and a contractor you believed was foreign turns into a missed 1099 with backup withholding.
2. Ask where the work will be performed
The worker’s address does not decide anything; where the services happen does. The worker’s own plan for the engagement tells you whether the pay is US-source or foreign-source.
3. Split any US-source portion
Work performed wholly abroad is foreign-source; work performed inside the United States is US-source. For a contractor who does both, source the pay on the basis that most correctly reflects where the income was earned.
4. Withhold on the US-source part only
Take 30% of the gross amount, or the treaty rate if Form 8233 supports a lower one, from each US-source payment at the time you make it. Nothing is withheld on foreign-source pay to a foreign person.
5. File what the year requires
US persons past the threshold get a 1099-NEC by January 31. Foreign persons with US-source income get a 1042-S, together with Form 1042, by March 15.
What mistakes cost
Skip the forms and the liability lands on you as the payer: Publication 515 makes the withholding agent liable for any tax required to be withheld from a foreign person’s US-source pay. An agent who never took the 30% still owes it, and the tax was due on the gross amount, so the exposure scales with everything you paid, not with the worker’s net.
The undocumented payee is the other exposure. Under the presumption rules at 26 CFR 1.1441-1, a payment you cannot tie to valid documentation is presumed made to a US person, so the same contractor you never asked for a form leaves you owing a 1099-NEC with backup withholding on top.
Risks beyond the forms
The US forms cover only the US side: a foreign contractor abroad can expose your company in the worker’s own country, where your US tax filings say nothing about your obligations there. Two exposures ride along with cross-border contractor relationships: permanent establishment and worker classification.
If the contractor signs clients, negotiates contracts or otherwise acts on your company’s behalf in their country, they can create a permanent establishment for you there, which changes the corporate tax you owe in that country. That risk turns on what the worker does day to day, not on where they sit.
The other risk is classification: a contractor who in practice works like an employee can be treated as one, with payroll and benefits obligations following. The model you hire under decides who carries those obligations, and an employer of record for independent contractors is the structure built for the case where the relationship is really employment.
FAQ
No. A foreign person performing the work outside the United States gets no 1099 from you: you keep their W-8BEN on file and report nothing. If some of their work happens inside the United States, the reporting moves to Form 1042-S, still not a 1099.
Only on the US-source part of their pay. Work performed inside the United States carries the 30% default withholding, or a lower treaty rate when the worker’s country has an income tax treaty with the United States; work performed entirely abroad is foreign-source pay, outside the US withholding rules.
Foreign persons performing their services outside the United States. With a W-8BEN on file and no US-source work, there is nothing to file for that worker: the certificate is the documentation that keeps the payment outside the 1099 system.
The W-9 certifies US status and the W-8BEN certifies foreign status. A US person, wherever they live, gives you a W-9 with their taxpayer identification number; a foreign individual gives you a W-8BEN, and you rely on one or the other for each worker, never both.
The certificate a foreign individual gives you to document foreign status. You collect it before the first payment, keep it on file, and rely on it to keep the worker out of the 1099 system and out of US withholding when their work is foreign-source. The IRS expects it whether or not the worker claims treaty benefits, because the form documents status, not the claim.
If the worker is a US person, the filing is still due: the 1099-NEC deadline of January 31 does not move, and the liability for missing it sits with you as the payer. If the worker is foreign and the work was performed abroad, nothing was due, and the W-8BEN on file is the document that shows it.
