1099-NEC Requirements for Foreign Contractors

As a virtual accountant for creative business owners, I see a lot of really impressive remote employer/contractor relationships. 

As my clients continue to grow their business, they often time seek virtual assistants and other talented contractors abroad.  One question that always comes up around tax time is “Do I have to prepare a 1099-NEC for a foreign contractor?“.

Do I have to prepare a 1099-NEC for a foreign contractor?

If the foreign contractor is not a U.S. taxpayer, and all of the contracted services were performed outside the U.S., a Form 1099 is not required. Instead, you will need to ask the contractor to complete a Form W-8BEN. 

The Form W-8BEN certifies that the foreign contractor is not a U.S. taxpayer.  The Form W-8BEN is never submitted to the IRS, however, it needs to be held in your files in case of an audit.  If you are audited by the IRS, the Form W-8BEN will support your reasoning for not issuing a 1099.