Do You Issue a 1099 to a Foreign Contractor?

Usually, you do not issue Form 1099-NEC to a foreign contractor who is a foreign person for U.S. tax purposes. Instead, certain payments to foreign persons may require reporting on Form 1042-S and may also involve U.S. tax withholding. The contractor’s tax status matters more than their address, citizenship alone, or the country where the payment is sent. A U.S. person who lives and works abroad may still fall under the usual 1099-NEC rules, while a foreign person working in the United States may not. Before choosing a form, confirm the payee’s status and review where the services were performed and whether the income is subject to U.S. reporting or withholding rules. The IRS guidance on reporting independent contractor payments distinguishes payments to U.S. persons from payments to foreign persons.

Determine Whether the Payee Is a U.S. Person

For U.S. information reporting, the central question is whether the payee is a U.S. person or a foreign person. A contractor can work from another country and still be a U.S. person. If the payment meets the applicable rules, Form 1099-NEC may be required. A contractor who is a foreign person may instead require Form 1042-S reporting, depending on the payment and its U.S. tax treatment.

A foreign mailing address or bank account does not establish a person’s tax status. Likewise, a U.S. address does not prove that the payee is a U.S. person. Use tax documentation rather than geography or payment details alone to make the determination.

Use the Appropriate Tax Certification

A U.S. person generally certifies their status on Form W-9 and provides a taxpayer identification number. That number may be an employer identification number or a Social Security number. For more on choosing the number to report, see EIN versus Social Security number.

A foreign person generally provides an appropriate form from the W-8 series. Individuals commonly use Form W-8BEN, while foreign entities commonly use Form W-8BEN-E. These forms document foreign status and may support the applicable withholding and reporting treatment. The 2026 IRS instructions for Forms 1099-MISC and 1099-NEC address taxpayer identification numbers and refer to Form 1042-S reporting for foreign persons.

Collect the relevant certification before making payments when possible. Having it on file gives the business a documented basis for determining which reporting process applies. The form is an important starting point, but it does not replace reviewing the services and payment involved.

When Form 1099-NEC May Apply

Form 1099-NEC is commonly used to report nonemployee compensation paid to eligible U.S. contractors. A contractor’s location abroad does not, by itself, remove the reporting requirement. For example, a U.S. person who lives abroad and provides services to a U.S. business may still be subject to the ordinary 1099-NEC rules. Learn more about nonemployee compensation.

For tax year 2026, the reporting threshold for Forms 1099-NEC and 1099-MISC increases from $600 to $2,000 under the One Big Beautiful Bill Act. RSM US explains the 2026 change to the 1099 reporting threshold. The threshold applies only after determining that the payee and payment belong in the 1099 reporting process. It does not turn a payment to a foreign person into a 1099-NEC payment.

When Form 1042-S May Apply

Form 1042-S is used to report certain payments to foreign persons. Whether a payment is reportable and whether withholding applies depend on the income’s U.S. tax treatment. Relevant facts can include the payee’s tax status and where the services were performed. The type of service and the documentation on file can also matter.

Services performed entirely outside the United States may be treated differently from services performed in the United States. A payment from a U.S. company does not by itself establish that the income is U.S.-source or that withholding is required. Review the payment and the engagement facts before deciding whether Form 1042-S or withholding applies.

How to Handle International Contractor Payments

1. Confirm the worker’s classification. Determine whether the person is properly treated as an independent contractor rather than an employee. Worker classification is separate from whether the payee is a U.S. or foreign person, but both questions affect the process.

2. Collect tax documentation. Request a W-9 or the appropriate W-8 form before the first payment when possible. Resolve incomplete information early rather than waiting until filing season.

3. Record where the services are performed. Keep the contract and invoices with records of the work location and payment history. These details can help establish the treatment of the services.

4. Match the reporting process to the facts. Use the certification on file as part of the decision. Do not rely only on an address or on a general label such as “international contractor.”

5. Plan for reporting deadlines. For tax year 2025, Form 1099-NEC had to be furnished by February 2, 2026. Forbes reported on the 2026 1099-NEC furnishing deadline. Set internal review dates well before filing and furnishing deadlines so there is time to address missing information.

Common Reporting Mistakes

• Assuming a non-U.S. address means Form 1042-S. An address alone does not establish that the payee is a foreign person.
• Issuing a 1099-NEC to every contractor paid by a U.S. business. A payment to a foreign person may follow a different reporting process.
• Applying the $2,000 threshold before identifying the correct form. The threshold concerns Forms 1099-NEC and 1099-MISC. It does not replace the separate analysis of Form 1042-S.
• Waiting until January to collect documentation. Missing information can delay the reporting decision and require additional follow-up.
• Treating the tax form as the whole process. Worker classification and records of where services were performed are also relevant to the reporting decision.

*This article is for general informational purposes only and is not legal advice.