1099 for Foreign Contractors: Usually None, Get a W-8BEN

Do you file a 1099 for foreign contractors? Usually not. Form 1099-NEC is for payments to US persons. If your contractor is not a US person and does the work outside the United States, you collect a Form W-8BEN (individual) or W-8BEN-E (company), keep it on file, and file no 1099. The IRS says that if you have a valid Form W-8 you can reliably associate with the payment, “you are exempt from reporting the payment on a Form 1099 and withholding under section 3406” (IRS requester instructions).

The details matter when the contractor is actually a US person living abroad, when a foreign contractor does some of the work inside the US, or when you are a Canadian or Australian founder paying people through a US LLC. This guide covers each case, the new $2,000 threshold for 2026 payments, and the filing deadlines in early 2027. All rules were checked against irs.gov on 31 Oct 2026.

This is general information, not tax or legal advice. Confirm with a CPA (US), or your accountant in Canada or Australia, for your situation.

The short decision table

Sources: Instructions for Forms 1099-MISC and 1099-NEC, IRS Pub. 515, W-8 requester instructions.

Why work done abroad needs no 1099

Two rules combine here.

1. Where the work happens decides the source. IRS Publication 515 says that for personal services, “the place where the services are performed determines the source of the income, regardless of where the contract was made, the place of payment, or the residence of the payer.” Work done in Canada or Australia is foreign-source income, even when a Delaware company pays for it.

2. A valid W-8 switches off 1099 reporting. The W-8 requester instructions say the form can establish a person’s foreign status for domestic information reporting (chapter 61) and backup withholding, and that with a W-8 you can rely on, you are exempt from Form 1099 reporting and backup withholding.

So for the most common founder setup, a US company paying a freelancer who lives and works abroad, the job is simple: get the right W-8 before the first payment, check it is complete, and store it. Not sure which form your contractor needs? See W-8BEN vs W-8BEN-E.

When Form 1099-NEC is required

The IRS instructions say to file Form 1099-NEC for each person you paid, in the course of your trade or business, at least $2,000 during the year for services by someone who is not your employee (including parts and materials), or for payments to an attorney. Four conditions must all be met:

• You paid someone who is not your employee.
• The payment was for services in the course of your trade or business.
• The payee is an individual, partnership or estate (or, in some cases, a corporation).
• You paid that payee at least $2,000 during the year.

Source: Instructions for Forms 1099-MISC and 1099-NEC (12/2026), “What is NEC?”.

Common exceptions in the same instructions:

• Corporations. Payments to a corporation, including an LLC treated as a C or S corporation, are generally not reported. Legal services are the main exception: attorneys’ fees are reportable even when paid to a corporation.
• Card and platform payments. Payments made by credit card or through third-party networks are reported on Form 1099-K by the payment settlement entity and “are not subject to reporting on Form 1099-MISC or Form 1099-NEC.”
• Personal payments. Only payments made in the course of your trade or business count.

The 2026 threshold is $2,000, not $600

For decades the line was $600. The IRS now says: “For payments made before 2026, the reporting threshold is $600. For payments made in 2026, the reporting threshold is $2,000” (IRS). The IRS’s 2026 Form 945 instructions attribute the change to P.L. 119-21, commonly known as the One Big Beautiful Bill Act, and say the threshold will be adjusted for inflation for each calendar year after 2026 (draft 2026 Instructions for Form 945).

One catch: if you backup-withheld from a payee, you must file a 1099-NEC for them regardless of the amount.

Deadlines for 2026 payments

The IRS instructions say section 6071(c) requires Form 1099-NEC to be filed “on or before January 31”, moving to the next business day when that date falls on a weekend or legal holiday. They also say you must furnish the recipient copy and file with the IRS by the same date. The general instructions add that no automatic extension is available for Form 1099-NEC. Pub. 515 gives the March 15 date for Forms 1042 and 1042-S, and the draft Form 945 instructions give the February 1, 2027 date.

Backup withholding: the 24% rule

Backup withholding is the stick behind Form W-9. The IRS general instructions say nonemployee compensation and certain other payments “may be subject to backup withholding at a 24% rate”, for example when the payee fails to furnish a taxpayer identification number (TIN) in the manner required. You keep withholding until the TIN is provided (General Instructions for Certain Information Returns).

The 2026 Form 945 instructions confirm the rate “remains 24%” and that the payment threshold for backup withholding on these payments rose from $600 to $2,000 in 2026.

What this means in practice:

• US contractor: get a signed W-9 with their SSN or EIN before you pay. No TIN means withholding 24% and depositing it, then reporting it on Form 945 and the 1099-NEC.
• Foreign contractor: a valid W-8 exempts them from backup withholding. Without any valid W-8 or W-9, the requester instructions warn that a payer that fails to withhold under the presumption rules may be assessed the 30% chapter 3 rate or the 24% backup withholding rate, plus interest and penalties.

Form 1042-S: when a foreign contractor works inside the US

The picture changes if a non-US contractor does the work in the United States, for example an Australian consultant who flies to San Francisco for a week of onsite work. That pay is US-source income under the place-of-performance rule.

Pub. 515 says pay for independent personal services by a nonresident alien is subject to chapter 3 withholding: you must withhold at 30% unless the contractor has a withholding agreement with the IRS, a final payment exemption, or a tax treaty exemption. Treaty exemptions for personal services are claimed on Form 8233, and the withholding agent must review it, sign it to accept it, and forward it to the IRS within 5 days of acceptance.

You then report the payment on Form 1042-S and file the annual Form 1042. Pub. 515 says both are due March 15 of the following year, and that every withholding agent required to file a Form 1042-S must also file Form 1042, even if no tax was withheld. For 2026 forms, Pub. 515 says IRIS “must be used to e-file 2026 Forms 1042-S (due March 15, 2027)” because the older FIRE system retires.

If you are planning onsite work for foreign contractors, talk to a CPA before the trip. It is the one case in this guide where you can end up owing the tax you failed to withhold.

Canadian and Australian founders paying through a US LLC

Many readers run a US LLC as a non-resident. The same rules apply from the payer’s side:

• Paying contractors in Canada, Australia or elsewhere for work done there: collect W-8BEN or W-8BEN-E. No 1099-NEC.
• Paying US contractors $2,000 or more in 2026: collect a W-9 and plan on a 1099-NEC by February 1, 2027.
• Paying yourself: money moving between a foreign owner and a foreign-owned single-member LLC is a related-party matter, not a contractor payment. See our Form 5472 guide.

One wrinkle: a single-member LLC owned by a non-resident is a disregarded entity, and the IRS general instructions have a separate section of “Rules for Non-U.S. Payers”. Ask your CPA whose name and EIN the 1099-NEC should be filed under. You will need an EIN either way; see EIN for non-US residents.

Worked example: one startup, four contractors in 2026

A Delaware LLC owned by a founder in Vancouver pays four contractors in 2026:

Arithmetic for the consultant: $5,000 x 30% = $1,500 withheld and deposited, $3,500 paid out. And if the New York copywriter had refused to give a TIN on Form W-9, backup withholding on their payments would have been $4,500 x 24% = $1,080.

Total 1099-NECs to file: one. Total 1042-S forms: one (plus Form 1042).

How to file: IRIS

The IRS’s free IRIS Taxpayer Portal lets you e-file up to 100 returns at a time, enter them manually or by CSV upload, and download payee copies. You need an IRIS Transmitter Control Code (TCC) first, and the IRS says TCC processing can take up to 45 days, so apply in November or December. Foreign filers without a US TIN can use the Foreign Filer TCC Registration System (IRS IRIS page).

E-filing is mandatory once you have 10 or more information returns in total for the year, counting all types together (1099-MISC/NEC instructions).

Who should and should not DIY this

DIY is reasonable if all your contractors work outside the US and have signed W-8s, or you have a handful of US contractors with W-9s on file.

Get a CPA if any foreign contractor works inside the US, anyone refused a W-9, you are a foreign-owned disregarded LLC unsure whose EIN to file under, or you paid anyone with US-source royalties or rent. Browse the rest of the US company setup hub for related filings.

Checklist before January

1. Pull a list of every contractor paid in 2026 and how (bank, card, platform).
2. Make sure each foreign contractor has a valid W-8BEN or W-8BEN-E on file.
3. Make sure each US contractor has a W-9 with a TIN.
4. Flag US payees at $2,000 or more who are not corporations.
5. Apply for an IRIS TCC now if you do not have one.
6. File and send 1099-NECs by February 1, 2027; file any 1042-S and 1042 by March 15, 2027.