If you hire non-US residents (foreign contractors), the 1099-NEC is usually NOT required unless the work is performed inside the United States. Here’s what you need to know:
1. No 1099 Needed for Work Done Outside the U.S.
- If a foreign contractor works entirely outside the U.S., do not issue a 1099-NEC.
- Instead, collect IRS Form W-8BEN (or W-8BEN-E for foreign entities) to confirm their foreign status.
2. Work Performed in the U.S. Requires Tax Withholding
- If a non-US resident performs services inside the U.S., 30% tax withholding may apply (unless a tax treaty reduces it).
- The business must report payments on IRS Form 1042-S and file Form 1042 to report the withholding.
3. Key Takeaways
- Always collect Form W-8BEN to verify nonresident status.
- No 1099-NEC is needed for work done outside the U.S.
