1099 for International Contractors: Who Gets One (2026)

You pay a developer in Warsaw and a designer in Manila. Your accountant asks whether they need 1099s. The answer is usually no, and the form you owe instead is the one that gets missed.

Most international contractors do not get a Form 1099. If the contractor is not a U.S. person and performs all of the work outside the United States, you collect Form W-8BEN from them and file nothing. A 1099-NEC is owed when the contractor is a U.S. person, wherever they live. Work performed inside the United States triggers Form 1042-S instead.

Who Actually Gets a Form 1099?

The 1099-NEC is a domestic information return. The IRS lists four conditions for filing one: you made the payment to someone who is not your employee, you made it for services in the course of your trade or business, you made it to an individual, partnership, estate, or certain corporations, and the payments to that payee reached the threshold amount for the year.

Notice what is absent from that list. Nothing in it says the payee has to be American. The status test sits one level up, in the rules that decide who the U.S. information-reporting system covers at all. That system covers U.S. persons. A U.S. person is a citizen, a green-card holder, or someone who meets the substantial presence test. Everyone else is a foreign person, and foreign persons sit outside the 1099 regime.

So the question is never "is my contractor abroad." Two contractors can sit at the same desk in Bucharest and owe you two different forms. The one holding a U.S. passport gets a W-9 and a 1099-NEC. The Romanian national gets a W-8BEN and no 1099 at all.

The passport decides the form. The postcode does not.

What Changed for the 2026 Tax Year?

The threshold changed, and the figure in circulation is the old one. For years the 1099-NEC and 1099-MISC reporting threshold sat at $600. The IRS instructions for Forms 1099-MISC and 1099-NEC now state that "for tax years beginning after 2025, the minimum threshold amount for reporting certain payments required to be reported on certain information returns and/or perform backup withholding on those payments increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027."

Read that alongside the current filing rule and the practical effect is clear: you file a 1099-NEC for each U.S. person you paid at least $2,000 for services during the year. The contractor you paid $1,400 in 2026 falls below the line. Under the old threshold they did not.

Two operational consequences follow. First, any internal threshold logic still hard-coded to $600 now over-reports, which is not a penalty risk but is wasted work and unnecessary data sharing. Second, from 2027 the number moves, so a hard-coded threshold of any value goes stale on a schedule. Treat it as a variable your finance team re-checks each January.

The deadline did not move. Form 1099-NEC is due 31 January under section 6071(c). If you file 10 or more information returns in total, counting the 1099 series, Forms 1042-S and Forms W-2 together, you must file them electronically.

Which Form Does a Foreign Contractor Get Instead?

Form W-8BEN, and the reason matters more than the name. The W-8BEN is not a report you send to the IRS. It is documentation you collect and keep, and its job is to establish that the person you paid is a foreign person so that the U.S. withholding rules do not attach to the payment.

Individuals sign the W-8BEN. Foreign entities sign the W-8BEN-E, including hybrid entities claiming treaty benefits. If your contractor invoices through a registered company rather than in their own name, the entity form is the one you need. The two get confused constantly, and a file full of the wrong version is a file of invalid documentation.

Validity is where this quietly goes wrong. The IRS rule is that a W-8BEN stays in effect from the date it is signed until the last day of the third succeeding calendar year, unless a change in circumstances makes the information on it incorrect. The IRS example in its own instructions makes the arithmetic concrete: a form signed 30 September 2015 remained valid through 31 December 2018. So a W-8BEN your contractor signed in March 2023 dies on 31 December 2026, whether or not anyone in your finance team notices.

What happens when it lapses is not a paperwork problem. The IRS states that failure to provide a Form W-8BEN when requested "may lead to withholding at the foreign-person withholding rate of 30% or the backup withholding rate." An expired form is not a form. The exposure comes back on the next payment.

Build the expiry date into your records at collection time. A W-8BEN with no renewal date attached is a liability with a timer on it. Where the collection step belongs in the wider sequence is set out in the contractor onboarding checklist for global remote teams.

What Happens When the Work Is Performed Inside the United States?

This is the branch that turns a simple answer into a filing obligation, and it is the one that gets dropped. A payer who learns "no 1099 for foreign contractors" and stops reading has the right answer to the wrong question.

The sourcing rule is geographic and it is blunt. The IRS states that "the place, where the personal services are performed, generally determines the source of the personal service income, regardless of where the contract was made, or the place of payment, or the residence of the payer." Your U.S. bank account is irrelevant. Your contract's governing law is irrelevant. Only the physical location of the work counts.

When a foreign contractor performs services on U.S. soil, that compensation becomes U.S.-source income. Nonemployee compensation paid to nonresident aliens is reported on Form 1042-S, Foreign Persons' U.S. Source Income Subject to Withholding. The 1099 series has no role here. Form 1042-S and the accompanying Form 1042 are both due 15 March of the following calendar year, six weeks after the 1099-NEC deadline. Two different forms, two different dates, one contractor.

The default withholding rate on U.S.-source income of this kind is 30%, reduced or eliminated only by an applicable treaty or a Code exception. The obligation sits with you. The withholding agent is liable for the tax it was required to deduct and withhold, which means the IRS collects from the payer, not the contractor who has already been paid and moved on. A nonresident alien claiming a treaty exemption on personal-services compensation files Form 8233 to claim it. Funded traders paid by proprietary trading firms hit a narrower version of the same documentation question, covered separately in prop firm trader taxes in 2026.

Mixed work gets allocated rather than guessed. Where a contractor works partly in the United States and partly elsewhere, the U.S. portion is calculated on a time basis: days worked in the United States divided by total days worked, multiplied by total compensation. So a contractor who spent 12 of 200 working days at your San Francisco office has 6% of the year's fees sitting in U.S.-source territory.

A one-week onsite visit is a tax event. Most companies book it as travel.

When Does a Foreign Contractor Become a U.S. Person?

By counting days, and the count is cumulative across three years. The substantial presence test is met when someone is present in the United States for at least 31 days during the current year and 183 days across the three-year period ending with it, where the three-year figure counts all days in the current year, one third of the days in the first prior year, and one sixth of the days in the second prior year.

Work the arithmetic on a contractor who visits often. Suppose they spent 120 days in the United States this year, 150 last year, and 150 the year before. The weighted total is 120, plus 50, plus 25, which is 195. That clears 183, and the 31-day condition is met, so this person is a U.S. resident for tax purposes. They now get a W-9 and a 1099-NEC, and your W-8BEN on file for them is documentation of a status they no longer hold.

Nobody sends a notification when this line is crossed. The contractor may not know. Their status changed inside your day-count records and the only party positioned to notice is the one holding the travel history.

If a contractor travels to you regularly, track their days the way you track their invoices.

How Do You Work Out Which Form You Owe?

Work through four questions in order. Each one narrows the answer, and the order matters, because a later question cannot fix a wrong answer to an earlier one.

Is this person a U.S. person? Citizen, green-card holder, or someone who meets the substantial presence test. If yes, collect Form W-9, and file Form 1099-NEC by 31 January if you paid them $2,000 or more for services during the year. Their country of residence changes nothing. U.S. citizens and resident aliens abroad are subject to U.S. tax on worldwide income from all sources, so living in Bali does not remove them from the system.

If no, are they an individual or an entity? Individuals sign Form W-8BEN. Foreign companies sign Form W-8BEN-E. Collect it before the first payment clears rather than at year-end, and record the date it expires.

Where was the work physically performed? All of it outside the United States means no U.S.-source income, no 1042-S, and no 1099. Any of it inside the United States means that portion is U.S.-source, reported on Form 1042-S by 15 March, with 30% withholding unless a treaty applies. Mixed work is allocated on the day-count basis above.

Is the documentation currently valid? A W-8BEN signed more than three calendar years ago has expired. So has one where the contractor has since moved country, changed entity, or acquired U.S. residency. An expired or contradicted form puts you back at the 30% default.

Four questions, asked before the first payment rather than in January. That sequencing is the whole difference between a filing exercise and a reconstruction project.

What Does Getting This Wrong Cost?

The penalties are per return, and they escalate with delay. For information returns due in 2026, the IRS charges $60 per return filed up to 30 days late, $130 per return from 31 days late through 1 August, and $340 per return filed after 1 August or not filed at all. Intentional disregard costs $680 per return, and unlike the others it carries no maximum.

Run that across a contractor base. Forty U.S. contractors whose 1099-NECs were never filed, assessed at the intentional-disregard rate, is $27,200 with no cap in sight. The same forty filed in February instead of January is $2,400. The gap between those two numbers is administrative, not strategic.

The withholding exposure is the larger number, and it works differently. When U.S.-source payments went out without documentation or withholding, the withholding agent is liable for the tax that should have been deducted. That is 30% of the payment, owed by you, on money that has already left your account and cannot be clawed back from a contractor whose engagement ended last quarter.

Penalties scale with headcount. Withholding liability scales with the payments themselves.

Why Does the Payment Rail Decide Whether You Have the Paperwork?

Because every requirement above is a documentation requirement, and documentation is collected at onboarding or not at all.

Consider how this fails in practice. A company pays 30 international contractors by bank wire, a consumer payment app, and a couple of local transfer services, because that is what each contractor asked for. There is no single system that knows who these people are. In January, someone in finance opens a spreadsheet and starts emailing 30 people to ask about their citizenship, their entity type, whether they travelled to the U.S. last year, and whether they ever signed a W-8BEN. Some reply. The ones who finished their engagement in April do not.

That is the real failure mode on this topic. It is rarely a misreading of the tax rules. It is that the rules require facts about each contractor which nobody captured while the contractor still had a reason to answer, because the payment method was chosen for convenience and carried no onboarding step. Which rail you pick is therefore a compliance decision as much as a cost one, which is the argument behind this comparison of contractor payment platforms for global teams.

A payments platform that collects tax documentation as part of onboarding inverts the sequence. The W-9 or W-8BEN exists before the first payment clears, tied to the contractor record, with the expiry date attached and the country of work on file. Nothing has to be reconstructed in January because nothing was left uncollected in March.

This is where Toku sits. Contractor onboarding, contracts, tax documentation, and payment run through one platform, so the record that supports your year-end filing is built as a by-product of paying people. Companies can fund payroll in fiat or stablecoins, and contractors can choose to receive stablecoins or their local currency. Toku handles the conversion in either direction, and recipients spend their balance with a Visa-enabled Rain Card. Toku does not file your returns or tell you what your obligations are. It makes sure that when your accountant asks who is a U.S. person and where the work happened, the answer is already in the system.

FIDL, an early-stage financial technology company building a distributed contractor team across several regions, is a worked version of this. Its contractor management and global payroll setup standardised onboarding with tax form verification and produced audit-ready payment records, in place of the manual tracking the founders started with.

The forms are not the hard part. Knowing who you paid is.

Disclaimer: Toku provides compliance infrastructure and is not a law firm. This content is for informational purposes only and does not constitute legal or tax advice. Consult your legal counsel for jurisdiction-specific guidance.

Ready to Stop Reconstructing Your Contractor Records in January?

The tax rules on this are settled and public. What decides whether your filing season is a half-day or a three-week reconstruction is whether tax documentation was collected when each contractor was onboarded, and whether it is still valid now.

Book a demo to see how contractor onboarding, documentation, and global payments run in one place.